IRS Instruction 8938 – IRS Forms, Instructions, Pubs 2026 – In an increasingly globalized world, many U.S. taxpayers hold assets abroad, from foreign bank accounts to investments in international stocks. If you’re one of them, understanding IRS Form 8938—Statement of Specified Foreign Financial Assets—is crucial to staying compliant with U.S. tax laws. This form, introduced under the Foreign Account Tax Compliance Act (FATCA), helps the IRS track foreign assets to prevent tax evasion. Failing to file can lead to hefty penalties, so whether you’re an expat, investor, or business owner, this guide breaks down the instructions for Form 8938, including who needs to file, what to report, and updates for the 2026 filing season (for tax year 2025).
What Is IRS Form 8938 and Its Purpose?
Form 8938 is an information return that U.S. taxpayers use to disclose certain foreign financial assets if their total value exceeds specific thresholds. It’s part of the IRS’s efforts to ensure transparency in international holdings, complementing other reporting requirements like the FBAR (FinCEN Form 114). The form doesn’t calculate taxes owed but reports asset details that might impact your tax liability. Unlike income-based forms, Form 8938 focuses on asset values, even if they generate no income.
Key purpose: To report “specified foreign financial assets” and help the IRS cross-check income from abroad. Filing Form 8938 doesn’t replace FBAR requirements; you may need both if thresholds are met.
Who Must File Form 8938?
You must file if you’re a “specified person” with foreign assets exceeding the reporting thresholds. Specified persons include:
- Specified Individuals: U.S. citizens, resident aliens, nonresident aliens electing to be treated as residents, and bona fide residents of U.S. territories.
- Specified Domestic Entities: Certain corporations, partnerships, and trusts formed or used to hold foreign assets, with at least 50% U.S. ownership.
Exception: If you don’t need to file a U.S. income tax return (e.g., income below filing thresholds), you skip Form 8938 even if asset values are high.
Reporting Thresholds for Form 8938
Thresholds vary by filing status, marital status, and residency. They remain unchanged for the 2026 filing season (tax year 2025). Use the higher of the year-end value or maximum value during the year.
| Filing Status | Living in the U.S. (Year-End / Anytime) | Living Abroad (Year-End / Anytime) |
|---|---|---|
| Unmarried or Married Filing Separately | $50,000 / $75,000 | $200,000 / $300,000 |
| Married Filing Jointly | $100,000 / $150,000 | $400,000 / $600,000 |
| Specified Domestic Entities | $50,000 / $75,000 | N/A |
For expats “living abroad,” you must meet the physical presence or bona fide residence test under IRC Sections 911(d)(1).
What Counts as Specified Foreign Financial Assets?
Specified foreign financial assets include a broad range of holdings not held in U.S. accounts. Common examples:
- Financial accounts at foreign banks or institutions (e.g., checking, savings, brokerage).
- Stocks or securities issued by non-U.S. persons.
- Interests in foreign entities like partnerships, corporations, trusts, or estates.
- Financial instruments or contracts with foreign issuers or counterparties (e.g., swaps, options, derivatives).
Assets held for investment qualify; business-use assets generally don’t. Report interests even if indirect (e.g., through a disregarded entity).
How to Value Your Foreign Assets
Value assets in U.S. dollars using fair market value. Key rules:
- Convert foreign currency using the U.S. Treasury exchange rate on the last day of the tax year (or a consistent good-faith source if unavailable).
- For unknown values (e.g., foreign pensions), use distributions received or estimate maximum value.
- Jointly owned assets: Report full value on joint returns; prorate for separate filings with spouses.
- Maximum value: Report the highest value during the year; use zero for negative values.
Attach additional statements if you have many assets.
Exceptions and Assets Not Required to Report
Not all foreign assets trigger filing. Exceptions include:
- Assets already reported on other IRS forms (e.g., Form 3520 for foreign trusts, Form 5471 for foreign corporations, Form 8621 for PFICs, Form 8865 for foreign partnerships).
- Domestic mutual funds, IRAs, or 401(k)s holding foreign investments.
- Bona fide U.S. possession residents’ local assets.
- Foreign grantor trusts if Forms 3520/3520-A are filed timely.
- Certain tax-favored foreign retirement trusts under Rev. Proc. 2020-17 (but this doesn’t affect Form 8938 obligations).
Always note which other forms were filed to claim exceptions.
How and When to File Form 8938?
Attach Form 8938 to your annual tax return (e.g., Form 1040, 1040-NR, 1040-SR, 1041, 1065, or 1120) by the due date, including extensions. For 2026 filings (tax year 2025):
- Individuals: Due April 15, 2026 (automatic extension to October 15, 2026).
- Electronic filing: Supported via Free File Fillable Forms or tax software.
Amended returns require an amended Form 8938 if needed. Don’t file standalone—always attach to a return.
Penalties for Not Filing Form 8938
Non-compliance is costly:
- Failure to file: $10,000 initial penalty, plus $10,000 every 30 days (up to $50,000 max).
- Accuracy-related penalty: 40% of underpayment if assets are undisclosed.
- Fraud penalty: 75% of underpayment.
- Criminal penalties: Possible for willful violations.
- Extended statute of limitations: 3 years for non-filing; 6 years if over $5,000 in income is omitted.
The IRS has ramped up audits for foreign assets in 2026, so voluntary disclosure programs like Streamlined Filing Compliance may help if you’re behind.
Form 8938 vs. FBAR: Key Differences
While both report foreign assets, they’re distinct:
- FBAR: Focuses on foreign bank accounts; filed separately to FinCEN by June 30; threshold $10,000 max value anytime.
- Form 8938: Broader assets; attached to tax return; higher thresholds; focuses on tax implications.
Many taxpayers file both. Check the IRS comparison chart for details.
Recent Updates for Form 8938 in 2026
As of February 2026, no major threshold changes, but note:
- Extended FATCA relief for foreign financial institutions through 2027, aiding compliance for banks.
- Ongoing IRS evaluation of digital assets (e.g., crypto held abroad) under FATCA rules.
- Form remains continuous-use, with updates posted on IRS.gov/Form8938.
For LLC owners, confirm if your entity qualifies as a specified domestic entity.
Final Thoughts on Complying with IRS Instructions for Form 8938
Navigating Form 8938 can be complex, especially for expats or those with diverse international investments. Always consult a tax professional to ensure accuracy and avoid penalties. Download the latest instructions from the IRS website and review your assets annually. Staying informed keeps you compliant and protects your financial future.
For more details, visit the official IRS page on Form 8938 or related publications. If you have questions about your specific situation, consider IRS resources or professional advice.