The instructions for IRS form 8938 for 2020 state the following, and only the following, under the heading "Interests in Specified Foreign Financial Assets":

You have an interest in a specified foreign financial asset if any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the asset are or would be required to be reported, included, or otherwise reflected on your income tax return.


You have an interest in a specified foreign financial asset even if no income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the asset are included or reflected on your income tax return for this tax year.

Simplifying, the sentences appear to read

You have an interest if any income, etc are to be included or reflected.


You have an interest even if no income, etc are included or reflected.


These seem contradictory. If they are then they seem unusable for determination of interest held.

After simplifying the original text, I can imagine the second sentence to be interpretable as "are to be reflected but were not", but the original text doesn't convey that nuance, so I also imagine that interpretation not to be correct.

Are these determination guidelines contradictory? If not, how can they to be reworded to show that they are not? If so, by what other guidelines is interest in specified foreign financial assets determined?

Bonus points for clarification of the differences between "reported", "included", and "reflected" (those seem like synonyms).

  • I see no contradiction. The two paragraphs seem to be plain-English description of un-overlapping Venn diagrams where the "set of interest" is the union of all descriptions in this instruction. You have interest if there is income. You have interest if there is no income in this year (which functionally suggests if you have declared interest in an asset in past tax years, keep declaring it if you own it, even if it produced no taxable income this year). Neither paragraph has any language suggesting it is the exclusive set of assets of interest.
    – user662852
    Nov 3, 2021 at 14:54
  • Thanks for your interpretation. Our conclusions disagree but I appreciate your sharing.
    – user112709
    Nov 4, 2021 at 0:05

1 Answer 1


TLDR: "is or would" includes as a subset "would"

In general, US income tax applies to, and accordingly you must report (if required to file at all), all income except for types explicitly excluded by law -- but only income that exists. (You must also report some excluded items, like muni bond interest, even though you don't pay tax on them.) If we tried to enumerate all possible types of nonexcluded income, the list in principle is infinite, but for concretness let's say there are 10,000 types. If you have three types in income in a year (say wages, bank interest, and jury pay) you report those three, but you don't report the other 9,997 that you didn't have.

The wording in the first paragraph is the actual requirement: "are or would be required to be reported ...", covers both possibilities.

Let's say you have a simple deposit account that pays interest pegged to a market rate, and right now (because COVID) central banks in many countries have forced this rate to zero (or even negative) so you don't actually get paid any interest. In past years when you did receive interest you were required to report it, and in future years (if you still have the account) you probably will again receive interest and be required to report it, but this year you aren't required to report any interest, although you would be required to report the interest if it existed. Therefore you must report the account both in the past and future years when you did report interest, and this year when you did not report interest because it didn't exist but would have reported it if it did exist.

In contrast, let's say you have a foreign 'pension plan' (similar to US 401k). At least for most countries (I checked only the model treaty, not the entire list) US does not tax earnings on this account on a current basis, although in future years when you (retire and) take distributions those will be taxed. You are not required to report the earnings as income when they occur, and you don't have to report the account -- not in years when you have earnings (and aren't required to report them) and not in years when you don't have earnings (but if you did you wouldn't be required to report them).

The second paragraph emphasizes that you must report an account even if it has no actual reportable income, but potential income that might have occurred would be reportable. They probably do this because this differs from the rest of your return, where you only include income (and deductions and credits) that actually occur -- and this is how people are used to filling out their returns: most people will continue to do what they did before unless they understand this is different, and for FATCA your reporting must include both accounts which did produce produce reportable income and those which didn't but could have produced income that would be reportable if it existed.

I don't have a definitive reference, but my interpretations of the verbs are:

  • 'reported' -- appears on the return. Most things on the tax return are used in computing your tax (that is after all the purpose of the return) but some things are written/placed on the return that don't affect tax, as noted above.

  • 'included' -- appears on the return and used in computing tax. I.e. this is items of income that are included in taxable income, and deductions or credits that are subtracted from taxable income or tax.

  • (otherwise) 'reflected' -- doesn't appear as such on the return (including schedules), but affects tax computation indirectly, by altering some (other) amount that does appear. Tax reporting has gotten more detailed and complete over time as automation makes it easier for most people to submit and the government to process, and there are progressively fewer things in this 'shadow' category; offhand I can't think of any that apply here and this might well just be defensive wording to avoid a loophole if they missed something or something might be changed or added in the future.

  • Thank you for your detailed answer. Can you link the model treaty and/or entire list you cited in paragraph five?
    – user112709
    Nov 3, 2021 at 14:38
  • @saxomophone: on irs.gov in the search box type 'treaty' -- first hit is the a-to-z list, second hit contains numerous references including the model treaty Nov 4, 2021 at 2:53

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