Key Distinction: Form 8938 and FBAR Are Two Separate, Independent Requirements
- Form 8938 (FATCA, IRC 6038D) is filed with the federal income tax return and administered by the IRS.
- FBAR (FinCEN Form 114) is filed separately with FinCEN under the Bank Secrecy Act, not with the IRS.
- Compliance with one does NOT satisfy the other. Both must be evaluated independently for every client with foreign financial activity.
- Form 8938 thresholds vary by filing status and whether the taxpayer lives in the U.S. or abroad. Verify all thresholds at IRS.gov. FBAR thresholds are separate; verify at FinCEN.gov.
- Specified Foreign Financial Assets (SFFAs) on Form 8938 are broader than FBAR-reportable accounts: they include directly held foreign stocks, foreign partnership interests, and foreign financial instruments, in addition to financial accounts at foreign institutions.
- Penalties apply independently under each regime. Do not state specific amounts; verify at IRS.gov and FinCEN.gov.
- If the client holds foreign mutual funds or ETFs that are PFICs, Form 8621 is an additional separate companion filing. See Section 4 of this guide.
The Foreign Account Tax Compliance Act (FATCA) created a reporting obligation that operates in parallel with, but independent of, the FBAR. For practitioners who work with clients holding foreign investments, Form 8938 is not a substitute for FBAR screening; it is an additional layer that covers a materially broader asset class. A client who owns foreign securities directly, holds interests in foreign partnerships, or participates in foreign defined-contribution plans may have a Form 8938 obligation that would not be surfaced by the FBAR analysis alone.
This guide is written for enrolled agents, CPAs, and tax attorneys. It covers the statutory background and who must file, the full scope of specified foreign financial assets and how it exceeds FBAR coverage, the Form 8938 vs. FBAR comparison on every material dimension, the PFIC and Form 8621 interaction, the IRC 6038D penalty structure, the streamlined filing compliance procedures for non-willful FATCA non-compliance, the extended statute of limitations for SFFA income omissions, and a practitioner workflow for each new client engagement. For the companion FBAR analysis, see the FBAR Foreign Account Compliance Practitioner Guide. For the GILTI, NCTI, and OBBBA framework that intersects with corporate and pass-through international tax, see the NCTI/GILTI Form 8992 and OBBBA International Tax Practitioner Guide.
All threshold amounts, penalty figures, eligibility criteria, and program specifics in this guide must be verified at IRS.gov before relying on them in any specific matter. The IRS updates Form 8938 instructions, penalty amounts, and program procedures; current figures govern. Clients with potential willful FATCA exposure should be referred to international tax counsel before any compliance submission.
Section 1: FATCA Background and the Form 8938 Filing Requirement
The Foreign Account Tax Compliance Act (FATCA) was enacted as part of the Hiring Incentives to Restore Employment Act (HIRE Act) in 2010. Its domestic reporting component, IRC 6038D, requires "specified persons" who hold interests in "specified foreign financial assets" (SFFAs) exceeding applicable thresholds to disclose those assets annually on Form 8938, Statement of Specified Foreign Financial Assets.
Who must file: specified persons
The Form 8938 filing obligation applies to "specified persons," which the statute defines as:
- U.S. citizens, regardless of where they reside.
- Resident aliens, including green card holders and individuals who meet the substantial presence test under IRC 7701(b).
- Certain nonresident aliens who make an election under IRC 6013(g) or 6013(h) to be treated as U.S. residents for federal income tax purposes (for example, a nonresident alien who makes a joint-return election with a U.S. citizen or resident spouse). The scope of Form 8938 for nonresident aliens is hedged to the IRS.gov Form 8938 instructions; confirm before drawing any conclusion in a specific nonresident alien situation.
Nonresident aliens who have not made a 6013(g) or 6013(h) election are generally not subject to Form 8938. Verify this conclusion for any specific nonresident alien situation at IRS.gov Form 8938 instructions.
When thresholds apply: filing status and residency
The Form 8938 filing threshold, the point at which the aggregate value of SFFAs triggers the reporting obligation, is not a single uniform figure. It varies based on two factors:
- Filing status: different thresholds apply for single filers versus married filing jointly.
- Residency during the tax year: higher thresholds apply to taxpayers who were physically present in a foreign country for the required period during the tax year. Do not advise a client on threshold amounts without first verifying the current thresholds at IRS.gov Form 8938 instructions; these figures govern and are the authoritative source.
Where and when Form 8938 is filed
Form 8938 is part of the federal income tax return. It is attached to Form 1040 (individual), Form 1040-NR (nonresident alien), Form 1041 (estate or trust), or the applicable return. It is submitted to the IRS as a component of the tax return, not filed separately with any other agency. The due date matches the due date of the underlying return, including any valid extension.
DIFFERENT AGENCY, DIFFERENT DEADLINE, DIFFERENT FORM
FBAR (FinCEN Form 114) is filed with FinCEN at the BSA E-Filing portal by April 15, with an automatic extension to October 15 (no request needed). Form 8938 is filed with the IRS, attached to the federal tax return, by the return due date including any extension. A client with a Form 4868 filing extension has until October 15 to file both the return (with Form 8938 attached) and the FBAR, but each deadline is governed by its own rules. Practitioner error on filing location is a separate compliance failure from late filing.
Section 2: What Must Be Reported -- Specified Foreign Financial Assets
The scope of what must be disclosed on Form 8938 is defined by IRC 6038D's category of "specified foreign financial assets." This is a broader category than the "foreign financial accounts" covered by FBAR. Practitioners must evaluate both standards; the overlap is significant, but neither set is fully contained in the other.
The four categories of SFFAs
Financial accounts maintained by a foreign financial institution
This category captures the same accounts that FBAR covers and more: savings accounts, checking accounts, brokerage accounts, securities accounts, pension and retirement accounts, deferred compensation plans held at a foreign financial institution, and foreign life insurance contracts with cash surrender value held at a foreign institution. The definition of "foreign financial institution" for Form 8938 purposes is set by IRS regulations under IRC 6038D; verify the current definition at IRS.gov Form 8938 instructions. This category substantially overlaps with FBAR-reportable accounts, but the threshold analysis is separate under each regime.
Foreign stocks or securities held directly (not in a foreign financial institution account)
This is the most important expansion beyond FBAR. Stock in a foreign corporation held directly by the taxpayer (in certificated form, in "street name" at a U.S. broker, or otherwise not through a foreign financial institution account) is a specified foreign financial asset reportable on Form 8938. It is NOT a foreign financial account and is NOT reportable on FBAR. A client who owns shares in a foreign company directly, without holding them through an account at a foreign financial institution, has a Form 8938 obligation and no corresponding FBAR obligation for that specific holding. Verify the current characterization of directly held foreign securities under the Form 8938 instructions at IRS.gov.
Foreign financial instruments (contracts, options, derivatives) issued by a foreign person
Foreign financial instruments, including contracts, options, and derivatives issued by a foreign person, are SFFAs. These are also not foreign financial accounts and do not appear on FBAR. A client who holds foreign-issued options or derivative contracts has a Form 8938 reporting obligation for those instruments if the aggregate value of SFFAs exceeds the applicable threshold. Verify the current definition of "foreign financial instrument" for Form 8938 purposes at IRS.gov Form 8938 instructions.
Any interest in a foreign entity not otherwise reported
Interests in foreign partnerships, foreign corporations, foreign trusts, and foreign estates are SFFAs to the extent they are not otherwise disclosed on a separate required international information return (for example, Form 5471 for certain foreign corporation interests, Form 8865 for certain foreign partnership interests, Form 3520 for foreign trust interests). Attribution and constructive ownership rules apply: trust beneficiaries and grantors of grantor-type foreign trusts may need to report their interest. Verify attribution and constructive ownership rules for Form 8938 purposes at IRS.gov before determining whether a specific interest in a foreign entity is an SFFA requiring separate Form 8938 disclosure.
The scope contrast: Form 8938 vs. FBAR in one sentence
Form 8938 covers all specified foreign financial assets (all four categories above). FBAR covers foreign financial accounts only (the first category). The practitioner who screens only for FBAR will miss directly held foreign stocks, foreign partnership interests, and foreign financial instruments that are SFFAs. The FBAR analysis and the Form 8938 analysis must both be run; they are not interchangeable.
Section 3: FBAR vs. Form 8938 -- The Critical Comparison
The two foreign reporting regimes share common territory (accounts at foreign financial institutions) but diverge significantly in assets covered, legal authority, filing mechanics, and penalty consequences. The table below organizes the key distinctions. For the FBAR side of this comparison in depth, see the companion FBAR Foreign Account Compliance Practitioner Guide.
| Dimension | Form 8938 (FATCA) | FBAR (FinCEN 114) |
|---|---|---|
| Legal authority | IRC 6038D (FATCA), enforced by the IRS | Bank Secrecy Act, 31 U.S.C. 5314, administered by FinCEN |
| Assets covered | All SFFAs: accounts at foreign financial institutions PLUS directly held foreign stocks, foreign partnership interests, foreign financial instruments, interests in foreign entities | Foreign financial accounts only (bank, brokerage, mutual fund accounts at foreign institutions) |
| Filing location | Attached to the federal income tax return; filed with the IRS | Filed separately with FinCEN via the BSA E-Filing System; not with the IRS |
| Deadline | Matches the tax return due date, including any valid extension (e.g., October 15 if a Form 4868 extension is filed) | April 15; automatic extension to October 15 with no separate request required |
| Threshold | Varies by filing status and whether taxpayer was abroad for the required period. Verify current thresholds at IRS.gov Form 8938 instructions. | Verify at FinCEN.gov. See the FBAR practitioner guide for the full threshold analysis. |
| Penalties | IRC 6038D civil penalties for failure to disclose; continuing failure penalty per month after IRS notice. Verify all amounts at IRS.gov. | BSA civil and criminal penalties; non-willful and willful tiers. Verify at FinCEN.gov and IRS.gov. |
| Statute of limitations | Extended to 6 years when taxpayer omits SFFA-attributable income above threshold per IRC 6501(e)(1)(A)(ii); threshold hedged to IRS.gov | Separate 6-year SOL under the Bank Secrecy Act, running from the FBAR due date |
| Does compliance satisfy the other? | No | No |
The asset gap: what Form 8938 covers that FBAR does not
The practical difference that most often surfaces at intake is the asset coverage gap. A client who owns shares of a foreign corporation through a U.S. brokerage account (held in street name at a U.S. broker, not a foreign financial institution) has a Form 8938 obligation if the aggregate SFFA value exceeds the applicable threshold, but has no FBAR obligation for that specific holding. Conversely, a client with signature authority over a foreign financial account but no financial interest in it may have an FBAR obligation with no corresponding Form 8938 obligation for that account. Both analyses must be run independently. See the FBAR practitioner guide for the signature authority analysis.
Section 4: PFIC Interaction and Form 8621
Practitioners who surface SFFA holdings that include interests in foreign mutual funds or foreign ETFs face an additional layer of complexity: many of those funds qualify as Passive Foreign Investment Companies (PFICs) under IRC 1291-1298, which triggers not only the Form 8938 reporting obligation but also a separate and additional Form 8621 filing for each PFIC.
What is a PFIC
A PFIC is a foreign corporation that meets either of two tests:
- Income test: 75% or more of the corporation's gross income is passive income (dividends, interest, rents, royalties, and certain gains).
- Asset test: 50% or more of the corporation's assets produce, or are held to produce, passive income.
Most foreign mutual funds and foreign ETFs meet at least one of these tests because their assets consist primarily of portfolio investments (passive assets) generating passive income. A client who holds units in a foreign-domiciled fund almost certainly holds a PFIC. This is the most common PFIC situation practitioners encounter.
PFIC as an SFFA: Form 8938 obligation
An interest in a PFIC is a specified foreign financial asset. If the aggregate value of SFFAs (including the PFIC interest) exceeds the applicable Form 8938 threshold, the PFIC must be disclosed on Form 8938. This reporting obligation applies to the PFIC interest as an SFFA, regardless of whether it is also held in a foreign financial institution account (which would also be an SFFA from a different category). Verify the current threshold at IRS.gov.
The separate Form 8621 requirement
Holding an interest in a PFIC also triggers a separate Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund) obligation. One Form 8621 must be filed per PFIC per taxpayer per year. Form 8621 is not a component of Form 8938; it is a separate annual information return that must be attached to the taxpayer's federal income tax return.
The PFIC tax regime involves three primary election frameworks, each with materially different tax consequences:
Excess distribution regime (default)
The default tax treatment for PFIC shareholders who make no election. Excess distributions (amounts received in excess of 125% of the average distribution from the prior three years) and gain on disposition are allocated ratably over the taxpayer's holding period and subject to the highest ordinary income rate in effect for each year to which they are allocated, plus an interest charge. All rate specifics are hedged to IRS.gov and Form 8621 instructions; do not quote specific rates or interest amounts to clients without current IRS.gov confirmation.
Mark-to-market election (MTM)
Under IRC 1296, a shareholder of a PFIC whose stock is "marketable" (as defined by IRS regulations, generally stock traded on a recognized exchange) may elect to mark the PFIC to market annually. Gains on the mark are taxable as ordinary income; losses are deductible as ordinary losses, subject to limitations. The MTM election avoids the interest-charge regime for new gains arising after the election year, but does not retroactively eliminate the excess distribution regime for prior holding periods. All specifics regarding the MTM election, including the definition of marketable stock and applicable limitations, are hedged to IRS.gov and IRC 1296.
Qualified Electing Fund (QEF) election
Under IRC 1293, a shareholder can elect to include the PFIC's pro rata share of ordinary income and net capital gain each year (a current inclusion election). The QEF election avoids the excess distribution regime prospectively, but requires the PFIC to provide a "PFIC Annual Information Statement" with the shareholder's share of ordinary earnings and net capital gain. Many foreign funds do not provide this statement, making the QEF election unavailable as a practical matter. All specifics of the QEF election, including the information statement requirement, are hedged to IRS.gov, Form 8621 instructions, and IRC 1293-1295.
IDENTIFY PFIC HOLDINGS EARLY: RETROACTIVE REMEDIATION IS COMPLEX
A client who has held a PFIC for multiple years without filing Form 8621 has accumulated a retroactive compliance problem. The excess distribution regime allocates gains back over the entire holding period, and purging the PFIC taint requires a deemed sale or deemed dividend election that triggers immediate taxable gain at ordinary income rates plus the interest charge. The longer the uncorrected holding period, the more complex and costly the remediation. Identify PFIC holdings at the first engagement, not after the client has held the fund for a decade. Clients with existing PFIC holdings and no prior Form 8621 filings should be referred to international tax counsel for remediation planning before any election is made.
Section 5: Penalties Under IRC 6038D
IRC 6038D imposes a civil penalty structure for failure to disclose specified foreign financial assets on Form 8938. All penalty amounts are set by statute and are hedged to IRS.gov; do not state specific figures to clients without verifying the current amounts at IRS.gov.
Initial failure-to-file penalty (IRC 6038D(d))
A fixed civil penalty applies per IRC 6038D(d) for failing to disclose SFFAs on Form 8938. Verify the current penalty amount at IRS.gov. The penalty is imposed per return period for each year that the required disclosure was not made.
Continuing failure penalty
If the failure to file continues after the IRS mails a notice of failure to disclose, a continuing penalty accrues per month for each month the failure continues. This continuing penalty applies from the date of the IRS notice, not the original return due date. A maximum penalty cap limits the total civil penalty exposure under this provision. Verify the per-month continuing penalty amount and the maximum cap at IRS.gov before advising a client on their exposure in a continuing non-compliance situation.
Reasonable cause exception
The IRC 6038D penalty does not apply if the failure to disclose was due to reasonable cause and not willful neglect. The taxpayer bears the burden of establishing reasonable cause. Reasonable cause in the FATCA context generally means the taxpayer exercised ordinary business care and prudence but was still unable to comply, for example, because they were unaware of the FATCA reporting requirement despite taking reasonable steps to understand their tax obligations. Reasonable cause is a facts-and-circumstances analysis that the IRS evaluates case by case. Practitioners should document the facts supporting reasonable cause contemporaneously with any disclosure.
Accuracy-related penalty stacking
An underpayment of tax attributable to a foreign financial asset not reported on Form 8938 is subject to an accuracy-related penalty at an enhanced rate under IRC 6662. This penalty stacks on top of the IRC 6038D disclosure penalty; both apply independently when there is both a disclosure failure and a resulting tax underpayment. Verify the current enhanced accuracy-related penalty rate for this category at IRS.gov before advising any client on stacked penalty exposure.
Criminal exposure: a separate assessment
IRC 6038D creates a civil penalty regime; it does not directly impose criminal penalties for willful failure to disclose SFFAs. However, willful failures to comply with FATCA reporting requirements may implicate other criminal statutes, including tax evasion under IRC 7201 and making false statements under 18 U.S.C. 1001. The civil IRC 6038D penalty and the criminal exposure analysis are separate tracks. Practitioners must assess criminal exposure independently; this assessment is outside the scope of standard return preparation and requires specialized legal counsel. Do not treat the absence of an explicit IRC 6038D criminal provision as a safe harbor against criminal exposure in willful FATCA non-compliance situations.
Section 6: Streamlined Filing Compliance Procedures
For taxpayers whose FATCA non-compliance was non-willful, the IRS offers two streamlined programs as a pathway to come into compliance with a defined penalty structure rather than face discretionary audit-driven assessment. All program specifics, penalty rates, and eligibility criteria are subject to IRS revision; verify current requirements at IRS.gov before advising any client.
CRITICAL: WILLFULNESS RISK BEFORE ANY STREAMLINED SUBMISSION
The IRS and the DOJ may challenge the "non-willful" characterization after a streamlined submission has been made. If the government determines the taxpayer was willful, the streamlined procedures provide NO protection from criminal prosecution or from the higher civil penalties applicable to willful violations. A streamlined submission made for a client who was actually willful can make the client's situation worse, not better. Assess willfulness risk carefully before recommending any streamlined program. Clients with potential willful exposure must be referred to international tax counsel before any submission is made.
Streamlined Foreign Offshore Procedure (SFOP)
The Streamlined Foreign Offshore Procedure is available to taxpayers who meet the IRS's non-residency test for the covered period (physical presence in a foreign country for the required duration during the covered years). It is designed for taxpayers who lived abroad and were unaware of their U.S. tax and FATCA reporting obligations. The filing requirements include:
- File 3 years of original or amended federal income tax returns for the applicable period.
- File 6 years of delinquent FBARs (FinCEN Form 114) for the applicable period.
- Pay all back taxes and interest owed on the amended returns.
- A non-willfulness certification is required explaining the facts and why the failure was non-willful.
The SFOP offshore penalty structure is hedged to IRS.gov; verify the current offshore penalty rate for SFOP at IRS.gov before computing any client's SFOP cost. Taxpayers who qualify for SFOP should have it analyzed before defaulting to SDOP, given the penalty difference. The non-residency qualification test is fact-specific and strict; confirm it at IRS.gov.
Streamlined Domestic Offshore Procedure (SDOP)
The Streamlined Domestic Offshore Procedure is available to U.S. residents who do not meet the SFOP non-residency test and whose FATCA non-compliance was non-willful. The filing requirements parallel those of SFOP:
- File amended returns for the 3 most recent tax years for which the return due date has passed.
- File FBARs for the 6 most recent calendar years for which the FBAR due date has passed.
- Pay all back taxes and interest owed.
- Pay the applicable offshore miscellaneous penalty, calculated as a percentage of the highest year-end aggregate balance of unreported foreign financial assets during the covered period. The penalty percentage and the exact calculation basis are hedged to IRS.gov; verify at IRS.gov before computing any client's SDOP penalty exposure.
- Submit a non-willfulness certification (Form 14654 for SDOP) with a detailed narrative of the facts and the reason for non-compliance.
Quiet disclosure: the pathway to avoid
"Quiet disclosure" refers to filing amended returns for prior non-compliant years without entering a formal streamlined or voluntary disclosure program. Practitioners should warn clients that quiet disclosure carries significant risk: the IRS has stated that it may identify and examine quiet disclosures and may pursue penalties for the non-compliant years, including penalties that exceed what would have applied under a formal streamlined program. Quiet disclosure does not provide the defined penalty protection that the streamlined procedures offer. If a client has prior-year FATCA non-compliance, entering a formal compliance pathway is generally the appropriate approach. Verify the current IRS position on quiet disclosures at IRS.gov before advising any client. Tax practitioners who encounter foreign account holders with knowledge of tax noncompliance should be aware of the IRS whistleblower program; see our IRS Whistleblower Program guide.
Section 7: Extended Statute of Limitations for SFFA Income Omissions
The standard income tax statute of limitations is 3 years from the return due date (or the date filed, if later) under IRC 6501(a). For returns involving foreign financial assets, a separate and materially longer statute of limitations applies when specified conditions are met.
The 6-year extended SOL for SFFA income omissions (IRC 6501(e)(1)(A)(ii))
If the taxpayer omits from gross income an amount attributable to a specified foreign financial asset that exceeds a threshold amount, the statute of limitations for the entire return is extended to 6 years from the return due date. The income threshold that triggers this extension is hedged to IRS.gov and IRC 6501(e)(1)(A)(ii); verify the current threshold before relying on it in any specific matter. This extended SOL applies to the full return, not just the SFFA-attributable income items.
The 6-year SOL applies even if Form 8938 was filed
The extended statute of limitations under IRC 6501(e)(1)(A)(ii) is triggered by the omission of income from the tax return, not by the failure to file Form 8938. A taxpayer who filed Form 8938 correctly but failed to report income attributable to the disclosed SFFAs on the income side of the return is still subject to the 6-year extended SOL for that return year. Filing the disclosure form does not cure an income reporting deficiency.
The FBAR SOL is a separate parallel risk
FBAR violations are subject to a separate 6-year statute of limitations running from the FBAR due date under the Bank Secrecy Act. The two extended statutes of limitations operate independently. A practitioner handling a foreign account matter that involves both unreported income and unfiled FBARs is working against two separate extended statutes, each with its own starting date and governing law. The interplay of both extended SOLs means that foreign-income audit risk can persist significantly longer than the standard 3-year SOL that governs most domestic returns.
Section 8: Practitioner Workflow for Form 8938 Compliance
The following workflow addresses the Form 8938 analysis as a component of every engagement where the client may have foreign financial activity. It runs in parallel with, not instead of, the FBAR analysis.
Intake: ask about the full SFFA universe, not just bank accounts
Intake for Form 8938 purposes must go beyond asking whether the client had foreign bank accounts. Ask specifically about: foreign accounts at foreign financial institutions (this is the FBAR question, but also covered by Form 8938); foreign stocks, bonds, or securities held directly (not in a foreign account); foreign mutual funds or ETFs; interests in foreign partnerships, corporations, trusts, or estates; foreign pension or retirement plans; and foreign life insurance contracts with cash surrender value. A client who answers "no" to the bank account question but holds shares of a foreign fund in their U.S. brokerage account may still have an SFFA that triggers Form 8938.
Identify all SFFAs and determine whether FBAR accounts are a subset
After intake, catalog all SFFAs the client holds. Determine which of those SFFAs are also foreign financial accounts (those must be analyzed under both Form 8938 and FBAR). Assets that are SFFAs but not foreign financial accounts (directly held foreign stock, foreign partnership interests, foreign instruments) require Form 8938 analysis but not FBAR analysis. Map the asset list to both regimes separately before drawing conclusions about filing obligations.
Determine the applicable Form 8938 threshold and apply it
Apply the correct Form 8938 threshold based on the client's filing status (single vs. married filing jointly) and residency during the tax year (U.S. resident vs. abroad for the required period). Do not rely on any threshold figure without verifying the current amount at IRS.gov Form 8938 instructions. Compute the aggregate fair market value of all SFFAs on the last day of the tax year and at any other point during the year where the aggregate value was higher; use the higher figure. Verify the current IRS guidance on SFFA valuation methods at IRS.gov.
Check for PFICs in the SFFA portfolio; prepare Form 8621 for each
For each foreign mutual fund or ETF in the SFFA list, assess whether it qualifies as a PFIC. Most foreign-domiciled funds do. For each PFIC holding, prepare Form 8621 (one per PFIC per year). Determine which PFIC election, if any, applies to each holding (excess distribution regime if no election, mark-to-market, or QEF). Where prior-year Forms 8621 were not filed, assess the retroactive compliance situation and refer to international tax counsel before making any elections. Verify current Form 8621 requirements and election mechanics at IRS.gov and the Form 8621 instructions.
Prepare Form 8938 and attach to the tax return
Complete Form 8938 for all SFFAs that exceed the applicable threshold. The form requires separate disclosure for each financial account (Part I) and each non-account SFFA (Part II). Attach Form 8938 to the return before filing. Failure to attach is a filing deficiency, not a disclosure; the form must actually be included with the return transmitted to the IRS. Verify current Form 8938 completion requirements at IRS.gov.
File the FBAR separately via BSA E-Filing by April 15 (auto-extension to October 15)
Run the FBAR analysis separately for the same client. For accounts that trigger both Form 8938 and FBAR obligations, prepare and file the FBAR through the BSA E-Filing System by April 15, relying on the automatic extension to October 15 if the return is on extension. The FBAR is NOT included with the federal tax return; it is a separate submission to FinCEN. See the FBAR practitioner guide for the complete FBAR filing workflow, FinCEN 114a authorization requirements, and BSA E-Filing System procedures.
Assess prior-year compliance: streamlined vs. quiet disclosure vs. voluntary disclosure
If the intake reveals prior-year FATCA non-compliance, evaluate the available pathways before making any submission. Streamlined procedures (SFOP or SDOP) are available for non-willful non-compliance. The IRS Criminal Investigation Voluntary Disclosure Practice is available for potentially willful situations. Quiet disclosure (amended returns without a formal program) carries risk that the IRS will identify the disclosure and pursue full penalties. Refer clients with any willful exposure to international tax counsel before proceeding. Document the pathway analysis and the reasoning in the client file.
Regulated Claims and Verification Requirements for This Guide
The following items require verification against current IRS.gov sources before relying on them in any specific matter: (1) Form 8938 filing thresholds vary by filing status and residency; verify all current threshold amounts at IRS.gov Form 8938 instructions. (2) IRC 6038D penalties (initial, continuing, and maximum cap) are set by statute; verify current amounts at IRS.gov. The accuracy-related penalty at an enhanced rate for Form 8938-related underpayments must also be confirmed at IRS.gov. (3) PFIC tax regime rates, excess distribution interest charges, and Form 8621 election mechanics are hedged to IRS.gov and the Form 8621 instructions; no specific rates are stated in this guide. (4) SFOP and SDOP penalty rates, lookback periods, and eligibility criteria are subject to IRS revision; verify at IRS.gov before advising any client. (5) The income omission threshold triggering the 6-year extended SOL under IRC 6501(e)(1)(A)(ii) is hedged to IRS.gov and the statute. (6) The non-willfulness certification under both streamlined programs is subject to IRS challenge; clients with potential willful exposure require international tax counsel before any submission. (7) Nonresident alien scope under Form 8938 is hedged to IRS.gov Form 8938 instructions. This guide does not constitute legal advice and does not substitute for current IRS.gov guidance.
Related Practitioner Guides
Form 8938 compliance intersects with the FBAR regime, the PFIC reporting framework, and the broader international tax landscape. The following guides address adjacent areas:
- FBAR Foreign Account Compliance Practitioner Guide: the Bank Secrecy Act obligation, FinCEN 114a authorization, BSA E-Filing workflow, post-Bittner penalty landscape, Streamlined SDOP and SFOP procedures, and Circular 230 due diligence for the Schedule B foreign account question
- NCTI/GILTI Form 8992 and OBBBA International Tax Practitioner Guide: the GILTI and NCTI regimes for corporate and pass-through international tax, Form 8992, and the OBBBA interaction
Frequently Asked Questions
If I filed the FBAR, do I also need to file Form 8938?
Yes. Form 8938 (FATCA) and FBAR (FinCEN Form 114) are independent requirements administered by different agencies. Filing one does not satisfy the other. Form 8938 covers a broader set of assets than FBAR, including directly held foreign stocks, foreign partnership interests, and foreign financial instruments that are not foreign financial accounts. Form 8938 is filed with your federal income tax return; FBAR is filed separately with FinCEN. Both obligations must be evaluated independently for every client with foreign financial activity. Verify current thresholds and definitions at IRS.gov and FinCEN.gov.
What types of assets trigger Form 8938 but not FBAR?
Several categories of specified foreign financial assets (SFFAs) trigger Form 8938 but are not foreign financial accounts reportable on FBAR. These include: foreign stocks or securities held directly (not in a foreign financial institution account), foreign partnership interests, and foreign financial instruments such as contracts, options, and derivatives issued by a foreign person. FBAR covers financial accounts at foreign financial institutions only. Form 8938 covers all SFFAs, which is a materially broader scope. A client who holds foreign company stock through a U.S. brokerage account, or who has an interest in a foreign partnership, may have a Form 8938 obligation with no corresponding FBAR obligation for that specific asset. Verify current definitions at IRS.gov Form 8938 instructions and FinCEN.gov.
Does a foreign mutual fund need to be reported on Form 8938?
Yes, if the value meets the applicable Form 8938 threshold (verify the threshold at IRS.gov; it varies by filing status and residency). A foreign mutual fund may also qualify as a Passive Foreign Investment Company (PFIC), in which case Form 8621 is also required separately, one per PFIC per year. The PFIC tax regime involves complex tax treatment across three possible election frameworks: the excess distribution regime (default), the mark-to-market election, and the Qualified Electing Fund (QEF) election. Do not rely on specific PFIC tax rates outside of current IRS.gov guidance and Form 8621 instructions. Identify PFIC holdings early; retroactive remediation is complex and costly.
What is the penalty for not filing Form 8938?
IRC 6038D imposes a civil penalty for failure to disclose specified foreign financial assets on Form 8938. A continuing-failure penalty also applies per month after the IRS mails a notice of failure to file. A maximum penalty cap limits total civil exposure under this provision. All penalty amounts are set by statute; verify current figures at IRS.gov before advising any client. The penalty does not apply if the failure was due to reasonable cause and not willful neglect; the taxpayer bears the burden of establishing reasonable cause. An additional enhanced accuracy-related penalty may also apply to any tax underpayment attributable to the undisclosed SFFA; verify the current enhanced rate at IRS.gov.
What is the difference between Streamlined Foreign Offshore and Streamlined Domestic Offshore procedures?
Both programs address non-willful FATCA non-compliance. The Streamlined Foreign Offshore Procedure (SFOP) is available to taxpayers who meet the IRS's foreign residency test for the covered period. The Streamlined Domestic Offshore Procedure (SDOP) is available to U.S. residents who do not meet the foreign residency test. The penalty structures differ between the two programs; verify current penalty rates and lookback period requirements at IRS.gov before advising any client. Both require a non-willfulness certification. The IRS may challenge the non-willful characterization, and streamlined procedures provide no protection from criminal prosecution or enhanced civil penalties for willful violations. Clients with any willful exposure must consult international tax counsel before any streamlined submission.
Does the 3-year statute of limitations apply to FATCA non-compliance?
No, when the taxpayer omits from gross income an amount attributable to specified foreign financial assets above a threshold amount. In that case, IRC 6501(e)(1)(A)(ii) extends the statute of limitations to 6 years from the return due date. The income omission threshold that triggers this extension is hedged to IRS.gov; verify the current threshold before advising any client. This 6-year extended SOL applies even if Form 8938 was filed correctly, provided that income attributable to the SFFAs was omitted from the income side of the return. FBAR violations also carry a separate 6-year SOL under the Bank Secrecy Act, running from the FBAR due date. The combination of two extended statutes of limitations means foreign-income audit risk persists significantly longer than for domestic returns.
Are non-resident aliens subject to FATCA Form 8938?
Generally no. Form 8938 applies to "specified persons," which are U.S. citizens, resident aliens (green card holders and individuals meeting the substantial presence test under IRC 7701(b)), and nonresident aliens who make an election under IRC 6013(g) or 6013(h) to be treated as U.S. residents for federal income tax purposes. Nonresident aliens who have not made such an election are generally not required to file Form 8938. However, the scope of Form 8938 for nonresident aliens involves specific IRS regulatory guidance; confirm the applicable rule for any nonresident alien situation at IRS.gov Form 8938 instructions before drawing a conclusion.
Can a client use streamlined procedures if they were willful in their FATCA non-compliance?
No. Streamlined filing compliance procedures are available only to taxpayers whose non-compliance was non-willful, meaning the failure resulted from a mistake, inadvertence, or lack of awareness of FATCA requirements. The taxpayer must certify non-willfulness in a detailed narrative submitted with the application. If the IRS or DOJ determines the taxpayer was willful, streamlined procedures provide no protection from criminal prosecution or from the higher civil penalties applicable to willful violations. A streamlined submission that mischaracterizes willful conduct as non-willful can worsen the client's exposure. Practitioners must assess willfulness risk before recommending any streamlined program; clients with any potential willful exposure must consult international tax counsel before a submission is made.