Living and working in Hong Kong brings exciting career benefits, but it also means navigating U.S. tax rules on assets held outside the country. The IRS rules for foreign asset reporting requirements can seem complex, yet they’re designed to capture unreported overseas holdings. High error rates in expat returns have prompted the IRS to ramp up data matching tools, so staying ahead of your obligations matters. Missing these filings could trigger penalties from $10,000 up to $100,000 per form, plus a 40 percent penalty on any understatement of tax.

Here’s the key takeaway: with a clear process and the right records, you can stay compliant and focus on your life abroad with confidence.

Identify reporting triggers

Specified foreign financial assets

  • You must report assets if they fall under the IRS definition of specified foreign financial assets. That includes bank accounts, stocks, mutual funds, trusts, and certain retirement accounts held outside the U.S.
  • If you have an interest in these assets (directly or through an entity), note their fair market value at year end.

Reporting thresholds for expats

Filing statusEnd-of-year thresholdPeak-year threshold
Single, living abroad$200,000$300,000
Married filing jointly, living abroad$400,000$600,000

Here are the primary thresholds (for complete details see our guide on FATCA reporting thresholds). Good news, tracking values on your bank statements or account summaries usually gives you the numbers you need.

Under the foreign account tax compliance act, U.S. citizens abroad must file Form 8938 if they exceed certain asset thresholds. Your FATCA reporting obligations kick in when your specified assets cross those lines.

Filing Form 8938

Form 8938 (Statement of Specified Foreign Financial Assets) attaches to your Form 1040. You file if your assets exceed the thresholds above (see FATCA reporting thresholds). For expats in Hong Kong, the end-of-year trigger is $200,000. (Thresholds double if you file jointly.)

Exceptions and overlapping forms

Some assets reported on other forms don’t need a separate entry on Form 8938, but you still count their value to see if you hit the reporting bar. In Part IV of Form 8938 you’ll list which forms cover those assets, such as Form 3520, 5471, or 8865. For more, check our overview of foreign account disclosure requirements.

Manage FBAR reporting

FBAR basics

If you have a financial interest in or signature authority over foreign bank accounts totaling over $10,000 at any time during the year, you must file FinCEN Form 114 (FBAR). For details on overseas holdings see overseas bank account reporting. The IRS and Financial Crimes Enforcement Network use this form to catch undeclared offshore accounts.

FBAR vs Form 8938

While both forms capture overseas accounts, they serve different purposes. FBAR focuses on bank and financial accounts, Form 8938 covers a wider range of assets. You may need to file both. For details on bank account disclosures see foreign bank account reporting rules and IRS foreign account disclosure.

Maintain valuation and records

You need a clear audit trail for each asset. Here’s how to stay organized:

  • Save periodic statements or electronic records for all foreign accounts.
  • Convert non-U.S. dollar balances using year-end Treasury exchange rates.
  • Keep documentation for funds transferred, dividends, and interest earned.
    Good record keeping limits guesswork if the IRS questions your filings.

Avoid common pitfalls

  • Waiting until the last minute (IRS penalties kick in as soon as you miss the deadline)
  • Mis-valuing assets (under-reporting can trigger a 40 percent penalty on any tax understatement)
  • Ignoring joint account rules (combine balances with your spouse’s holdings when you file jointly)
  • Forgetting FBAR (the FBAR deadline is April 15, with an automatic extension to October 15)

Prepare your tax return

When it’s time to wrap up, follow these steps:

  1. Gather all Form 8938-relevant statements and records.
  2. Complete Form 8938 and attach it to your Form 1040.
  3. File FBAR (FinCEN 114) online by October 15 via the BSA E-Filing System.
  4. Review with a tax advisor familiar with foreign account compliance to avoid mistakes.

If you’d like expert assistance, our team at American Pacific Tax is ready to help. Visit us at American Pacific Tax for more on expat tax return preparation.

FAQs

Do I need to file Form 8938 if I only have a Hong Kong bank account?
If the account’s highest value pushes you over the reporting threshold ($200,000 for single expats), you must file. Otherwise you’re exempt.

Can I use estimates for asset values?
Yes, the IRS allows reasonable estimates when exact market values aren’t available, but keep documentation showing how you got those numbers.

What penalties apply if I miss FBAR or Form 8938?
Failure to file can mean $10,000 for each missing or incomplete form, up to $50,000 in continuation penalties, plus a 40 percent penalty on any understated tax.