What Is FATCA Reporting? Thresholds, Form 8938, and Penalties

FATCA reporting is the annual requirement for U.S. taxpayers holding foreign financial assets above certain dollar thresholds to disclose those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The rule comes from the Foreign Account Tax Compliance Act, enacted in 2010 as part of the HIRE Act, and it targets tax evasion through offshore accounts. If you meet the threshold and skip the filing, civil penalties start at $10,000 and the IRS gets more time to audit your return.¹

Who Has to File

Form 8938 applies to “specified individuals” and “specified domestic entities.” Specified individuals include U.S. citizens, resident aliens (under the green card test or substantial presence test), and nonresident aliens who elect to be treated as residents to file a joint return. Bona fide residents of American Samoa or Puerto Rico are also covered.¹

Certain closely held domestic corporations, partnerships, and trusts also qualify when they are used to hold foreign assets. The entity generally must be at least 80 percent owned by a specified individual and earn or hold at least 50 percent of its income or assets from passive sources.²

Reporting Thresholds

Whether you have to file depends on filing status, where you live, and the total value of your foreign financial assets. You check the aggregate fair market value both on the last day of the tax year and at any point during the year, and use whichever number is higher.³

Living in the United States

Single or married filing separately: file if 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 combined foreign assets exceed $100,000 on the last day of the year or $150,000 at any point during the year.

Living Abroad

Single or married filing separately: file if foreign assets exceed $200,000 on the last day of the year or $300,000 at any point during the year.
Married filing jointly: file if combined foreign assets exceed $400,000 on the last day of the year or $600,000 at any point during the year.

The higher thresholds abroad reflect that people living overseas typically rely on local banks. Couples filing jointly submit a single Form 8938 covering both spouses’ foreign assets.⁴

What Counts as a Foreign Financial Asset

FATCA covers a wide range of holdings. Reportable assets include financial accounts at foreign banks and investment firms, stock or securities issued by non-U.S. entities held outside an account, foreign partnership interests, interests in foreign corporations or trusts, foreign hedge and private equity funds, and foreign-issued life insurance or annuity contracts with cash value.⁵ Financial instruments or contracts where the issuer or counterparty is not a U.S. person are also included.⁶

You add up the fair market value of everything that qualifies, even assets that produce no current income. Spreading holdings across several foreign platforms does not get you under the line.

What Does Not Count

Several categories of foreign holdings are excluded from Form 8938.⁷

Foreign real estate held directly, such as a personal residence or rental property. If the property is owned through a foreign corporation or other foreign entity, your interest in that entity is reportable.
Foreign currency held physically outside any financial account.
Tangible assets and collectibles held directly abroad, including art, antiques, jewelry, cars, and precious metals.
Rights to payments from a foreign government’s social insurance program.
Accounts at U.S. financial institutions, including U.S. mutual funds, IRAs, and 401(k) plans that invest in foreign securities.
Accounts at U.S. branches or U.S. affiliates of foreign banks, and accounts held through foreign branches of U.S.-based institutions.

How to File

Form 8938 is attached to your annual income tax return, usually Form 1040. The IRS does not accept it mailed on its own; it has to come in with a return or an amended return.¹

For each foreign account, list the financial institution’s name and address, the account number, and the maximum value during the year. For assets held outside an account, list the issuer or counterparty and identifying details about the interest. You also report any income the asset generated (interest, dividends, royalties) and identify the schedule or form on your return where that income is reported. Interests already disclosed on another form, such as Form 5471 for foreign corporations or Form 8865 for foreign partnerships, can simply be cross-referenced rather than repeated.⁵

All values go on the form in U.S. dollars. For foreign-currency assets, use the U.S. Treasury Bureau of the Fiscal Service exchange rate for purchasing U.S. dollars on the last day of the tax year. If no Treasury rate exists for the currency, use another publicly available rate and disclose which one on the form.¹

The deadline follows your return: April 15 for most individuals, October 15 if you extend. No separate extension request is needed for Form 8938.⁴ Keep supporting records (statements, account documentation, exchange-rate calculations) for at least as long as the statute of limitations on the related return remains open.

FATCA Reporting vs. the FBAR

Form 8938 is often confused with the FBAR (Report of Foreign Bank and Financial Accounts), filed on FinCEN Form 114. They overlap, but they are separate obligations, and many taxpayers owe both.⁶

Threshold: the FBAR is triggered when your foreign financial accounts exceed $10,000 in the aggregate at any point in the year, far below the $50,000 Form 8938 minimum.
Where it goes: Form 8938 goes to the IRS with your tax return. The FBAR goes to the Financial Crimes Enforcement Network (FinCEN).
What it covers: the FBAR is limited to foreign financial accounts. Form 8938 covers those accounts plus non-account assets like directly held foreign stock, partnership interests, and contracts with non-U.S. counterparties.
Deadline: both use April 15 with an automatic extension to October 15. The FBAR extension is automatic without a separate request.⁸

Filing one does not excuse the other. If your foreign accounts cross $10,000 you likely owe an FBAR even when your total assets fall below the Form 8938 threshold.

Penalties and Audit Exposure

The civil penalty for failing to file a complete and correct Form 8938 by the due date is $10,000. If the IRS notifies you of the missing form and you still do not file within 90 days, an additional $10,000 applies for each 30-day period (or part of one) the failure continues, capped at $50,000. The total exposure can reach $60,000.³

You can avoid penalties by showing the failure was due to reasonable cause and not willful neglect. The statute states expressly that fear of a foreign-government penalty for disclosing the information does not qualify as reasonable cause.³

A missed Form 8938 also affects how long the IRS has to audit. If you fail to file the form or fail to report a required asset, the statute of limitations on your return stays open until three years after you eventually file. Separately, if you omit more than $5,000 of income tied to foreign financial assets, the IRS has six years from the date you filed to assess additional tax, whether or not Form 8938 was otherwise required.⁹

If You Should Have Filed in Prior Years

Taxpayers who should have filed Form 8938 or FBARs but did not can use the IRS streamlined filing compliance procedures to catch up. The program is limited to non-willful conduct: negligence, inadvertence, mistake, or a good-faith misunderstanding of the law. You are not eligible if the IRS has already begun an examination or criminal investigation of your returns.¹⁰

There are two tracks. If you live in the United States, the streamlined domestic offshore procedures require a miscellaneous penalty equal to 5 percent of the highest aggregate balance of your unreported foreign financial assets over the covered period.¹¹ If you live abroad and meet the non-residency requirement (generally, at least 330 full days physically outside the United States in one of the prior three tax years), the streamlined foreign offshore procedures impose no additional penalty.¹²

Returns submitted through either track are processed like any other. The IRS does not send an acknowledgment or a closing agreement, and the returns are not automatically audited, though they remain subject to the same selection processes as any other filing.

1
Internal Revenue Service. Instructions for Form 8938
2
eCFR. 26 CFR 1.6038D-6 Specified Domestic Entities
3
Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets
4
Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets?
5
Internal Revenue Service. Summary of FATCA Reporting for U.S Taxpayers
6
Internal Revenue Service. Comparison of Form 8938 and FBAR Requirements
7
Internal Revenue Service. Basic Questions and Answers on Form 8938
8
FinCEN.gov. Due Date for FBARs
9
Internal Revenue Service. Instructions for Form 8938
10
Internal Revenue Service. Streamlined Filing Compliance Procedures
11
Internal Revenue Service. U.S. Taxpayers Residing in the United States
12
Internal Revenue Service. U.S. Taxpayers Residing Outside the United States