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What is the 8938 form (Statement of Specified Foreign Financial Assets)?

The 8939 form is used to report specific foreign financial assets if the total value of the specified foreign financial assets is more than the appropriate reporting threshold.

Who has to file it?

A US citizen, resident alien, or any specific domestic entity.

Specified Domestic entity:

  • A closely held domestic corporation that has at least 50% of its gross income from passive income.

  • A closely held domestic corporation that has at least 50% of its assets produce or are held for the production of passive income.

A domestic corporation would be closely held if a specific individual directly, indirectly, or constructively holds at least 80% of the total combined voting power, total value of the stock of the corporation, or of the capital or profits interest in the partnership.

Taxpayers living in the United States and specified domestic entities must file if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year, doubled for married couples.

Taxpayers living outside the United States must file if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year, doubled for married couples.

The Form 8938 provides information to the IRS and is separate from the FBAR. You will still need to file the form 8938 even if you filed the FBAR.

What is a specified foreign financial asset?

  • Financial accounts maintained by a foreign financial institution.

  • The following foreign financial assets if they are held for investment and not held in an account maintained by a financial institution.

  • Stock or securities issued by someone that is not a U.S. person (including stock or securities issued by a person organized under the laws of a U.S. possession).

  • Any interest in a foreign entity.

  • Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person (including a financial contract issued by, or with a counterparty that is, a person organized under the laws of a U.S. possession).

Penalties:

If you fail to file a complete and correct form 8938 by the due date, you are subject to a penalty of $10,000. After 90 days, you will be subject to an additional penalty of $10,000 for each 30-day period which you continue to fail to file Form 8938, up to a maximum of $50,000.

Sources:

IRS

HRBlock

Giulia Iacobelli