Foreign Property Reporting to the IRS: The Plain-English Form 8938 Guide

Theme: Bureaucracy Without Pain – written by a U.S. tax attorney who’s had more coffees with the Internal Revenue Code than with most humans.

Moving money, investing, or even just living abroad no longer flies under the radar. Since 2010 the Foreign Account Tax Compliance Act (FATCA) has required U.S. taxpayers to tell the Treasury about certain overseas assets on Form 8938, Statement of Specified Foreign Financial Assets.

I’ve walked hundreds of clients through this form. Most arrive stressed, picturing Kafka-esque red tape; most leave surprised at how manageable it is once you know a few rules of thumb. This article distills those rules—minus the legal Latin—to help you file accurately, avoid penalties, and get back to more interesting things (like planning that surf-office month in Peniche).

Table of Contents

1. Who must file Form 8938
2. Types of property included
3. Valuation tips
4. Penalties and relief options
5. Bureaucracy Without Pain: Putting it all together

Who Must File Form 8938

“Do I even have to file this thing?” is the right first question. The obligation hinges on two factors:

1) whether you are a specified individual under FATCA, and
2) whether your aggregate foreign financial assets cross certain dollar thresholds.

1. Specified Individuals

You fall into the “specified” bucket if you are:

• A U.S. citizen (living anywhere)
• A resident alien for tax purposes
• A non-resident who makes a §6013(g) or (h) election to be treated as resident
• Certain domestic entities that resemble individuals (think closely held corporations, partnerships, and trusts triggered under §6038D(d))

Quick sanity check: Green-card holder spending 50 weeks a year in Seoul? Yes, you count. U.S. citizen who just expatriated last July? You count for the part of the year you were still a citizen.

2. Dollar Thresholds

The IRS didn’t choose intuitive numbers—so here’s the cheat sheet:

*“Living abroad” means your tax home is outside the U.S. and you meet either the bona fide residence test or physical presence test under §911.

Call-out: The thresholds apply to the aggregate of your foreign financial assets. Five €10,000 accounts add up quickly.

Example Walk-Through

• Maria (single, Miami-based) holds a Colombian broker account worth $40,000 on 12/31 but it briefly spiked to $78,000 in May.
  • End-of-year: below threshold
  • Any-day: above $75,000
  → Maria must file Form 8938.

• Andre & Léa (married, digital nomads, qualifying under FEIE in Chiang Mai) had €150,000 total in EU ETFs all year. They’re under the $200k/$300k abroad thresholds → no Form 8938 this year.

Keep in mind: even if you escape Form 8938, you may still owe an FBAR (FinCEN 114) at the much lower $10,000 threshold. Yes, it’s maddening; no, they haven’t merged the forms (yet).

Types of Property Included

People hear “property” and imagine their hillside villa in Tuscany. Here’s the nuance: Form 8938 focuses on specified foreign financial assets, not every physical item you own abroad.

A. Clearly Reportable Assets

1. Foreign bank and brokerage accounts (checking, savings, term deposits)
2. Stocks or securities issued by non-U.S. companies (held directly, not via U.S. broker)
3. Interest in a foreign partnership, corporation, or trust
4. Foreign pensions and retirement accounts (e.g., UK SIPP, Australian superannuation)
5. Foreign mutual funds, ETFs, or hedge funds
6. Life-insurance policies with cash value issued by a non-U.S. insurer
7. Any debt owed to you by a non-U.S. person (note receivable)

B. Maybe Reportable Assets

C. Assets Exempt or Already Reported Elsewhere

• Inheritance or gifts you merely received but haven’t invested
• Social Security equivalents compelled by a foreign government (often classified as mandatory public benefits)
• Assets in a U.S. brokerage denominated in foreign currency (because the custodian is domestic)

Tip: If you’ve already filed Form 3520/3520-A for a foreign trust or Forms 5471/8865 for controlled corporations or partnerships, you still mention them on Form 8938—just tick the box to say details are “included on another form.”

Real Talk on Real Estate

Let’s clear the confusion with examples:

• Scenario 1: You personally own a vacation condo in Cabo worth $180,000. Result: No Form 8938 reporting because it’s direct ownership of tangible property.
• Scenario 2: Same condo but held in a Mexican fideicomiso (bank trust). You now own an interest in the trust—i.e., a financial asset—so you must value and report it.
• Scenario 3: Condo is inside your 100%-owned Panamanian LLC. You disclose the LLC’s value (indirectly capturing the condo).

Valuation Tips

Once you know what to report, you need the maximum fair market value (FMV) during the tax year, converted to U.S. dollars using the year-end Treasury rate (or another published interbank rate—just stay consistent).

1. Finding Fair Market Value

• Bank/Broker Statements: Use the highest closing balance or daily high.
• Publicly Traded Securities: Multiply the highest share price by shares held (include splits).
• Non-Public Entities: Use GAAP or IFRS book value if available; otherwise, reasonable estimate based on underlying assets.
• Foreign pensions: Request an annual statement or actuarial value; if impossible, estimate contributions plus growth.

Attorney Tip: Document your methodology. I keep a one-page memo in each client’s records citing the rate used (“U.S. Treasury yearly average 2023: 0.920 EUR/USD”) and data source (Bloomberg, company accounts, etc.). If the IRS questions you years later, that memo is gold.

2. Dealing With Exchange Rates

The IRS blesses any reasonable and consistently applied rate. Popular choices:

• Treasury Reporting Rates of Exchange (posted quarterly)
• Federal Reserve year-end rate
• Major bank’s year-end spot rate

Pin the rate used across all assets to avoid eclectic conversions.

3. Limited Information? Use Best-Available Data

I once had a client whose Vietnamese brokerage provided only quarterly snapshots. Solution: we assumed the highest of those four was the maximum. Conservative, yes; battle-tested? Also yes.

If you genuinely cannot obtain a figure, attach a statement explaining the efforts taken. The IRS is far kinder to filers who disclose uncertainties than to those who ignore the asset entirely.

4. Common Mistakes to Avoid

• Mixing “end-of-year” with “any-day” thresholds when valuing individual assets. Thresholds apply to aggregates; each asset still needs its own FMV box.
• Converting each deposit with a different daily FX rate (messy and triggers math errors).
• Relying on purchase price for real estate-holding entities. The condo you bought ten years ago for €80k now merits a €250k appraisal.

Penalties and Relief Options

1. Statutory Penalties

• Failure to file: $10,000 per year, per form.
• Continued failure after IRS notice: Additional $10,000 per 30 days, max $50,000.
• Accuracy-related understatement: 40% if the asset omission results in underpaid tax.
• Criminal charges: Rare, but willful non-disclosure can escalate to fraud allegations.

2. Reasonable Cause

The magic words. If you can show you exercised “ordinary business prudence” yet couldn’t obtain the information, penalties may be waived. Key ingredients:

1. Documented requests for statements or valuations
2. Proof of reliance on a professional advisor
3. Timely correction once information became available

3. Streamlined Filing Compliance Procedures (SFCP)

For taxpayers who slipped up in prior years but were non-willful:

• File three years of amended 1040s + six years of FBARs/Forms 8938.
• Pay back taxes plus interest.
• Penalties: 0% for non-resident streamlined, 5% of offshore asset value for domestic streamlined.

The streamlined route is faster and cheaper than the old Offshore Voluntary Disclosure Program (OVDP), which closed in 2018.

4. Delinquent International Information Return Program

If you didn’t need to amend income and can certify non-willfulness, you may file late Forms 8938 standalone—often penalty-free. I’ve seen dozens of clients skate through unscathed by promptly using this program.

Bureaucracy Without Pain: Putting It All Together

Filing Form 8938 doesn’t have to feel like dental surgery without anesthesia. Here’s a minimalist playbook you can reuse yearly:

1. Inventory every non-U.S. account, entity, or pension as you approach December 31.
2. Grab statements or FMV snapshots dated as close to 12/31 as possible.
3. Convert using a single year-end FX rate.
4. Aggregate totals; compare to your filing threshold.
5. Complete Form 8938 (six parts, most people finish in 30–45 minutes with software).
6. Store your valuation memo in a secure folder—digital or that shoebox with your passport (hey, I won’t judge).
7. Revisit mid-year if you open a juicy new account in, say, Portugal after reading our Estonia vs Malta digital nomad visa perks compared article and decide Europe is calling your name.

One Stop Shop: BorderPilot

My lawyerly view: systems beat memory. BorderPilot’s relocation dashboard nudges you when thresholds change, saves FX rates, and even catalogs your statements alongside visa research and lifestyle tools. It’s the same place our travel writers help you decipher local transport apps when you don’t speak the language—because taxes and buses both derail relocations when ignored.

Pull-Quote
“The IRS wants transparency, not perfection. Give them a good-faith, well-documented Form 8938 and you’ll sleep better than the auditor reviewing it.”

Final Thoughts

Form 8938 is just a six-page reminder that the IRS follows you abroad. Handle it methodically—identify assets, nail the valuation, file on time—and the form becomes a yearly administrative chore, not a nightmare.

Thinking of a broader move—say, shifting your tax home to Lisbon or Taipei? BorderPilot’s data-driven engine can forecast local costs, residency visas, and yes, your ongoing U.S. compliance obligations. Create your free relocation plan today and turn bureaucracy into just another checklist.