If you’re a U.S. person with property or accounts outside the country, declaring foreign property to the IRS is generally required once your holdings cross specific thresholds. Foreign bank and brokerage accounts trigger a filing at a combined balance of $10,000, and a broader set of foreign financial assets triggers a second form starting at $50,000. Foreign real estate you hold directly in your own name is a notable exception: it isn’t reportable on either form, though income from it and any accounts tied to it usually are.
Who the Rules Apply To
The reporting obligation attaches to any “U.S. person.” That covers U.S. citizens and green card holders wherever they live, resident aliens, and domestic partnerships, corporations, estates, and certain trusts. Non-citizens who spend enough time physically in the United States can also become U.S. persons for tax purposes under the substantial presence test, which counts days across a three-year window.1Internal Revenue Service. Substantial Presence Test Once you’re in that category, the foreign-asset rules apply the same way they would to any citizen.
Foreign Accounts: The FBAR
If the combined value of all your foreign financial accounts exceeds $10,000 at any point during the calendar year, you must file a Report of Foreign Bank and Financial Accounts, known as the FBAR, on FinCEN Form 114.2Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) The threshold looks at the aggregate peak, so a single day above $10,000 across all your accounts creates the obligation, even if balances fall the next morning.
Reportable accounts include checking, savings, brokerage, and mutual fund accounts held at a financial institution outside the United States. The form captures accounts where you have either a financial interest or signature authority, so an account you don’t personally own can still land on your FBAR.
The FBAR is due April 15 for the prior calendar year, with an automatic extension to October 15 if you miss it. You don’t need to request the extension. Filing happens electronically through FinCEN’s BSA E-Filing System, entirely separate from your income tax return.3Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts
Larger Holdings: Form 8938
Form 8938 covers more types of assets than the FBAR and uses higher dollar thresholds.4Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets Specified foreign financial assets include foreign bank and brokerage accounts, stock or securities issued by a foreign entity, interests in foreign partnerships or corporations, and foreign-issued life insurance policies with cash value.
The thresholds depend on your filing status and where you live:
- Single filers living in the U.S. must file if the total exceeds $50,000 on the last day of the tax year or $75,000 at any point during the year.
- Married filing jointly in the U.S.: $100,000 on the last day or $150,000 at any point.
- Single filers living abroad: $200,000 on the last day or $300,000 at any point.
- Married filing jointly abroad: $400,000 on the last day or $600,000 at any point.
Because these numbers sit well above the $10,000 FBAR trigger, many people owe an FBAR without owing a Form 8938.5Internal Revenue Service. Comparison of Form 8938 and FBAR Requirements Form 8938 attaches to your annual income tax return and follows the same due date, including extensions.6Internal Revenue Service. Instructions for Form 8938 The two requirements are independent, and meeting one doesn’t satisfy the other, so plenty of people file both.
Foreign Real Estate
This is where most confusion sits. If you own a house or apartment overseas in your own name, that property is not a specified foreign financial asset and does not go on Form 8938 or the FBAR.7Internal Revenue Service. Basic Questions and Answers on Form 8938 The property itself is invisible to those two forms.
Holding it through a foreign corporation, partnership, or trust changes the answer. In that case your interest in the entity is a specified foreign financial asset, and the entity’s value (including the real estate underneath it) counts toward your Form 8938 threshold.7Internal Revenue Service. Basic Questions and Answers on Form 8938
Even directly held property can pull you into reporting indirectly. Rental income goes on Schedule E of your tax return the same way domestic rental income would. Taxes paid to the foreign country on that income can generally support a foreign tax credit on Form 1116, so you aren’t taxed twice on the same money. And if the rent or sale proceeds sit in a foreign bank account, that balance counts toward the $10,000 FBAR threshold.
Other Foreign Holdings That Trigger Reporting
Foreign Mutual Funds and PFICs
Owning shares in a foreign mutual fund or similar pooled investment can create a separate, complex filing. Most foreign mutual funds qualify as passive foreign investment companies, and shareholders generally must file Form 8621 for each PFIC.8Internal Revenue Service. About Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund The form is required if you receive distributions, sell shares at a gain, or make certain elections, and an annual report is required for anyone holding PFIC shares under the section 1298(f) rules. A limited exception applies when your total PFIC stock is $25,000 or less ($50,000 for joint filers) on the last day of the year and you had no distributions or dispositions.9Internal Revenue Service. Instructions for Form 8621 The default tax treatment is harsh: gains and certain distributions face the top ordinary income rate plus an interest charge computed as if you’d owed the tax across every year of ownership.
Foreign Gifts and Inheritances
A large gift or inheritance from a foreign source doesn’t create U.S. income tax, but it does create an information filing. Receiving more than $100,000 in total during the year from a nonresident alien individual or a foreign estate triggers Form 3520. A separate, lower threshold applies to gifts from foreign corporations or foreign partnerships and is adjusted annually for inflation.10Internal Revenue Service. Instructions for Form 3520 The form is due April 15 for calendar-year filers, and the penalty for missing it is generally the greater of $10,000 or a percentage of the property involved.
Joint Accounts With a Non-U.S. Spouse
Sharing a foreign account with a non-U.S. spouse doesn’t cut your reporting in half. Each joint owner reports the full balance on the FBAR, and that full balance counts toward the $10,000 aggregate threshold.11Financial Crimes Enforcement Network. Reporting Jointly Held Accounts Your income tax filing status has no bearing on this.
How Filing Actually Works
Start by listing every foreign financial account and asset you held at any point during the year. For the FBAR, find the maximum value each account reached during the year and add those peaks together. If the total crosses $10,000, every account goes on the form, including small ones.
For Form 8938, calculate the total on the last day of the tax year and the highest value during the year, then compare each figure against the threshold for your situation. Exceeding either one is enough.
Both forms want the account name and number, the institution’s name and address, the account type, and the maximum value. Convert foreign currency to U.S. dollars using the Treasury Reporting Rates of Exchange for December 31 of the reporting year.12U.S. Treasury Fiscal Data. Treasury Reporting Rates of Exchange Keep copies of your filings and the underlying statements for at least five years from the FBAR due date.2Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
What Happens If You Don’t File
Penalties for missing these forms are steep, and they escalate sharply if the IRS considers the failure willful.
For a non-willful FBAR failure, the statutory maximum is $10,000 per violation, adjusted annually for inflation.13Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties The Supreme Court’s 2023 decision in Bittner v. United States confirmed that this penalty applies per report, not per account, so one missed FBAR listing ten accounts is one violation.14Supreme Court of the United States. Bittner v. United States Willful violations carry the greater of roughly $100,000 (inflation-adjusted) or 50 percent of the highest account balance at the time of the violation, and courts have read “willful” to include reckless disregard, not just deliberate concealment. Criminal prosecution is possible in extreme cases. A reasonable cause exception is available for non-willful failures if you can show the lapse wasn’t due to negligence and you properly reported the account balances.
Failing to file Form 8938 starts at a $10,000 penalty. If you still haven’t filed 90 days after the IRS mails a notice, another $10,000 accrues for every 30-day period the failure continues, capped at $50,000 in continuation penalties.15Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets Any tax underpayment tied to undisclosed foreign assets also faces a 40 percent accuracy-related penalty.16Internal Revenue Service. FATCA Information for Individuals
Getting Caught Up
If you’ve missed foreign-asset filings and the failure wasn’t willful, the IRS offers streamlined filing compliance procedures to get current without triggering the full penalty regime.17Internal Revenue Service. Streamlined Filing Compliance Procedures You certify under penalty of perjury that the failure was due to negligence, inadvertence, mistake, or a good-faith misunderstanding.
The program has two tracks. Living outside the United States for at least 330 full days in any of the most recent three tax years puts you in the foreign offshore procedures, which carry no additional penalty. Living in the U.S. means the domestic offshore procedures, which charge a 5 percent miscellaneous offshore penalty on the highest aggregate value of your unreported foreign assets over the covered period.18Internal Revenue Service. Streamlined Filing Compliance Procedures for U.S. Taxpayers Residing in the United States You aren’t eligible if the IRS has already opened a civil examination of any of your returns or if you’re under criminal investigation. The program isn’t guaranteed to stay open indefinitely, so acting before the IRS contacts you preserves the option.