FATCA Form 8938 Explained: Specified Foreign Financial Assets, Thresholds, and How It Differs From FBAR
Where FATCA Form 8938 Came From: IRC §6038D and the 2010 HIRE Act
The Foreign Account Tax Compliance Act became law in March 2010 as part of the Hiring Incentives to Restore Employment Act. Congress wanted two things. One, force foreign banks to identify their US customers and report those accounts to the IRS. Two, force US taxpayers to disclose their own foreign holdings directly on their tax return. The second piece is what we now call Form 8938.
The statutory authority sits in Internal Revenue Code §6038D. The statute is short, only a few subsections, but it does a lot of work. It defines who is a “specified person,” what counts as a “specified foreign financial asset,” and what happens when you don’t tell the IRS about either. The regulations under Treas. Reg. §1.6038D-2 through §1.6038D-8 fill in the operational details — the dollar thresholds, the asset categories, the valuation rules, and the exceptions.
Form 8938 itself didn’t appear until 2011 returns. Before that, the only US-side foreign account disclosure was the FBAR, which had been around since 1970 and lived under the Bank Secrecy Act. The FBAR was handled by FinCEN, not the IRS. Congress decided one form sitting outside the income tax system wasn’t enough — they wanted a second disclosure attached to the tax return itself, where the penalties could be assessed under the tax code and the information would flow directly into the examination process.
That history matters because it explains why we have two overlapping forms today. The FBAR didn’t go away when FATCA passed. Form 8938 was added on top of it. Most expats and a lot of domestic high-net-worth filers now have to file both. Same taxpayer, same accounts, two separate forms with different thresholds, different scope, and different penalty regimes.
FATCA also created the foreign bank reporting side — the FFI agreements, the W-8BEN-E forms, the chapter 4 withholding rules. That side of FATCA runs in the background. When a Swiss bank asks you to certify your US status before opening an account, that’s FATCA chapter 4 working. The IRS receives those reports under intergovernmental agreements with more than 100 countries. So when you file Form 8938, the IRS often already has matching data from the foreign institution. The form is partly a self-check against information the agency has already received.
Practical takeaway: Form 8938 isn’t optional paperwork. It’s a statutory disclosure tied to your tax return, backed by a separate penalty regime, and cross-checked against data the IRS pulls in from foreign banks under FATCA reporting agreements. Treat it like any other return form, not like an afterthought.
Who Has to File Form 8938
The filing requirement applies to “specified persons” who own “specified foreign financial assets” above the applicable threshold. The IRS defines specified person to include US citizens, resident aliens (anyone meeting the green card test or substantial presence test under IRC §7701(b)), nonresident aliens who elect to be treated as residents for joint filing, and certain domestic entities — closely held corporations, partnerships, and trusts with significant passive foreign holdings.
For individuals, the test is straightforward. If you file a Form 1040 (or 1040-NR with a §6013(g) or §6013(h) election) and you own foreign financial assets above the threshold, you file Form 8938. The form attaches to the return. There’s no separate filing date, no separate fee, no separate envelope. It rides along with the 1040.
Where the rules get interesting is the dual-status filer abroad. If you’re a US citizen living in London for the full year, you get the higher “living abroad” thresholds we’ll cover in the next section. If you moved to London on July 1, you only qualify for the abroad thresholds if you meet the bona fide residence or physical presence test for the tax year — the same tests that gate the foreign earned income exclusion under Form 2555. Partial-year movers usually fall into the domestic threshold bucket for that first year.
Domestic entities get pulled in under §6038D-6 if they’re closely held (more than 50% owned by a specified individual) and at least 50% of their gross income or assets are passive. The threshold for entities is a flat $50,000 at any time during the year or $50,000 on the last day — much lower than the individual thresholds. Most operating businesses don’t trip this. Passive holding structures often do.
A few categories of people are not specified persons. Nonresident aliens who don’t elect joint filing don’t file Form 8938 at all, even if they have US tax obligations on other income. Government entities, tax-exempt organizations under §501(a), and certain trusts (REITs, real estate mortgage investment conduits, common trust funds) are also excluded. If you’re outside those exceptions and you have foreign assets, the question is just whether you cross the dollar threshold.
One spot we see clients trip up: green card holders who’ve been living abroad for years and assume they no longer have US filing obligations. Holding the green card means you’re still a resident alien for tax purposes until you formally abandon it by filing Form I-407 with USCIS. Until that paperwork is processed, you’re a specified person who files a 1040 and, if you’ve got accounts above threshold, a Form 8938. We’ve handled cleanup engagements where someone hadn’t filed in five years because they’d “left the US.” The green card was still active. So was the filing requirement.
Form 8938 Thresholds: $50K, $75K, $100K, $150K, $200K, $300K, $400K, $600K
Form 8938 thresholds are not one number. There are four pairs, and the right pair depends on filing status and where you live. Each pair has a year-end value and a high-water-mark value. You file if either is exceeded.
Single filer, living in the US: $50,000 on the last day of the year OR $75,000 at any time during the year. Married filing jointly, both living in the US: $100,000 on the last day OR $150,000 at any time. These are the lowest thresholds. A single filer in Brooklyn with a Spanish brokerage account that hit €70,000 mid-year before settling at €40,000 by December 31 still files — the mid-year peak crossed $75,000 USD even though the year-end value is under $50,000.
Single filer, living abroad: $200,000 on the last day OR $300,000 at any time. Married filing jointly, both living abroad: $400,000 on the last day OR $600,000 at any time. The abroad thresholds are four times higher than the domestic ones. Congress recognized that someone genuinely living in another country will naturally have higher foreign balances — local bank accounts for groceries, brokerage accounts for retirement, maybe a foreign pension. Setting the domestic threshold for those filers would generate a flood of low-value reporting.
To qualify for the abroad thresholds, you have to meet either the bona fide residence test (you’ve been a bona fide resident of a foreign country for an uninterrupted period that includes a full tax year) or the physical presence test (you were physically present in foreign countries for at least 330 full days during any 12-month period that overlaps the tax year). These are the same tests under IRC §911 that gate the foreign earned income exclusion. If you fail both tests, you use the domestic thresholds even if you spent most of the year overseas.
Married filing separately gets its own treatment. An MFS filer in the US uses the $50,000/$75,000 single thresholds. An MFS filer living abroad uses the $200,000/$300,000 single thresholds. But — and this is the part that surprises people — when one spouse on an MFS return reports a joint account, they only report half the value. The other spouse reports their half on a separate Form 8938. So MFS filers each need to track ownership percentages carefully.
Aggregation matters. The threshold is the total value of all specified foreign financial assets combined, not per account. Two $30,000 accounts hit the $50,000 single domestic threshold together. The form requires you to list every reportable asset, not just the ones that individually exceeded the threshold. We’ve seen taxpayers file an 8938 listing only their biggest account, missing two smaller ones. The IRS treats that as incomplete — same penalty exposure as not filing at all.
Counterintuitive note: the threshold for Form 8938 is much higher than the threshold for FBAR, which is just $10,000 aggregate at any point in the year. So a single domestic filer with $40,000 across five foreign accounts files an FBAR but not a Form 8938. The two forms catch different slices of the same population.
Specified Foreign Financial Assets: What Counts and What Doesn’t
The phrase “specified foreign financial asset” (SFFA) is doing the heavy lifting on Form 8938. The scope is broader than what the FBAR covers. The Form 8938 net catches more than just bank accounts.
Three buckets are clearly inside. Foreign deposit accounts — checking, savings, time deposits at any non-US financial institution. Foreign custodial accounts — brokerage accounts at non-US firms holding securities. Foreign-issued financial instruments held outside a US account — foreign stock certificates, foreign partnership interests held directly, foreign mutual funds (which often happen to be PFICs and have their own reporting headache on Form 8621), foreign-issued bonds, foreign hedge fund interests, and interests in foreign trusts and estates.
Foreign-issued life insurance with cash value counts. So does an interest in a foreign retirement plan or pension, with some exceptions for plans treated as Social Security equivalents under treaty. Foreign annuity contracts with a cash surrender value are reportable. Direct interests in foreign mutual funds and ETFs — even if held inside a US brokerage that has a feeder structure — generally count.
What doesn’t count. Foreign real estate held directly does not count. The Paris apartment in your own name is not an SFFA. But the moment you put it inside a foreign LLC or SARL, the interest in that entity becomes an SFFA. The underlying real estate is still excluded, but the entity wrapper is reportable. This is one of the most common planning conversations we have with expat clients buying property abroad.
Tangible personal property doesn’t count. Gold bullion sitting in a vault in Zurich in your own name is excluded. Gold inside a foreign brokerage account or foreign-issued ETF is reportable. Foreign currency held as cash (not in an account) doesn’t count. Same logic — once it goes into an account, it’s an SFFA.
Foreign assets held inside a US-based financial institution don’t count. If your Schwab brokerage account holds Toyota stock, that Toyota stock is not an SFFA because Schwab is a US institution. The IRS already gets full reporting through the 1099 system. The SFFA rules target assets held outside the US reporting net.
Social Security-type benefits from foreign governments are excluded. UK State Pension, German social insurance — these are treated like US Social Security and don’t go on Form 8938. Private foreign pensions (employer plans, IRA-equivalents) do count.
The valuation rule is fair market value in US dollars, translated at the Treasury Department’s year-end exchange rate. Account statements in local currency get converted at December 31’s rate for the year-end test and at the date of peak value for the high-water-mark test. Brokerage accounts use the periodic statement value. Hard-to-value assets (foreign trust interests, private foreign company stock) get a reasonable estimate.
Form 8938 vs. FBAR: A Side-by-Side
Form 8938 and the FBAR (FinCEN Form 114) are the two main US-side foreign account disclosures. They cover overlapping but distinct ground. Filing one doesn’t satisfy the other. Most expats file both.
Filing agency: Form 8938 goes to the IRS, attached to the income tax return. FBAR goes to FinCEN, filed separately through the BSA E-Filing system. Two different agencies, two different submission methods, two different penalty regimes.
Threshold: FBAR is $10,000 aggregate maximum value across all foreign accounts at any time during the year. One number, one threshold, no filing-status variation, no living-abroad variation. Form 8938 has the four-pair threshold structure we covered above, ranging from $50,000 to $600,000.
Scope of reportable assets: FBAR covers “foreign financial accounts” — bank accounts, securities accounts, and a few specifically named instruments. It doesn’t reach directly held foreign stock certificates, foreign partnership interests, or foreign-issued bonds held outside an account. Form 8938’s SFFA definition does reach those. So Form 8938’s scope is wider on assets but its dollar threshold is higher.
Account types: FBAR catches accounts where you have signature authority but no financial interest — the corporate treasurer with check-signing power on the company’s foreign account files FBAR for that account, even though they don’t own it. Form 8938 only requires reporting for assets you have a beneficial ownership interest in. Signatory-only accounts stay off the 8938.
Filing deadline: FBAR is due April 15 with an automatic extension to October 15. Form 8938 follows the return — April 15 with the same extension options as your 1040 (Form 4868 pushes to October 15). For expats getting the automatic two-month extension to June 15, the 8938 follows that.
Penalties: FBAR non-willful is up to $10,000 per violation, adjusted for inflation (currently around $16,000). FBAR willful jumps to the greater of $100,000 or 50% of the account balance. Form 8938 non-willful starts at $10,000, plus another $10,000 per 30 days after IRS notice up to $50,000 total. Form 8938 willful triggers criminal penalties under IRC §7203 — up to one year in prison and $25,000 fine for misdemeanor failure to file.
Statute of limitations: This is where Form 8938 has a sharp edge. Failure to file Form 8938 keeps the statute of limitations open on the entire tax return — not just the foreign-account piece. The IRS can come back six years (or longer in some cases) and audit your full return because of one missing 8938. FBAR has its own six-year statute under the Bank Secrecy Act but doesn’t extend the income tax statute. Missing 8938 is usually the more damaging oversight from a reopening-the-return perspective.
Practical bottom line: file both. We’ve never seen a client harmed by over-reporting, and we’ve seen plenty harmed by under-reporting.
Inside the Form: Parts I, II, III, IV, V, and VI
Form 8938 is structured into six parts. The first two parts ask for the total values. The next four ask for asset-by-asset detail.
Part I — Foreign Deposit and Custodial Accounts Summary. This is the rollup for the simpler asset types. You list how many accounts you have, the maximum aggregate value at any point in the year, and whether any of the accounts were closed during the year. Part I doesn’t ask for account-by-account detail at this stage — that comes in Part V.
Part II — Other Foreign Assets Summary. Same rollup logic, but for the broader SFFA categories that aren’t deposit or custodial accounts. Foreign stock held directly, foreign partnership interests, foreign trust interests, foreign retirement plans not on Form 3520, foreign-issued life insurance. Counts, maximum value, and closure indicator.
Part III — Summary of Tax Items Attributable to SFFAs. This is where you tie the foreign assets to the income they generated. Interest from foreign deposits goes on a line, dividends from foreign stock on another, gains and losses on yet another. Each line tells the IRS where to find the matching number on your 1040 or schedules. A foreign account that generated $4,000 of interest should match a $4,000 entry on Schedule B. If it doesn’t, you’ve got reconciliation work to do.
Part IV — Excepted Specified Foreign Financial Assets. This is the carve-out section for assets reported on other forms. If you’ve already reported a foreign trust on Form 3520, a foreign corporation on Form 5471, a PFIC on Form 8621, or a foreign partnership on Form 8865, you list them in Part IV and don’t have to repeat the details in Parts V/VI. This prevents double reporting but doesn’t reduce your threshold calculation — you still count those assets toward the threshold determination.
Part V — Detailed Information for Each Foreign Deposit and Custodial Account. This is one row per account. Account number, institution name and address, account type, opened/closed during year, joint with spouse indicator, maximum value during the year, exchange rate used. If you’ve got eight foreign bank accounts, Part V has eight rows.
Part VI — Detailed Information for Each Other Foreign Asset. One row per SFFA that isn’t a deposit or custodial account. Description of asset, identifying information, status (acquired/disposed during year), maximum value, exchange rate, issuer name, issuer type (individual, corporation, partnership, trust, etc.), issuer address.
Mechanical tip: most tax software now handles Form 8938 natively, but you have to enter the data carefully. Software won’t catch a missing account. We pull the underlying statements, list every account on a working schedule, and tick them off against Part V/VI as we input them. That extra reconciliation step is the difference between a clean 8938 and a 30-day-penalty-notice 8938.
Penalties: $10,000 Starting, $50,000 Capped, Criminal Exposure on Top
Form 8938 has its own penalty regime under IRC §6038D(d). The structure is tiered and escalates with time.
Initial failure-to-file penalty: $10,000. Triggered by failing to file Form 8938 by the return due date (including extensions) when it should have been filed. This applies regardless of whether the omission was intentional or accidental. There’s no reasonable-cause defense built into the statute itself, though the IRS may consider reasonable cause arguments — the bar is high.
Continuation penalty: After the IRS sends a notice demanding the form, you have 90 days to file. If you don’t, an additional $10,000 applies for each 30-day period (or fraction) of continued non-filing, up to a maximum continuation penalty of $50,000. So the worst-case civil penalty for one year of non-filing tops out at $60,000 — the initial $10,000 plus $50,000 in continuation.
Accuracy-related penalty: If the omitted information results in an understatement of tax, the §6662 accuracy penalty applies — 40% of the understatement attributable to undisclosed foreign financial assets. That’s a doubled rate compared to the standard 20% accuracy penalty. The 40% rate sits in IRC §6662(j).
Criminal penalties: Willful failure to file Form 8938 can be prosecuted under §7203 (failure to file) as a misdemeanor, with up to one year in prison and a $25,000 fine. Willful filing of a false form falls under §7206 — felony, up to three years and $100,000. Criminal prosecutions for 8938 alone are rare. They usually come bundled with FBAR willfulness, unreported income, and other tax crimes. But the exposure is real, and prosecutors have used 8938 omissions to support broader cases.
Statute-of-limitations extension: Failure to file Form 8938 keeps the assessment statute open for the entire return until three years after the form is finally filed. Under IRC §6501(c)(8), the IRS can come back six years on income from foreign assets if the understatement exceeds $5,000. This is the underrated consequence. Most clients fixate on the $10,000 penalty. The bigger problem is often that one missing form gives the IRS six extra years to audit everything else on your return.
Reasonable cause: §6038D(g) lets you avoid the penalty if you can show reasonable cause and not willful neglect for the failure. The IRS reads this narrowly. “My accountant didn’t tell me” is not reasonable cause unless you can show you provided complete information to a qualified preparer who failed in their duties. “I didn’t know” almost never works for US citizens and resident aliens, who are presumed to know their tax obligations. Reasonable cause works better for first-year green card holders and certain inbound transferees with limited US tax exposure history.
Streamlined Filing Compliance Procedures: For taxpayers whose non-filing was non-willful, the IRS offers Streamlined Filing Compliance Procedures. The streamlined program waives the §6038D penalty (and accuracy penalty) in exchange for filing three years of amended returns plus six years of FBARs, paying any tax due plus interest, and certifying non-willful conduct. For US residents the program requires a 5% offshore penalty on the year-end value of foreign accounts. For non-residents the penalty is zero. Streamlined is the cleanest fix when it applies — but it has to be entered before the IRS contacts you about the issue.
Counterintuitive point: many clients delay disclosure hoping the IRS won’t notice. The data sharing under FATCA has changed the math. Over 100 countries now report US-owned accounts to the IRS automatically. The agency often already has the data before they send a notice. Waiting is usually the worst option.
Common Form 8938 Errors We See on Cleanup Engagements
After handling several hundred 8938s over the years, the errors fall into a few patterns. None of these are exotic. Most are detail-level mistakes that turn a clean filing into one the IRS questions.
Omission of small accounts. The threshold is aggregate, but once you cross it, every reportable asset gets listed. Filers commonly list their main brokerage account and forget the €2,000 checking account they opened for groceries. The form is incomplete, the IRS can deem it not filed, and the $10,000 penalty applies. We always pull a list of every foreign institution from credit reports, banking aggregators, and direct client interviews before signing the form.
Wrong exchange rates. The IRS allows year-end Treasury rates or any other published rate as long as it’s reasonable and consistently applied. The mistake is using the rate on the date the account was opened, or the average rate for the year, when the rule wants the rate on the relevant valuation date (December 31 for year-end value, the date of the peak balance for the high-water mark). Wrong rates throw off the threshold calculation and the per-asset values.
Failure to use Part IV for already-reported assets. If a foreign corporation interest is on Form 5471, it goes in Part IV of Form 8938, not Part VI. Filers who don’t know about Part IV either duplicate the reporting (filling out both 5471 and 8938 Part VI) or skip 8938 entirely on the assumption that 5471 was enough. Neither approach is right. Part IV is the bridge.
Foreign real estate misclassification. We see this constantly. A client owns a house in Italy through an Italian LLC (SRL). The house value is €600,000. The client doesn’t file 8938 because they read that foreign real estate doesn’t count. But the SRL interest does count. The reportable asset is the interest in the entity, valued at fair market value, not the real estate itself. The IRS treats the underlying real estate as the entity’s asset, not the taxpayer’s.
Joint account misallocation on MFS returns. When spouses file MFS and own joint foreign accounts, each spouse reports their half. We see returns where both spouses reported 100% of the joint account on their respective forms, doubling the apparent foreign asset values to the IRS. We also see returns where only one spouse reported and the other didn’t, leaving half the value off the system.
Pension plan confusion. Foreign pensions are messy. Some are treated like Social Security under treaty and excluded. Others are reportable as foreign trusts on Form 3520. Others are reportable as SFFAs on Form 8938. The treatment depends on the country, the plan type, and applicable treaty language. We see filers either over-report (putting Social Security equivalents on 8938 unnecessarily) or under-report (missing reportable employer pensions entirely). The fix is plan-specific analysis using country guides and treaty research.
Missing form entirely because FBAR was filed. The most common error, by a wide margin. The taxpayer filed an FBAR, assumed they were done, and didn’t file 8938. We catch this on review of prior-year returns and usually have to go through streamlined or quiet disclosure to fix it.
Final practical note: review every prior 8938 you filed when you sit down for the current year. Account closures, asset transfers, valuation changes, and new accounts all need to be tracked year over year. The form is not a one-time setup. It’s an annual reconciliation.
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Frequently Asked Questions
What is FATCA Form 8938 explained for an average US expat?
For an average US expat, FATCA Form 8938 explained in the most direct way is this: it’s the form you attach to your annual US tax return to disclose foreign financial accounts and investments you own, when the total value crosses certain thresholds. It’s required by Internal Revenue Code §6038D, which Congress passed as part of FATCA in 2010. The form lives with your 1040 — same deadline, same envelope, same software.
The thresholds for an expat are higher than for someone living in the US. A single expat files Form 8938 when foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any point during the year. Married filing jointly expats use $400,000 and $600,000. Those numbers sound generous until you add up a Spanish brokerage account, a German pension, a UK ISA, and a French bank account. Many expats cross the threshold without realizing it because they’re thinking in euros or pounds, not US dollars.
FATCA Form 8938 explained from a practical standpoint means understanding three things. First, the form is separate from the FBAR. You file both — different agencies, different scopes. Second, the form lists every reportable foreign account or asset, not just the big ones. Once you cross the threshold, you disclose every account, even the €500 emergency fund. Third, the form ties the foreign assets to the income they generated. Interest from your foreign savings account on Part III matches the interest line on Schedule B.
The asset categories an expat typically reports are foreign deposit accounts (checking, savings), foreign brokerage accounts, foreign-issued mutual funds and ETFs (often PFICs with separate complications), foreign pensions and retirement plans not on Form 3520, foreign-issued life insurance with cash value, and direct ownership of foreign stock or partnership interests. Foreign real estate held directly does not count. Foreign real estate held inside a foreign LLC, SRL, GmbH, or other entity does count — you report the entity interest, not the underlying property.
FATCA Form 8938 explained in terms of what’s at stake: the failure-to-file penalty starts at $10,000. The continuation penalty after IRS notice adds up to $50,000 more. The accuracy-related penalty on any tax understatement attributable to undisclosed foreign assets is 40% — double the normal rate. And critically, failing to file extends the statute of limitations on your entire return, meaning the IRS can come back six years or more to audit everything else, not just the foreign piece.
For most expats we work with, the form takes a few hours per year if records are well-maintained. The harder part is getting the records in shape — pulling year-end statements from every foreign institution, translating local-currency values to US dollars at the right exchange rates, and identifying which assets need to be reported elsewhere first (PFICs on Form 8621, foreign trusts on Form 3520, foreign corporations on Form 5471). Once those other forms are sorted, Part IV of Form 8938 carries the cross-reference and the same asset doesn’t get listed twice in Parts V or VI.
If you’re an expat reading this and you haven’t filed Form 8938 in past years where you should have, the cleanest path is the Streamlined Filing Compliance Procedures. The program waives the §6038D penalty in exchange for filing three amended returns and six FBARs, paying any tax owed plus interest, and certifying non-willful conduct. For non-resident filers (which most full-time expats qualify as) the 5% offshore penalty is waived. Streamlined has to be entered before the IRS contacts you about the issue — once they reach out, the program is no longer available.
Our usual advice to expat clients: file Form 8938 if you’re anywhere near the threshold, even if you think you’re under. Over-reporting costs nothing. Under-reporting costs $10,000 minimum plus statute-of-limitations exposure on your entire return. The math isn’t close. Visit our expat tax services page for how we work with US persons living abroad.
Does FATCA Form 8938 explained replace the FBAR?
No. FATCA Form 8938 explained correctly means understanding that it does not replace the FBAR. The two forms coexist. Most filers with foreign accounts file both, every year, separately, to two different agencies.
The FBAR (FinCEN Form 114) goes to the Financial Crimes Enforcement Network — part of Treasury, but not part of the IRS. It’s filed online through the BSA E-Filing System and lives outside the income tax return entirely. The legal authority is the Bank Secrecy Act of 1970, not the Internal Revenue Code. The threshold is simple: $10,000 aggregate maximum value across all foreign financial accounts at any point during the calendar year.
Form 8938 goes to the IRS, attached to your income tax return. It’s authorized by IRC §6038D, added by FATCA in 2010. The thresholds vary by filing status and residence — $50,000/$75,000 for single domestic filers, climbing to $400,000/$600,000 for MFJ filers living abroad. Same accounts often appear on both forms in the same year.
FATCA Form 8938 explained in comparison to the FBAR: the 8938 has a higher dollar threshold (so fewer filers hit it) but a broader scope of reportable assets (so it catches things FBAR misses). FBAR covers foreign financial accounts — bank, brokerage, and a few specifically named instruments. Form 8938 covers “specified foreign financial assets,” which includes accounts plus directly held foreign stock, foreign partnership interests, foreign-issued bonds held outside an account, foreign trust interests, foreign retirement plans, foreign life insurance with cash value, and several other categories.
Another sharp difference: signatory-only accounts. The FBAR requires reporting of any foreign financial account over which you have signature or other authority, even if you have no financial interest in it. The corporate controller signing checks on a Hong Kong subsidiary’s bank account files FBAR for that account, every year, even though they don’t own it. Form 8938 only requires reporting when you have a beneficial ownership interest. Signatory-only accounts don’t go on 8938.
FATCA Form 8938 explained from a penalty perspective looks different than FBAR penalties too. FBAR non-willful penalty maxes at around $16,000 per violation (adjusted for inflation from the statutory $10,000). FBAR willful penalty is the greater of $100,000 or 50% of the account balance — and willful FBAR violations can also trigger criminal prosecution. Form 8938 starts at $10,000, can reach $60,000 in civil penalties for one year (with the continuation penalty), and triggers the 40% accuracy penalty on related tax understatements.
The most damaging difference is the statute of limitations. Failing to file Form 8938 keeps the IRS’s assessment window open on your entire return — not just the foreign piece. Under IRC §6501(c)(8), the agency can come back six years or longer to audit any item on the return as long as the 8938 remains unfiled and there’s at least $5,000 of related understatement. The FBAR has its own six-year BSA statute but doesn’t affect the income tax statute. So from a return-reopening perspective, missing 8938 is usually the bigger exposure.
The practical takeaway: file both. They take different information, they go to different agencies, and they protect against different risks. We’ve never advised a client to skip one because they filed the other. FATCA Form 8938 explained as a substitute for the FBAR is a misunderstanding that ends up costing money.
How are FATCA Form 8938 explained thresholds different for filers living abroad?
The thresholds change dramatically based on residence. FATCA Form 8938 explained in terms of threshold structure has four pairs of numbers, and where you live determines which pair you use. For filers living abroad, the thresholds are four times higher than for filers in the US.
Domestic single filer: $50,000 on the last day of the year or $75,000 at any point during the year. Domestic married filing jointly: $100,000 last day or $150,000 anytime. These are the lowest thresholds. A New York-based single filer with $60,000 spread across two foreign accounts at year-end files Form 8938. A US-based couple with $130,000 in a joint foreign brokerage at any point during the year files Form 8938.
Abroad single filer: $200,000 last day or $300,000 anytime. Abroad MFJ: $400,000 last day or $600,000 anytime. The same single filer with $60,000 in foreign accounts, but now living in Berlin and meeting the bona fide residence test, doesn’t file Form 8938 — the threshold is $200,000, not $50,000.
FATCA Form 8938 explained at the threshold level recognizes a real-world difference. Someone genuinely living in another country naturally has higher foreign account balances. They get paid into a local bank, they save into local investment accounts, they contribute to a local pension. Setting the domestic threshold for them would produce a flood of $50,000 disclosures that don’t tell the IRS anything useful. The abroad thresholds target the actually-substantial foreign holdings.
To qualify for the abroad thresholds, you have to meet either the bona fide residence test or the physical presence test from IRC §911 — the same tests that gate the foreign earned income exclusion under Form 2555. Bona fide residence means you’ve been a bona fide resident of one or more foreign countries for an uninterrupted period that includes a full tax year. Physical presence means you were physically present in foreign countries for at least 330 full days during any 12-month period that overlaps the tax year.
These tests don’t overlap with the threshold automatically. You can meet them for §911 purposes but not for Form 8938 if your residence pattern straddles the calendar year. A US citizen who moved to London on July 1 and stayed there through year-end might meet physical presence by November of the following year (330 days starting July 1). For Form 8938 purposes in the year of the move, though, they probably don’t qualify for the abroad thresholds because the bona fide residence test requires a full tax year of residence. They use the domestic thresholds for the partial year.
FATCA Form 8938 explained for dual-status filers (someone who became or stopped being a US resident during the year) follows the same logic. Whatever your status is at year-end usually determines the threshold pair, but the tests have to be satisfied by the end of the tax year, not retroactively. We work through this with clients who relocate mid-year, because the wrong threshold pick can either trigger an unnecessary filing or miss a required one.
MFS expats use the single thresholds — $200,000/$300,000 if both spouses live abroad. If only one spouse lives abroad and the other is in the US, things get complicated. The IRS instructions treat each spouse based on their own residence for threshold purposes, even on a joint return — but since joint returns require both spouses’ foreign assets to be combined, the threshold becomes the higher of the two applicable pairs. We’ve had to work through this manually on returns where one spouse moved abroad mid-year.
Bottom line: living abroad doesn’t exempt you from Form 8938, but it raises the dollar bar substantially. FATCA Form 8938 explained correctly accounts for this, and getting the threshold right is the first check we run on any expat engagement. For broader planning, see our tax strategy consulting page.
What specifically counts under FATCA Form 8938 explained that doesn’t count for FBAR?
The Form 8938 scope is wider than the FBAR scope on the asset side. FATCA Form 8938 explained in terms of “what counts” includes several categories the FBAR doesn’t reach. This is a frequent source of error for filers who assume the two forms cover the same things and only file one.
Directly held foreign stock and securities. If you own shares of a foreign company that are held outside any account — paper certificates, registered ownership through the foreign company itself, or any direct ownership arrangement — that interest is reportable on Form 8938 as a specified foreign financial asset. The FBAR doesn’t reach directly held securities because the FBAR’s scope is foreign financial accounts, and direct ownership isn’t an account. We see this with clients who inherited shares of foreign family businesses or received private foreign stock as part of compensation packages.
Foreign partnership interests held directly. An interest in a French SARL, a German GmbH treated as a partnership for US purposes, a Cayman partnership — held outside any account, in your own name — goes on Form 8938 in Part VI. FBAR doesn’t cover this either. The same partnership interest held through a brokerage account would be on both forms (the brokerage account on FBAR, the partnership interest within it on Form 8938 Part V or VI depending on how the account holds it).
Foreign-issued bonds and notes held outside an account. A direct holding of UK gilts, Italian government bonds, or a private note from a foreign borrower goes on Form 8938. Not on FBAR if it’s not in an account. This catches clients who lent money to a foreign business or family member and hold a private note as the only documentation.
Interests in foreign trusts and estates. A beneficial interest in a foreign trust is an SFFA on Form 8938 (often reported in Part IV with cross-reference to Form 3520). The FBAR doesn’t have a specific category for trust interests — it reaches accounts owned by the trust if the beneficiary has signature authority or financial interest under the FBAR rules, but the bare beneficial interest itself isn’t an FBAR item.
Foreign retirement plans and pensions (employer plans, not Social Security equivalents). A UK SIPP, a German Riester pension, an Australian superannuation account, a Swiss Pillar 2 or Pillar 3 plan — most of these are reportable on Form 8938. The FBAR position on pensions is more complicated. Some pensions have account features that pull them onto the FBAR; others don’t. Form 8938’s scope here is generally clearer and broader. FATCA Form 8938 explained in the pension context typically catches more than the FBAR does.
Foreign-issued life insurance and annuity contracts with cash value. A whole-life policy issued by a French insurer with a cash surrender value is an SFFA. A variable annuity from a Swiss insurer is an SFFA. Term life with no cash value is not. FBAR includes some insurance arrangements (those structured as accounts) but the SFFA category is broader.
Foreign mutual funds and ETFs held directly. If you own units of a foreign mutual fund directly through the fund company rather than through a brokerage account, that interest is an SFFA. Most foreign mutual funds are also PFICs (Passive Foreign Investment Companies) and trigger Form 8621 reporting with its own painful tax treatment — but Form 8938 still wants the SFFA disclosure, cross-referenced to Form 8621 in Part IV.
On the other side, FATCA Form 8938 explained also has some narrower scope than the FBAR. Signatory-only authority over a foreign account doesn’t trigger Form 8938 — only beneficial ownership does. So the corporate officer with check-signing authority on the foreign subsidiary’s account files FBAR but not Form 8938 for that account. And Form 8938 has a higher dollar threshold, so plenty of filers hit FBAR but never reach 8938.
Bottom line: the two forms overlap but neither one is a subset of the other. Filing one doesn’t satisfy the other. The accurate FATCA Form 8938 explained framing is “complementary, not substitute.” We work through both forms in parallel on every expat engagement, and we cross-check the lists against each other to catch anything that landed on one but not the other when it should have been on both.
What are the penalties when FATCA Form 8938 explained reporting is missed?
FATCA Form 8938 explained from the penalty angle gets ugly fast. The civil penalty regime in IRC §6038D(d) starts at $10,000 and the related provisions push the total exposure much higher. There’s criminal exposure on top, and a separate consequence that’s often the most damaging — the statute of limitations extension on the entire return.
Failure-to-file penalty: $10,000 per year the form should have been filed but wasn’t. This is the baseline. It applies whether the omission was inadvertent or deliberate. The statute doesn’t carve out an automatic reasonable-cause defense, though the IRS may consider reasonable-cause arguments in practice. The bar for reasonable cause is high — “I didn’t know” generally doesn’t qualify for US citizens or longtime resident aliens, who are presumed to know their filing obligations.
Continuation penalty: After the IRS sends a notice demanding the form, you have 90 days to file. If you don’t, the agency assesses an additional $10,000 for every 30-day period (or fraction thereof) of continued non-filing, capped at $50,000. So one year of non-filing can produce $60,000 in civil penalties — $10,000 initial plus $50,000 continuation — before you’ve even gotten into accuracy penalties or interest.
Accuracy-related penalty: If the unreported foreign assets generated income you also failed to report, the §6662 accuracy penalty applies at the doubled 40% rate under §6662(j) for the portion of understatement attributable to undisclosed foreign financial assets. Standard accuracy penalty is 20%; the foreign-asset penalty doubles it. On a $25,000 understatement of tax, that’s $10,000 in accuracy penalty alone, on top of the form penalties.
Statute of limitations extension: This is the consequence most clients underestimate. Under IRC §6501(c)(8), failing to file Form 8938 keeps the IRS’s assessment window open on the entire tax return until three years after the form is finally filed. Under §6501(e)(1)(A)(ii), if the omission of foreign asset income exceeds $5,000, the assessment window extends to six years. In practical terms, one missed 8938 can give the IRS six extra years to audit anything on your return — not just the foreign piece. The full return reopens. FATCA Form 8938 explained as a procedural form misses this point. The statute extension is the procedural teeth.
Criminal exposure: Willful failure to file under IRC §7203 is a misdemeanor — up to one year in prison, $25,000 fine, plus costs of prosecution. Willfully filing a false form under §7206 is a felony — up to three years in prison and $100,000 fine. Criminal prosecutions specifically for Form 8938 alone are rare. They usually come as add-on counts in broader cases involving FBAR willfulness, unreported income, structuring, or other tax crimes. But the exposure is real and prosecutors do use 8938 omissions as part of pattern-of-conduct evidence.
Reasonable cause: §6038D(g) lets you avoid the form penalty if you can show reasonable cause and not willful neglect. The IRS reads this narrowly. The factors that help — recent immigration to the US, language barriers, first-year US residence, qualified preparer who was provided complete information and failed in their duty. The factors that hurt — longtime US citizenship, prior tax sophistication, evidence of intentional avoidance. We’ve successfully argued reasonable cause in a handful of cases. It’s not the bet to make if you can avoid it.
Streamlined Filing Compliance Procedures: The IRS Streamlined program is the main route for taxpayers whose non-filing was non-willful. The program waives the §6038D penalty and the accuracy-related penalty in exchange for three years of amended returns, six years of FBARs, payment of any tax due plus interest, and a non-willfulness certification. For taxpayers meeting the foreign residence requirement, the 5% offshore penalty is waived entirely. For US-resident filers, the 5% offshore penalty applies to the year-end value of foreign accounts but in exchange you wipe out the much larger $10,000-per-year form penalty exposure. Streamlined must be entered before the IRS contacts you about the issue — once they reach out, the program closes for that taxpayer.
FATCA Form 8938 explained from a risk-management view: file it. Always file it when you’re near the threshold. Over-reporting costs nothing. Under-reporting starts at $10,000 and reopens your entire return for six more years. If you’ve already missed filings in past years and the IRS hasn’t contacted you yet, get into Streamlined before they do. Once a notice arrives, the cheapest path closes. For help with an unfiled-form cleanup, contact us through our new client inquiry form.