Form 8938 Penalties

Form 8938, Statement of Specified Foreign Financial Assets, is the part of the foreign reporting rules that is attached to your income tax return. It covers a wider range of assets than the FBAR, including foreign accounts and certain other foreign financial interests, and it has its own penalties. This page explains who needs to file, what happens if the form is missing, and how the penalties build.

Who files

Form 8938 is filed with your return if the total value of your specified foreign financial assets is above the threshold for your situation. The IRS lists these thresholds in the instructions and in its comparison with the FBAR:

Specified domestic entities use the $50,000 and $75,000 figures. These are the thresholds in the current Form 8938 instructions, so confirm them in the instructions for the tax year of your return. If you need to file, the form is due with your return, including extensions. For clients with Indian bank accounts, mutual funds or property interests, see Form 8938 for India assets.

The penalty amounts

The IRS comparison page describes the potential maximum as $60,000 in total: the $10,000 initial penalty plus the $50,000 continuation penalty. For married taxpayers filing jointly, the penalties apply as if the spouses were one person, and each is responsible for the whole amount. If you do not provide enough information about the value of an asset when the IRS asks, the IRS can presume that you hold assets above the reporting threshold.

Example (hypothetical). You should have filed Form 8938 with your 2025 return but did not. The IRS mails a notice in 2027. You file nothing for 90 days, then wait another 75 days. That is three additional 30-day periods, or $30,000 on top of the $10,000. The total is $40,000, short of the $60,000 limit. If you filed on day 91, only one 30-day period would have started, so the extra penalty would be $10,000.

The penalty is separate from the FBAR penalties. A person can owe both for the same account.

Other consequences

• 40% accuracy penalty. If an underpayment arises from a transaction involving an undisclosed foreign financial asset, the penalty is 40% of that underpayment instead of the usual 20%. The Form 8938 instructions say this. See the accuracy-related penalty.
• Fraud. A 75% penalty can apply to an underpayment due to fraud.
• Open statute of limitations. If you fail to file Form 8938 or fail to report a required asset, the period for the IRS to assess tax on the return may stay open until 3 years after you file the form. If you omit more than $5,000 of income tied to the foreign assets, the period is 6 years after filing.
• Criminal penalties. The instructions say you may face criminal penalties for failing to file, failing to report an asset or underpaying tax.

Reasonable cause

The instructions say no penalty applies if the failure was due to reasonable cause and not willful neglect, and that you must affirmatively show the facts. They also state that a foreign law that would penalize disclosure is not reasonable cause. The IRS international penalties page adds that you generally need to show that you acted responsibly before and after the failure, and that interest can be removed only if the penalty is. Not every international penalty qualifies for relief. See reasonable cause penalty relief.

How to fix a missed Form 8938

If you did not file for a prior year, the usual first step is to determine whether you were required to file at all by comparing the maximum asset values with the thresholds for your filing status and location. If you were, filing the missing forms with accurate returns, and explaining the reason in writing if the IRS has asked, is generally the way forward. The right path depends on whether the omission was willful and whether income from the assets was reported. We recommend a professional review before you file, especially if income from the assets was omitted.

How to avoid penalties

• Keep a list of every foreign account and other specified asset with year-end and highest-balance values.
• Test the thresholds each year, because a change in filing status, a move abroad or a market gain can change the answer.
• Do not assume a bank, broker or fund reports on your behalf. Form 8938 is your own filing.

How we can help

We prepare Form 8938 and the FBAR together, build the account inventory, and review earlier years for missed filings. If you have received an IRS notice about a missing form, we can help assemble the response. Our international tax service works with clients in Naperville and across the U.S., including those with ties to India. We do not promise that penalties will be waived. Contact us for a review.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.