When you think about fatca reporting obligations, they might feel complex and time-consuming. Under the Foreign Account Tax Compliance Act you’re required to report specified foreign financial assets to the IRS if their aggregate value exceeds certain thresholds. Skipping this step can lead to separate penalties for each missed form, so it pays to know exactly what to do.
Key takeaway: If you hold offshore investments or accounts while living in Hong Kong, you must understand Form 8938 rules, coordinate with FBAR requirements, and stay aware of reporting thresholds.
Understand FATCA reporting obligations
FATCA (the Foreign Account Tax Compliance Act) was enacted in 2010 to curb offshore tax evasion. If you’re a U.S. citizen or resident alien with financial assets outside the United States, you may need to report them on Form 8938, Statement of Specified Foreign Financial Assets, which attaches to your annual tax return.
A 2023 IRS analysis found penalties for non-compliance topped $100 million, so it’s worth a few extra minutes to get it right. Your obligation under this foreign account tax compliance act is separate from any other disclosure you file.
Determine your reporting thresholds
Reporting requirements hinge on your residency and filing status. For single filers living in the United States, Form 8938 kicks in when your specified foreign assets exceed $50,000 on the last day of the tax year or $75,000 at any time. If you live abroad, the thresholds rise to $200,000 and $300,000 respectively. Married couples filing jointly double those amounts.
- Single (in US): > $50,000 end-of-year or > $75,000 anytime
- Single (abroad): > $200,000 end-of-year or > $300,000 anytime
- Married jointly: double the single thresholds
For a detailed breakdown, see our reporting thresholds guide on FATCA reporting thresholds.
Gather your financial information
Before you complete Form 8938, assemble details for all specified foreign financial assets, which include:
- Foreign bank accounts and other financial accounts
- Foreign stocks, bonds, and securities
- Interests in foreign entities, like partnerships or trusts
- Foreign financial instruments and contracts
Good news, most statements from Hong Kong banks list account balances in U.S. dollars or with a clear conversion rate. If you need guidance on other disclosure requirements, check our foreign asset reporting requirements.
File your Form 8938
When you prepare your U.S. expat tax return, attach Form 8938 to your IRS Form 1040. Key steps:
- Part I: Identify yourself and your filing status.
- Part II: List each foreign asset with its maximum value and income generated.
- Part III: Summarize total assets and calculate thresholds.
- Sign and date, then e-file or mail with your return by April 15 (automatic extension to October 15 if requested).
If you work with a tax professional, like those at American Pacific Tax, they’ll ensure every box is filled and deadlines are met.
Coordinate with FBAR requirements
Form 8938 does not replace the FinCEN Form 114, known as FBAR. You must file FBAR if your aggregate foreign account balances exceed $10,000 at any point in the year. Here’s a quick comparison:
| Requirement | Form 8938 | FBAR (FinCEN 114) |
|---|---|---|
| What to report | Specified foreign financial assets | Offshore financial accounts |
| Threshold | ≥ $50,000 (US) or ≥ $200,000 (abroad) | > $10,000 aggregate |
| Filing deadline | With Form 1040 (April 15 / Oct 15 ext.) | April 15 (automatic extension to Oct 15) |
| Filing method | Attach to tax return | File electronically via BSA E-Filing |
Staying on top of both sets of rules keeps you in good standing. For details on overseas bank account reporting, visit our foreign bank account reporting rules.
Avoid penalties and extended limitations
Failure to file Form 8938 can trigger:
- A $10,000 penalty for not filing
- Up to $50,000 more if you still don’t file after IRS notification
- A 40 percent penalty on any understated tax related to undisclosed assets
- Extended statute of limitations (up to six years) if you omit over $5,000
(If you want more on general disclosure duties, see our foreign account disclosure requirements.) Good news, catching up late is possible, though you’ll owe interest and fees. It’s best to file on time or request an extension.
Quick recap and next steps
- Confirm if your offshore assets hit the reporting thresholds.
- Gather statements for each specified foreign financial asset.
- Complete and attach Form 8938 to your U.S. tax return.
- File FBAR if your account balances ever exceed $10,000.
- Review potential penalties and stay ahead with extensions if needed.
You’ve got this. Taking these steps now means smoother filings and fewer surprises later.
Frequently asked questions
Do I need to file Form 8938 if I already submitted an FBAR?
Yes, the two are separate. You file FBAR for foreign bank accounts and Form 8938 for specified assets. Both can apply simultaneously.
What assets count as “specified foreign financial assets”?
They include foreign bank accounts, stocks, bonds, mutual funds, financial instruments, and interests in foreign entities. Personal property like real estate isn’t included.
Can I file late without penalty?
If you miss the deadline, you can file late but expect a $10,000 penalty plus interest. If you receive an IRS notice, acting quickly can limit further penalties.
At American Pacific Tax, we specialize in expat compliance. Visit americanpacifictax.com to learn how we can streamline your offshore reporting.
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