Form 8938 is crucial for reporting your foreign assets and investments to the IRS. If you’re earning money abroad, you’re going to want to file Form 8938 with your tax return. This form is part of FATCA – the Foreign Account Tax Compliance Act – and it helps the IRS keep track of money and investments held outside the U.S.
If you’re not sure how to begin, you’ve come to the right place. Let’s walk through the basics from start to finish.
Step 1: Know If You Need to File
Before getting everything started, make sure this is a requirement specific to you.
You need to file Form 8938 if you’re a U.S. citizen or resident and the total value of your foreign assets is above a certain threshold.
Here’s a quick overview of the thresholds.
| Filing Status | Live in U.S. | Live Abroad |
|---|---|---|
| Single / Married Filing Separately | $50,000 at year-end or $75,000 anytime | $200,000 at year-end or $300,000 anytime |
| Married Filing Jointly | $100,000 at year-end or $150,000 anytime | $400,000 at year-end or $600,000 anytime |
Foreign financial assets can include:
- Foreign bank or brokerage accounts
- Stocks or mutual funds held outside the U.S.
- Interests in foreign partnerships or corporations
- Some foreign pensions or retirement accounts
- Crypto if it’s held under foreign exchange
Step 2: Gather All Necessary Information
For each foreign asset you own, try to get as much information as possible. The more you can collect the better.
- Name of the institution or entity
- Country where it’s at
- Type of asset
- Account number or identifying details
- Maximum value during the year (in USD)
- Date opened or acquired
Step 3: Download or Open Form 8938
Now we’ll get into the actual form by opening it from any access point. If you’re using a tax software it will be in there as a form option. If not, you can find Form 8938 on the IRS website here.
Before you start, review all of the parts in the form and identify which ones you’ll need to report on. That way you know what information you’re going to need to get.
Step 4: Fill Out the Form
Below is a quick overview of what you’ll find on the form, and what each part covers.
- Part I – Summary: This is where you’ll check off what types of assets you’re reporting and how many
- Part II – Detailed information about your bank and brokerage accounts held abroad
- Part III – Other foreign assets (ex: stocks not in an account, interests in foreign businesses, etc.)
- Part IV – Additional details: If you’re filing jointly or have foreign trusts, income from the assets, etc.
It’s important to be as accurate as possible. You don’t need to report the same asset twice if you’ve already reported it on another form previously, but it’s best to note that somewhere on Form 8938.
Step 5: Attach It to Your Tax Return
Form 8938 isn’t filed on it’s own. You’ll attach it to your Form 1040 when you file your tax return. If you file electronically, most software will automatically connect the two.
However, if you mail your return, print and attach Form 8938 as part of the package.
Step 6: Keep Copies for Your Records
Even if you file online, keeping a PDF copy of your return and any documents used is highly recommended. Not only will it give you an easy review next year, but if the IRS asks for more information later you’ll have everything you need.
What Happens If You Don’t File?
If you’re supposed to file and don’t, you could see:
- A $10,000 penalty, plus
- An additional $10,000 for every 30 days you don’t file (up to $50,000)
- Even criminal charges in extreme cases
Whether you didn’t know you had to file or not, the IRS won’t always go easy – so it’s best to stay ahead of it.
Understand the Basics
We know Form 8938 can seem overwhelming, especially if you have multiple accounts or investments abroad. But once you understand the basics of what needs reported and how to get the right information, it’s not so bad! It’s also a lot easier than dealing with potential penalties later down the road.
If you’re unsure how to go about the process, consider reaching out to us below for assistance.
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