Late Form 8938: Streamlined Filing or Reasonable Cause?

Quick answer: A late Form 8938 may be corrected through normal amended-return procedures, the Streamlined Filing Compliance Procedures, or another compliance path. The right choice depends on whether foreign income was omitted, whether other forms were missed, whether the conduct was non-willful, and whether the IRS has contacted the taxpayer. A reasonable-cause statement may be submitted, but it does not guarantee that a penalty will be avoided.

Why Form 8938 requires a separate analysis

Form 8938 reports specified foreign financial assets and is attached to the federal income tax return. It is different from the FBAR, which is filed separately with FinCEN. The forms overlap, but their filing thresholds, covered assets, and legal authorities are not identical.

A taxpayer can therefore have four possible fact patterns:

• Form 8938 was missed, but the FBAR and all income reporting were correct;
• Both Form 8938 and one or more FBARs were missed;
• Form 8938 was missed and foreign income was omitted; or
• Form 8938 was one of several missing international information returns.

What current IRS guidance says about delinquent information returns

The IRS’s current delinquent international information return guidance states that taxpayers who are not under civil examination or criminal investigation—and who have not already been contacted about the delinquent form—should generally file through normal procedures.

For forms other than Forms 3520 and 3520-A, the delinquent international information return generally should be attached to an amended income tax return and filed according to that amended return’s instructions.

The IRS also warns that penalties may be assessed under existing procedures.

Where reasonable cause fits

A taxpayer may attach a reasonable-cause statement to each delinquent information return for which relief is claimed. The statement should connect the taxpayer’s facts to the filing failure and show ordinary business care and prudence under the circumstances.

For most delinquent international information returns, the IRS may assess a penalty without first considering the attached statement. The taxpayer may then need to respond to IRS correspondence and submit or resubmit the reasonable-cause explanation.

That means a reasonable-cause statement is evidence supporting a request for relief—not an automatic pre-clearance letter.

When streamlined procedures may be a better fit

The Streamlined Filing Compliance Procedures may be relevant when the Form 8938 failure is part of a broader non-willful foreign-reporting problem, particularly when foreign income, FBARs, or other international forms were also missed.

A domestic streamlined submission generally involves amended returns, covered FBARs, Form 14654, and a 5% miscellaneous offshore penalty. An eligible foreign streamlined submission generally uses Form 14653 and has different penalty treatment.

Facts to collect before amending

• Original returns and every Schedule B for the relevant years;
• Prior FBARs and other international information returns;
• Year-end and maximum values of each foreign account or asset;
• Foreign income records and foreign tax statements;
• Communications with the return preparer;
• Documents showing how and when the taxpayer learned of Form 8938; and
• Any IRS notice, examination contact, or penalty correspondence.

Common mistakes

• Attaching Form 8938 to an amended return without checking whether foreign income changed;
• Assuming that an FBAR filing also satisfies Form 8938;
• Using a generic reasonable-cause statement;
• Ignoring related Forms 3520, 5471, 8621, 8858, or 8865;
• Failing to reconcile asset values and ownership across forms; and
• Amending after IRS contact without first analyzing the available procedure.