Form 8938 (Foreign Financial Assets) COVID Penalty Refund

Form 8938 reports specified foreign financial assets and carries a $10,000 base penalty under §6038D for each failure to file, with continuation penalties up to $50,000. Penalties assessed during Jan 20, 2020 – July 10, 2023 may be eligible for refunds under Kwong. File Form 843 by July 10, 2026. Refund eligibility is not guaranteed; Kwong is being appealed.

Who qualifies

Form 8938 is required for U.S. taxpayers with specified foreign financial assets above certain thresholds. The §6038D penalty for failure to file starts at $10,000 per missed filing and can stack to $50,000 with continuation penalties. Penalty assessments dated within the COVID-19 disaster window may be eligible under the Kwong reasoning. This is one of the highest-dollar-per-filing penalty exposures in the entire IRS framework.

  • Account transcript shows a §6038D penalty assessment dated between Jan 20, 2020 and July 10, 2023.
  • Form 8938 was filed (or should have been filed) with a Form 1040 due within the disaster window.
  • Both the initial $10,000 penalty and any continuation penalties may be eligible for the same Kwong-based challenge.

How much could I get back?

§6038D penalties run $10,000 per missed filing as a floor, with maximum continuation reaching $50,000. A taxpayer with missed 8938s across multiple years could face $30,000–$150,000 in cumulative penalties. The per-filing scale makes Form 8938 one of the highest-leverage refund segments. Refund eligibility and amounts cannot be guaranteed.

Why this specifically

International information return penalties — including Form 8938 — are uniquely high-dollar and have historically been heavily disputed in tax court. Kwong adds a new procedural ground on top of any substantive defenses. For taxpayers with foreign assets exposure during 2020–2022, this is among the most consequential refund opportunities.

FAQ

Does this overlap with FBAR (FinCEN Form 114) penalties?

No. FBAR is administered by the Treasury (FinCEN), not the IRS, and falls outside the §7508A(d) deadline-suspension reasoning Kwong is built on. This page applies only to the §6038D Form 8938 penalty.

What if the IRS asserts intentional-disregard treatment under §6038D(d)?

Intentional-disregard classification doesn't change Kwong eligibility — the deadline reasoning applies regardless of how the IRS classified the underlying conduct. The dollar amounts are larger, which makes the refund opportunity bigger.

Should we coordinate with our international tax attorney?

Yes. Form 8938 cases often involve substantive issues (asset valuation, reportable-account determinations) on top of the procedural Kwong question. PenaltyBack handles the Form 843 filing; substantive tax counsel coordinates the broader strategy.