FATCA Financial Accounts: Form 8938, Thresholds, and Penalties

FATCA reporting requirements obligate U.S. citizens, resident aliens, and certain domestic entities to disclose their foreign financial assets to the IRS on Form 8938 once those assets cross specific dollar thresholds, with penalties starting at $10,000 for a missed filing and reaching $60,000 per tax year, plus a 40% accuracy penalty on any tax underpaid because of undisclosed offshore holdings.¹ The rules sit alongside the older FBAR requirement, and many taxpayers owe both.

Who Has to File Form 8938

You must file if you are a “specified individual” and your foreign financial assets exceed the threshold that applies to your filing status and residence. Specified individuals include U.S. citizens regardless of where they live, resident aliens for any part of the tax year, nonresident aliens who elect to file jointly with a U.S. citizen or resident spouse, and nonresident aliens who are bona fide residents of American Samoa or Puerto Rico. The obligation applies whether or not the accounts generated income during the year.²

Certain closely held domestic entities also file. A domestic corporation or partnership is covered if at least 50% of its gross income is passive or at least 50% of its assets produce passive income, and a specified individual owns at least 80% of the entity. Domestic trusts with a specified person as a current beneficiary are also included. The threshold for these entities is $50,000 on the last day of the tax year or $75,000 at any point during the year.³

Reporting Thresholds

Two tests apply: the total value of your specified foreign financial assets on the last day of the tax year, and the highest value at any point during the year. Crossing either number triggers the filing requirement, and the totals aggregate across all your foreign assets, so a group of smaller accounts can push you over even when no single one is large.

If You Live in the United States

Single or married filing separately: value exceeds $50,000 on December 31, or exceeded $75,000 at any time during the year.
Married filing jointly: value exceeds $100,000 on December 31, or exceeded $150,000 at any time during the year.

If You Live Abroad

Single or married filing separately: value exceeds $200,000 on December 31, or exceeded $300,000 at any time during the year.
Married filing jointly: value exceeds $400,000 on December 31, or exceeded $600,000 at any time during the year.

What Counts as a Specified Foreign Financial Asset

The definition is broader than many people expect and splits into two groups.

The first group is foreign financial accounts. Any account maintained by a foreign financial institution is reportable, including checking and savings accounts at foreign banks, brokerage accounts, mutual fund accounts, and accounts at foreign branches of financial institutions. Assets held inside a reportable account do not need to be listed separately; reporting the account is enough.⁴

The second group covers foreign assets held for investment outside any account. This includes stock or securities issued by a non-U.S. person, financial instruments or contracts with a foreign counterparty, interests in foreign partnerships, corporations, or trusts, and foreign life insurance or annuity contracts with cash value.

A few important exclusions round out the picture. Directly owned foreign real estate is not a specified foreign financial asset, so a vacation home or rental property held in your own name does not have to be reported. If the property is held through a foreign entity, though, your interest in the entity is reportable and the real estate factors into that entity’s value.⁵ Foreign social security and government social insurance benefits are also excluded.⁶ If an asset has already been reported on another timely international information return, such as Form 5471 for foreign corporations or Form 8865 for foreign partnerships, you don’t have to list it again on Form 8938, but you must identify the other form and still count the asset toward your threshold.

FATCA Form 8938 vs. FBAR

This is where taxpayers get tripped up. Form 8938 and the FBAR (FinCEN Form 114) are separate obligations, and meeting one does not excuse the other.

Threshold: the FBAR is triggered at just $10,000 in aggregate foreign account balances at any point in the year, well below the Form 8938 minimums.⁷
Where it goes: Form 8938 attaches to your tax return and goes to the IRS. The FBAR goes to FinCEN through the BSA E-Filing System and is not part of your tax return.
When it’s due: Form 8938 follows your tax return deadline, including extensions. The FBAR is due April 15 with an automatic extension to October 15.
Scope: Form 8938 covers a wider set of assets, including non-account investments like directly held foreign stock and interests in foreign partnerships. The FBAR is limited to accounts at foreign financial institutions.

⁸ Run each test independently. Foreign accounts totaling $60,000, for example, will trigger an FBAR while sitting under the Form 8938 floor for a single U.S. filer.

How to File

Form 8938 must be attached to your annual income tax return. For most individuals that means Form 1040, filed by the standard April deadline; if you extend your return, the Form 8938 extension follows automatically.³ For each asset you’ll report the name and address of the foreign institution, the account number, the highest value during the year, and whether the account was opened or closed during the period. The form can be filed electronically or on paper.⁹

All values report in U.S. dollars. In most cases, use the Treasury Bureau of the Fiscal Service exchange rate to convert foreign currency amounts.¹⁰ You can also use the conversion rate shown on a financial account statement issued at least annually by the institution holding the account. When no Treasury rate is available for a currency, use any publicly available rate and disclose which one on the form.

If you jointly own a foreign account with someone who isn’t a specified individual, such as a nonresident alien spouse, report the entire account value, not just your share. The full value also counts toward your threshold.¹¹ Hold onto foreign bank statements, brokerage records, and currency conversion documentation while the statute of limitations remains open, which can be six years for returns involving undisclosed foreign assets.

Penalties for Non-Compliance

The penalty structure escalates quickly and reaches both the failure to file and any refusal to comply after the IRS reaches out.

Civil Penalties

A failure to file Form 8938 or a failure to include required information triggers a flat $10,000 penalty. If the IRS mails you a notice and you still haven’t filed 90 days later, an additional $10,000 accrues for every 30 days of continued noncompliance, capped at $50,000 in additional penalties. That brings the maximum civil penalty per tax year to $60,000.¹

Separately, if you underpay tax because of income tied to undisclosed foreign assets, the accuracy-related penalty is 40% of the underpayment, double the standard 20% rate that applies in most other situations.¹²

Extended Audit Window

The IRS normally has three years to assess additional tax. That window extends to six years if you omit more than $5,000 of gross income tied to a foreign financial asset that should have been reported under FATCA. This applies even if your assets fell below the dollar threshold for Form 8938, because the statute looks at whether the asset would have been reportable if no threshold existed.¹³ Omitting income from foreign assets can extend the audit window even when you legitimately didn’t owe a Form 8938.

Criminal Penalties

Willful tax evasion involving undisclosed foreign assets can produce a felony conviction carrying up to five years in prison and fines up to $100,000 for individuals or $500,000 for corporations.¹⁴ Criminal charges are separate from civil penalties, so a willful violator can face both. The IRS distinguishes between taxpayers who genuinely didn’t know about their obligations and those who actively concealed assets.

If You’re Already Behind

Coming forward before the IRS contacts you widens your options considerably. Which route fits depends on whether your failure was willful and on what exactly you missed.

Streamlined Filing Compliance Procedures

These procedures are for taxpayers whose failure to report foreign assets and pay related taxes was not willful, meaning the failure came from negligence, inadvertence, mistake, or a good-faith misunderstanding of the law. You certify non-willfulness under penalty of perjury, and you’re not eligible if the IRS has already begun examining any of your returns.¹⁵

There are two tracks. If you live abroad, the Streamlined Foreign Offshore Procedures generally waive penalties. If you live in the United States, the Streamlined Domestic Offshore Procedures require a miscellaneous offshore penalty of 5% of the highest aggregate value of your foreign financial assets during the covered period. Either way, you file amended returns for the three most recent tax years and delinquent FBARs for the six most recent years.¹⁶

Delinquent Information Return Submission

If you missed only Form 8938 or other international information returns but reported all your income correctly, you may be able to file the late forms through normal procedures without entering a formal program. You attach the delinquent returns to amended income tax returns with a reasonable cause statement explaining the delay. Penalties may still be assessed during processing, so expect to respond to correspondence and reassert reasonable cause if needed.¹⁷

Reasonable Cause

Outside the formal programs, penalties can be abated if you show reasonable cause and the absence of willful neglect. The IRS looks at whether you exercised ordinary care but were still unable to comply. Natural disasters, serious illness, or an inability to obtain records may qualify. Ignorance of the filing requirement generally does not, and neither does reliance on a tax professional who failed to advise you of the obligation.¹⁸ The fact that a foreign country would penalize you for disclosing account information to the IRS is explicitly not treated as reasonable cause.¹⁹

1
Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets
2
Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
3
Internal Revenue Service. Instructions for Form 8938 – Statement of Specified Foreign Financial Assets
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eCFR. 26 CFR 1.6038D-3 – Specified Foreign Financial Assets
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Internal Revenue Service. Basic Questions and Answers on Form 8938
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Federal Register. Reporting of Specified Foreign Financial Assets
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Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
8
Internal Revenue Service. Comparison of Form 8938 and FBAR Requirements
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Internal Revenue Service. About Form 8938, Statement of Specified Foreign Financial Assets
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Bureau of the Fiscal Service. Treasury Reporting Rates of Exchange
11
Internal Revenue Service. Instructions for Form 8938
12
Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
13
Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
14
Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax
15
Internal Revenue Service. Streamlined Filing Compliance Procedures
16
Internal Revenue Service. U.S. Taxpayers Residing in the United States
17
Internal Revenue Service. Delinquent International Information Return Submission Procedures
18
Internal Revenue Service. Penalty Relief for Reasonable Cause
19
eCFR. 26 CFR 1.6038D-8 – Penalties for Failure to Disclose