Form 8938: What's the Difference Between Deposit Accounts vs Custodial Accounts?

Think of it this way: a deposit account is like giving your friend $20 to hold for you. They've got your money, but it's still just cash. A custodial account is more like giving your comic book collection to a friend to keep safe - they're holding your actual assets. Deposit accounts are your typical bank accounts where you put money in and take money out. The bank holds your cash, and you can generally access it whenever you want. Custodial accounts are where a financial institution holds and manages actual assets (like stocks, bonds, mutual funds) on your behalf. You own the assets, but the custodian holds the title and handles transactions. From what you described, your everyday and savings accounts are definitely deposit accounts. Your shares bought through the trading platform would typically be in a custodial account since the platform/broker is holding those securities for you. Your superannuation (similar to our 401k) is likely custodial as well since they're managing those investments. The P2P lending might be trickier - depends on how it's structured. For Form 8938 purposes, this distinction matters because you report them differently. Both types need to be reported if they meet the thresholds, but understanding the difference helps you complete the form correctly.

After struggling with Form 8938 myself last year (I have accounts in Singapore), I found this amazing tool called taxr.ai that literally saved me hours of confusion. I was in the same boat trying to figure out what counted as deposit vs custodial vs financial assets. I uploaded my Australian bank statements and investment documents to https://taxr.ai and it analyzed everything and told me exactly how to categorize each account. It even explained why my brokerage account qualified as custodial while my regular savings was a deposit account. What really helped was that it walked me through each section of Form 8938 step by step. The tool explained that my foreign index funds needed special attention because they might be PFICs (another tax nightmare). Would have completely missed that without guidance.

Just wanted to update after trying taxr.ai for my Australian accounts. This thing is seriously a game-changer! I uploaded my superannuation statement and bank documents, and it immediately identified that my super account needed to be reported as a custodial account on Form 8938 but also flagged that it might qualify for treaty benefits under the US-Australia tax treaty. The tool also confirmed my CommSec trading account is a custodial account and explained exactly which parts of Form 8938 to complete. It even calculated my maximum account values in USD with the proper exchange rates for the reporting date. Would have spent days figuring all this out on my own. Totally worth it if you're dealing with foreign accounts.

If you're struggling to get answers about Form 8938 classifications directly from the IRS (I know I was), I recommend using Claimyr. I spent WEEKS trying to get through to someone at the IRS who could answer my specific questions about Australian accounts. Found https://claimyr.com and they got me connected to an actual IRS agent in under 20 minutes - no joke. They basically hold your place in the phone queue and call you when an agent is about to pick up. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with clarified that my Australian mutual funds needed to be reported as financial assets on a custodial account, and explained exactly how to handle the P2P lending platform (turns out it depends on whether you have signature authority or just beneficial interest).

I need to eat my words about Claimyr. After another frustrating week of trying to reach the IRS myself about my Australian accounts, I decided to try it out of desperation. Got connected to an IRS tax law specialist in about 25 minutes without having to sit through the hold music myself. The agent confirmed my superannuation should be reported on Form 8938 as a custodial account and explained exactly which currency conversion rates to use. She also told me that my P2P lending platform investments would be considered "other financial assets" rather than deposit or custodial accounts. For anyone struggling with these Form 8938 classifications for foreign accounts, actually speaking to an IRS specialist makes a huge difference. They answered questions I couldn't find clear answers to anywhere online.

Just to add to the deposit vs custodial discussion - I'm an Aussie expat who's been filing US taxes for years. A good rule of thumb I use: if your account statement shows actual money amounts (like bank accounts), it's probably a deposit account. If your statement shows shares, units, or other securities, it's probably a custodial account. For your P2P lending platform, it depends on the structure. If you're lending directly to borrowers, it might be considered "other financial assets." If the platform pools money and issues you units/shares, it's more likely a custodial arrangement. Also don't forget FBAR (FinCEN Form 114) which is separate from Form 8938 but covers many of the same accounts. The thresholds and requirements are different.

Has anyone used the streamlined filing procedures for catching up on Form 8938 filings? I've been in the US for 3 years and just realized I should have been reporting my Australian accounts this whole time... 😬

As someone who's been dealing with both US and international tax compliance for years, I wanted to add a few practical tips that might help other expats: 1. **Keep detailed records**: For Form 8938, you'll need to track not just year-end values but also the highest balance during the year. I recommend taking screenshots of your account balances monthly, especially for accounts that fluctuate significantly. 2. **Currency conversion timing matters**: Use the Treasury's published exchange rates for the specific dates you're reporting. Don't just use average rates or whatever Google shows you - the IRS expects you to use their official rates. 3. **Australian superannuation complexity**: While your super is technically reportable on Form 8938, there are ongoing debates about whether it should also be reported on Forms 3520/3520-A as a foreign trust. The IRS hasn't provided clear guidance, so many practitioners take a conservative approach and report it on multiple forms. 4. **P2P lending platforms**: These can be tricky. If you're lending directly to individuals, it's likely "other financial assets." If the platform pools funds and you own units/shares in a fund, it's probably custodial. Check your statements to see exactly what you own. Remember that Form 8938 and FBAR have different thresholds and requirements, so you might need to file one but not the other depending on your account values.

Just went through this exact situation last year as a fellow Aussie expat! Your regular bank accounts (CommBank savings, etc.) are definitely deposit accounts - pretty straightforward there. For your trading platform shares, that's a custodial account since the platform holds the securities on your behalf. Your superannuation is also custodial, though as others mentioned, there might be treaty protections to consider. The P2P lending is the tricky one - it really depends on the platform structure. If it's something like RateSetter or SocietyOne where you're essentially buying loan parts directly, that's usually "other financial assets." If it's more like a managed fund where you own units, then custodial. One thing I learned the hard way: make sure you're converting to USD using the Treasury rates for the actual dates, not just year-end rates for everything. Also, keep really good records of your highest balances during the year - I had to go back through 12 months of statements to find peak values. The good news is once you get the hang of the classifications, subsequent years are much easier. And don't forget about FBAR filing if your combined account values hit $10K+ at any point!