International / FBAR & FATCA
FBAR and FATCA reporting for U.S. persons abroad.
A U.S. citizen or resident reports worldwide income no matter where they live, and reports foreign financial accounts separately from that income. Two regimes apply, they overlap without replacing each other, and the one most people have never heard of is not even filed with the tax return.
The two regimes
What each one covers
The FBAR is filed with FinCEN, not the IRS
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is filed electronically through the BSA E-Filing System. It is required when the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year. Aggregate is the word that catches people: five accounts holding $2,500 each trigger it, and the peak balance counts even if the money was in transit.
Signature authority counts, ownership is not required
You report accounts you own and accounts over which you have signature or other authority, which is why officers of foreign subsidiaries, trustees, and people named on a parent’s account abroad are frequently required to file without realizing they hold anything at all.
Form 8938 is the FATCA filing, and it goes with the return
Form 8938, Statement of Specified Foreign Financial Assets, is filed with Form 1040. Its thresholds are higher than the FBAR’s, vary by filing status, and are higher again for taxpayers living abroad. It also reaches assets the FBAR does not, including foreign stock and securities held outside an account, interests in foreign entities, and certain foreign contracts.
Filing one does not satisfy the other
The same account is commonly reported twice, on both forms, with different valuation dates and different definitions. Neither form replaces the other, and neither one reports income. Interest, dividends, and gains from those accounts still belong on the return.
Other forms often ride along
Depending on what you hold, a foreign account is frequently accompanied by Form 8621 for passive foreign investment companies, which catches most foreign mutual funds and many pooled investments, Form 5471 for interests in foreign corporations, Forms 3520 and 3520-A for foreign trusts and large foreign gifts, and Form 8865 for foreign partnerships.
How catching up works
From a first look to a complete filing.
- Scope the yearsIdentify every account, holder, and year that is open or unreported.
- Value correctlyReconstruct maximum balances and apply the required exchange rates.
- Pick the procedureDelinquent submission, streamlined filing, or amended returns.
- File and close it outSubmit the package with the required certifications and keep the record.
Exposure
Penalties, and the procedures that limit them
FBAR penalties are severe and independent of tax owed
A non-willful failure to file carries a penalty of up to $10,000, adjusted for inflation. The Supreme Court held in Bittner in 2023 that the non-willful penalty applies per annual report, not per unreported account, which materially reduced exposure for taxpayers with many accounts. Willful violations are far worse: up to the greater of $100,000, inflation adjusted, or half the account balance at the time of the violation.
Form 8938 carries its own penalty
Failure to file Form 8938 is a $10,000 penalty, rising by $10,000 for each 30-day period after IRS notice, up to $50,000, with an extended statute of limitations on the entire return while the form remains unfiled. That last point is easy to miss: an unfiled information return can hold the whole year open.
Delinquent FBAR submission procedures
If the income from the accounts was properly reported and tax was paid, but the FBARs were not filed, the FBARs can be submitted late through the BSA system with a statement of the reason. Penalties are generally not asserted where there is no unreported income and no prior IRS contact about it.
Streamlined filing compliance procedures
Where income was also unreported and the failure was non-willful, the streamlined procedures allow amended or delinquent returns for three years and FBARs for six, with a signed non-willfulness certification. The domestic and foreign versions differ, and the foreign version carries no miscellaneous offshore penalty. Choosing the wrong track, or certifying non-willfulness where the facts do not support it, creates a worse problem than the one being fixed.
The deadline is easier than it looks
The FBAR is due April 15 with an automatic extension to October 15. You do not have to request the extension, which means a taxpayer who misses April 15 is usually not late yet. Form 8938 follows the return, including its extensions.
This page is general information about how the rules work, not tax or legal advice for a specific situation. Facts change outcomes. Talk with the firm before acting on anything here.
Questions
Common questions
I am a U.S. citizen who has lived abroad for years and never filed. Where do I start?
Start with a scope review rather than a filing. The right procedure depends on how many years are open, whether income was unreported as well as accounts, whether the failure was non-willful, and whether the IRS has already made contact. Filing returns before that is settled can foreclose the better option.
Do I report an account that was closed during the year?
Yes. The FBAR test is the maximum value at any point during the calendar year, so an account that held funds in March and was closed in April still counts, and its peak balance still goes into the aggregate.
Does a foreign pension have to be reported?
Usually, though the analysis depends on the country and the plan. Many foreign retirement arrangements are reportable on the FBAR, on Form 8938, or both, and some are treated as foreign trusts or as PFIC-holding vehicles. A few are protected by treaty. This is one of the areas where general answers are unreliable and the plan documents matter.
I have signature authority on my employer’s foreign account but no money of my own in it.
That is still reportable on the FBAR. Signature or other authority over an account is sufficient, and the fact that none of the funds are yours does not change it. Certain narrow exceptions exist for officers of some entities, and they have to be checked rather than assumed.
Will filing late trigger an audit?
Filing correctly through an established procedure is not an audit trigger in itself, and the alternative is worse. Unfiled information returns can keep the statute of limitations open indefinitely on the underlying return, which means the exposure does not age out.
If you are behind, there is a way back.
Late foreign account reporting is common and there are established procedures for fixing it. The route depends on the facts, and the choice matters. Let us look at the years in question.