Form 8938, Statement of Specified Foreign Financial Assets, is a FATCA-mandated reporting form that requires U.S. taxpayers to disclose their ownership of specified foreign financial assets — including foreign bank and brokerage accounts, foreign stocks, securities, interests in foreign entities, foreign mutual funds, hedge funds, and certain foreign insurance or annuity policies with a cash value. Filing is generally required when the aggregate value of these assets exceeds $50,000 ($100,000 for married couples filing jointly) for domestic filers, or $200,000 ($400,000 jointly) for taxpayers residing abroad. The penalties for failing to file or filing an incomplete Form 8938 are significant: the IRS can impose a $10,000 base penalty, with additional penalties of $10,000 for each 30-day period of continued non-compliance after IRS notification, up to a maximum of $60,000. On top of that, any tax underpayment attributable to non-disclosed foreign financial assets is subject to a heightened 40% accuracy-related penalty. Failure to file also keeps the statute of limitations on the taxpayer’s entire income tax return open until three years after the non-compliance is cured, and willful violations may result in criminal prosecution.
Many taxpayers are unaware that Form 8938 is a separate and distinct requirement from the FBAR (FinCEN Form 114), and that filing one does not satisfy the other. Form 8938 covers a broader range of assets than the FBAR, including foreign stocks, securities, and interests in foreign entities that do not fall within FBAR reporting. The IRS actively cross-references information it receives from foreign financial institutions under FATCA with the data reported on taxpayers’ Form 8938 filings, and discrepancies between bank-reported balances and the amounts disclosed on the form are a significant audit trigger. For taxpayers who discover they have unfiled or incorrectly filed Forms 8938, several compliance pathways exist to mitigate penalty exposure, including the Delinquent International Information Return Submission Procedures (DIIRSP), the Streamlined Domestic Offshore Procedures (SDOP), the Streamlined Foreign Offshore Procedures (SFOP), and the Voluntary Disclosure Practice (VDP). Each program has distinct eligibility requirements, and the right choice depends on the taxpayer’s individual facts and circumstances, including whether unreported income is involved and whether the conduct was willful or non-willful.
Patel Law Offices has counseled hundreds of taxpayers in determining their Form 8938 filing requirements, preparing accurate returns or amendments, seeking penalty relief, and defending against IRS examinations. Led by Mr. Patel — a Board Certified Tax Law Attorney and graduate of Georgetown (J.D.) and New York University (LL.M. in Tax) — our legal team has counseled over 1,000 clients in international tax compliance and voluntary disclosure matters and cures common Form 8938 errors for clients around the globe. We understand the overlap and interplay between Form 8938, the FBAR, and other international information returns such as Forms 5471, 3520, and 8865, and we ensure our clients achieve comprehensive compliance across all reporting obligations. If you have unfiled or late Forms 8938, have received a penalty notice from the IRS, or are concerned about foreign asset reporting exposure, contact Patel Law Offices to schedule a strategy session.