Form 8938: The Most Overlooked Overseas Asset Filing — Avoid Costly FATCA Penalties in 2025
Many taxpayers assume that filing FBAR alone completes their foreign reporting obligations.
But for anyone with substantial bank accounts, investments, or foreign financial assets, Form 8938 (FATCA Report) is often required — and failing to file can trigger massive IRS penalties.
📌 Table of Contents
1️⃣ What Is Form 8938?
Form 8938 is part of the FATCA (Foreign Account Tax Compliance Act) regulations.
It requires U.S. taxpayers to report certain foreign financial assets directly to the IRS.
Unlike FBAR — which is filed with the Treasury — Form 8938 is submitted as part of your annual tax return (Form 1040).
The purpose is simple: the IRS wants transparency about foreign investments, foreign income sources, and offshore asset ownership — regardless of whether those assets produced income.
2️⃣ Who Must File Form 8938?
You must file Form 8938 if you are a U.S. Person and your total value of specified foreign financial assets exceeds the IRS thresholds.
This includes U.S. citizens, green card holders, and anyone treated as a U.S. tax resident.
3️⃣ Reporting Thresholds for 2025
The Form 8938 thresholds depend on your filing status and where you live.
🏠 U.S. Residents (most taxpayers)
- Single / Married Filing Separately:
– $50,000 at year-end, or
– $75,000 at any time during the year - Married Filing Jointly:
– $100,000 at year-end, or
– $150,000 at any time during the year
🌍 U.S. Expats (living outside the U.S.)
- Single / MFS:
– $200,000 at year-end, or
– $300,000 at any time - Married Filing Jointly:
– $400,000 at year-end, or
– $600,000 at any time
FBAR uses a simple $10,000 combined maximum balance rule.
Form 8938 uses filing-status–based thresholds and includes more categories of assets.
4️⃣ What Assets Are Reportable?
Form 8938 covers a wide range of foreign financial assets, including:
- Foreign bank accounts
- Foreign brokerage and securities accounts
- Foreign stocks (even if held directly, outside an account)
- Mutual funds, ETFs, and foreign investment funds
- Foreign retirement or pension plans (varies by country)
- Cash value in foreign life insurance or investment-linked policies
- Ownership in foreign entities (certain cases)
Directly held foreign stocks or foreign mutual funds may require Form 8938 reporting even if they are not included on FBAR.
This is one of the most common filing errors among U.S. taxpayers with overseas investments.
5️⃣ Key Differences Between FBAR and Form 8938
Many people confuse these two forms. Here is a clear comparison:
| FBAR (FinCEN 114) | Form 8938 (FATCA) |
| Treasury Department | IRS (part of Form 1040) |
| $10,000 combined maximum balance | $50k–$600k depending on residence & filing status |
| Bank & financial accounts | Financial assets (stocks, funds, insurance, accounts, etc.) |
| Filed online via BSA E-Filing | Filed with annual tax return |
6️⃣ How to File Form 8938
Form 8938 is submitted along with your federal income tax return.
- Gather information on each foreign asset
- Determine the highest value during the year
- Apply IRS year-end exchange rates
- Attach Form 8938 to your Form 1040
- Report foreign income (interest, dividends, gains) separately
Same as your regular tax return — April 15, or October 15 when extended.
7️⃣ Penalties for Non-Filing
Form 8938 penalties are significant and can escalate quickly.
- $10,000 initial penalty for failure to file
- Up to $50,000 additional penalties for continued noncompliance
- Potential criminal charges for intentional non-filing
Over 100 countries — including South Korea — share financial information with the U.S.
The IRS often already has access to foreign account data before a taxpayer files.
8️⃣ Real-Life Example
Sarah holds the following assets overseas:
– Korean stocks: $42,000
– Foreign bank deposits: $26,000
– A mutual fund investment: $14,000
Total value at year-end = $82,000.
Since she files as Single and exceeds the $50,000 year-end threshold, she must file Form 8938 for 2025.
9️⃣ EA Practitioner Tips
1) Use official IRS year-end FX rates (can differ from FinCEN rates).
2) Filing FBAR does not satisfy Form 8938 requirements — they are separate.
3) Foreign pensions and cash-value insurance often trigger Form 8938.
4) Ownership in foreign businesses requires advanced reporting — consult a tax professional.
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