How it works
The Foreign Account Tax Compliance Act requires foreign financial institutions to report U.S. account holders to the IRS and requires U.S. taxpayers to attach Form 8938 to their return when specified foreign financial assets exceed thresholds: 50,000 dollars at year end or 75,000 dollars at any time for single filers in the United States, double for joint filers, and 200,000 or 300,000 dollars for those living abroad. It is separate from the FBAR and covers some assets the FBAR does not, such as foreign stock held directly and interests in foreign entities.
Why it matters
Many taxpayers must file both forms. A missing Form 8938 carries a 10,000 dollar penalty and keeps the statute of limitations open on the entire return, not just the foreign items.
Example
A single taxpayer living in Chicago holds 60,000 dollars in a foreign brokerage account. She must file both an FBAR (over 10,000 dollars) and Form 8938 (over 50,000 dollars at year end).
Related: FBAR. Read more: FBAR vs. FATCA.
