Foreign Account Tax Compliance Act (FATCA): Form 8938 and FBAR

The Foreign Account Tax Compliance Act, known as FATCA, is a U.S. tax law that requires you to report foreign financial assets to the IRS on Form 8938 once their value crosses a set threshold, and separately requires foreign banks to report your accounts directly to the IRS. The two sides of the law work together: what you disclose gets cross-checked against what your bank overseas is already sending in.

The base threshold for individuals is $50,000, but it climbs sharply depending on your filing status and whether you live in the United States or abroad. Below that line, you owe no Form 8938. Above it, the filing is mandatory, and the penalties for skipping it are steep.

Who Has to Report

U.S. citizens are covered no matter where they live. A passport holder who hasn’t been back to the country in ten years still owes the same reporting obligation as someone in Ohio. Resident aliens are covered if they meet the green card test or the substantial presence test, and a non-resident alien who elects to be treated as a resident (typically by filing jointly with a citizen spouse) picks up the same duties.¹

Certain domestic corporations, partnerships, and trusts formed or used to hold foreign financial assets can qualify as “specified domestic entities” and face the same filing requirement, with a $50,000 year-end or $75,000 peak-value threshold.²

The Dollar Thresholds That Trigger Form 8938

The statute sets a $50,000 floor and lets Treasury set higher figures for other filers.³ In practice the IRS uses four tiers, based on where you live and how you file.

If you live in the United States:

Single or married filing separately: file if your foreign assets exceed $50,000 on the last day of the year or $75,000 at any point during the year.
Married filing jointly: file if the total exceeds $100,000 at year-end or $150,000 during the year.

If you live abroad, the numbers are much higher, because ordinary daily banking in a foreign country would otherwise pull almost every expat into the system:

Single or married filing separately: $200,000 at year-end or $300,000 during the year.
Married filing jointly: $400,000 at year-end or $600,000 during the year.

These are “or” tests. If either the year-end value or the highest value during the year crosses the line, you have to file.⁴

For a joint account with a spouse when you’re filing separately, count half its value toward your own threshold. If that half is enough to put you over, you still report the full value of the joint asset on your Form 8938.⁵

What Counts as a Foreign Financial Asset

The definition is broad. Two categories cover almost everything:³

Foreign financial accounts: deposit, custodial, and securities accounts held at a foreign financial institution, including checking, savings, and brokerage accounts.
Foreign non-account assets held for investment: stocks or securities issued by a non-U.S. person and not held in a domestic account, financial instruments or contracts with a non-U.S. counterparty, and interests in foreign entities such as partnerships or trusts.

Foreign-issued life insurance with a cash value, foreign annuities, and foreign hedge fund interests all fall in the second bucket. An asset counts toward your threshold even if it produced no income during the year.

Foreign Retirement Accounts

An interest in a foreign pension or deferred compensation plan is reportable. You generally use the plan’s fair market value on the last day of the year. If that isn’t reasonably available, use total distributions received during the year. If neither figure is available and you received no distributions, report the value as zero and note that on the form.⁶ The foreign equivalent of Social Security is not reportable; the rule reaches private and employer-sponsored plans.

What FATCA Does Not Reach

Foreign real estate held directly in your own name is not a specified foreign financial asset. If you hold the same property through a foreign corporation or trust, however, your interest in that entity is reportable. Personal property abroad, such as art, jewelry, or vehicles, is also outside these rules.⁷

FATCA and the FBAR Are Not the Same Filing

This is where confusion is most expensive. Form 8938 (FATCA) and FinCEN Form 114 (the FBAR) overlap heavily but are separate filings, and doing one does not satisfy the other.

The FBAR has a much lower trigger: file if your foreign financial accounts combined exceed $10,000 at any point during the year. The FBAR goes to the Financial Crimes Enforcement Network through its BSA E-Filing system, not to the IRS with your tax return.²

Both forms cover foreign deposit and custodial accounts, foreign mutual funds, and foreign life insurance or annuity contracts with a cash value. Form 8938 also reaches foreign stocks, securities, partnership interests, and other non-account investment assets that the FBAR does not. The FBAR, in turn, catches accounts where you have signature authority but no ownership; Form 8938 does not.²

The FBAR is due April 15 with an automatic extension to October 15 that you don’t have to request. Form 8938 rides on your income tax return deadline, including any extension you filed for the return itself.²

How to File Form 8938

Form 8938 is attached to your annual income tax return and follows the same deadline, including any extension.⁸ Most tax software handles the attachment when you file electronically. There is no standalone filing route: if you’re not otherwise required to file a return for the year, you don’t need to file Form 8938 either, even if your assets would otherwise exceed the threshold.⁴

For each foreign account, you provide the account number, the name and address of the institution, and the maximum value during the year. For non-account assets, you describe the asset and identify any issuer or counterparty. Values must be reported in U.S. dollars using the Treasury Bureau of the Fiscal Service’s year-end exchange rate to determine both maximum values and whether you cross the reporting threshold.⁸ Where no established market price exists, you can estimate fair market value from publicly available financial data or other verifiable sources without hiring an appraiser.⁶

The form also asks you to tie each asset to where the related income appears on your return. If an account generated interest reported on Schedule B, you note that. If the asset produced no income, you check a box saying so.

Penalties for Not Filing

Failure to file Form 8938 when required carries an immediate $10,000 penalty. If you still haven’t filed 90 days after the IRS mails you a notice, another $10,000 accrues for each 30-day period of continued non-compliance, up to $50,000 in additional penalties. Between the two, one missed form can cost $60,000.³

Separately, the accuracy-related penalty on any tax underpayment tied to an unreported foreign asset doubles from the usual 20 percent to 40 percent.⁹ The IRS also has a longer look-back window. The normal three-year statute of limitations extends to six years when a return omits more than $5,000 of income attributable to foreign assets that should have been reported.¹⁰

Willful failure to report can move the case into criminal territory. Under the general tax evasion statute, a conviction can bring a fine of up to $100,000 and up to five years in prison.¹¹ Criminal cases target concealment, not confusion, but the distinction between the two is one you don’t want the IRS deciding for you.

Fixing Missed Filings From Prior Years

If you should have been filing Form 8938 and weren’t, coming forward on your own is stronger than waiting for an IRS letter. Three formal paths exist, and the right one depends on why you didn’t file.

Streamlined Filing Compliance Procedures

The streamlined route is for taxpayers whose failure to report was non-willful, meaning the result of negligence, misunderstanding, or an honest mistake. You certify that in writing. You cannot use these procedures if the IRS has already started a civil examination or if you’re under criminal investigation.¹²

Taxpayers living in the United States use the Streamlined Domestic Offshore Procedures and pay a miscellaneous offshore penalty of 5 percent of the highest aggregate balance of unreported foreign financial assets over the covered period.¹³ Taxpayers living abroad use the Streamlined Foreign Offshore Procedures, which have more favorable penalty terms. Both tracks require filing amended returns and delinquent FBARs for the covered years.

Delinquent International Information Return Submission Procedures

If you missed a Form 8938 but have reasonable cause for the delay, you can submit the delinquent form with a written statement explaining why. Penalties may still be assessed while your submission is processed, so be ready to substantiate the reasonable cause claim. This route is unavailable if you’re already under examination or the IRS has contacted you about the missing return.¹⁴

Voluntary Disclosure Practice

If your non-compliance was willful and criminal exposure is on the table, the IRS Voluntary Disclosure Practice offers a path to resolve liabilities and, in exchange for full cooperation and civil penalties, protection from criminal prosecution. Penalties here are substantially higher than under the streamlined procedures. Anyone considering this route should talk to a tax attorney before making any submission.¹⁵

What Foreign Banks Report to the IRS About You

FATCA also requires foreign financial institutions to identify their U.S. account holders and send account information directly to the IRS.⁵ The Treasury has intergovernmental agreements with over 100 jurisdictions, and foreign governments in many of those cases collect the data from their domestic institutions and pass it along.

The practical consequence for you: by the time you file, the IRS often already has independent data about your foreign accounts. A gap between what your bank reported and what you disclosed is exactly the sort of mismatch that draws attention. Filing accurately is the point of the exercise; filing consistently with what the IRS already sees is what keeps you out of a letter.

1
Internal Revenue Service. Substantial Presence Test
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Internal Revenue Service. Comparison of Form 8938 and FBAR Requirements
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Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets
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Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
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Internal Revenue Service. Summary of FATCA Reporting for U.S. Taxpayers
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Internal Revenue Service. Basic Questions and Answers on Form 8938
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Internal Revenue Service. Instructions for Form 8938
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Internal Revenue Service. Instructions for Form 8938 – Statement of Specified Foreign Financial Assets
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Office of the Law Revision Counsel. 26 USC 6662 – Imposition of Accuracy-Related Penalty on Underpayments
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Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
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Office of the Law Revision Counsel. 26 USC 7201 – Attempt to Evade or Defeat Tax
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Internal Revenue Service. Streamlined Filing Compliance Procedures
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Internal Revenue Service. U.S. Taxpayers Residing in the United States
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Internal Revenue Service. Delinquent International Information Return Submission Procedures
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Internal Revenue Service. Offshore Voluntary Disclosure Program, Streamlined Filing Compliance Procedures and Voluntary Disclosure Practice