Foreign Accounts: FBAR and FATCA Reporting

U.S. citizens, permanent residents, and most resident aliens are subject to two overlapping foreign-account reporting regimes. The Foreign Bank Account Report (FinCEN Form 114, "FBAR") is required by the Bank Secrecy Act and administered by the Treasury Department's Financial Crimes Enforcement Network. The Foreign Account Tax Compliance Act report (IRS Form 8938) is required by the Internal Revenue Code and filed with the income tax return. They have different thresholds, different filers, and different — extraordinarily severe — penalties. Both can apply to the same account.

FBAR (FinCEN Form 114)

Statutory authority: 31 U.S.C. §5314; implementing regs at 31 C.F.R. §1010.350.

• Who files: Any U.S. person with a financial interest in or signature authority over foreign financial accounts whose aggregate maximum value exceeds $10,000 at any time during the calendar year.
• What is reported: Each foreign account separately, with maximum value during the year, account number, institution, and address.
• Deadline: April 15 with automatic extension to October 15. Filed electronically through the BSA E-Filing System, not with the tax return.
• Penalties: Non-willful: up to $10,000 per violation (per Bittner v. United States, 598 U.S. 85 (2023), per report rather than per account). Willful: greater of $100,000 or 50% of the account balance per year. Criminal penalties for willful failure include up to five years' imprisonment.

FATCA (IRS Form 8938)

Statutory authority: Internal Revenue Code §6038D; implementing regs at Treas. Reg. §1.6038D-1 through -8.

• Who files: Specified individuals (citizens, residents, certain nonresidents electing joint filing) with specified foreign financial assets above filing thresholds.
• Thresholds (filed with Form 1040):
  • Unmarried U.S. resident: $50,000 end-of-year or $75,000 at any point.
  • MFJ U.S. residents: $100,000 / $150,000.
  • Unmarried U.S. citizen residing abroad: $200,000 / $300,000.
  • MFJ U.S. citizens residing abroad: $400,000 / $600,000.
• What is reported: Foreign financial accounts, foreign-issued securities held outside of a financial account, foreign partnership interests, foreign mutual funds.
• Penalties: $10,000 per failure-to-file; up to $50,000 in additional penalties for continued failure after IRS notice. 40% accuracy-related penalty on understated tax attributable to undisclosed foreign assets under §6662(j).

Other foreign-asset forms commonly triggered

• Form 3520: Reports gifts and inheritances from foreign persons (over $100,000 from a foreign individual or $19,570 from a foreign corporation in 2025). Penalty: 5% per month, up to 25% of the gift value.
• Form 5471: U.S. persons who are officers, directors, or 10%+ owners of foreign corporations. $10,000 per form per year for failure.
• Form 8621: Passive Foreign Investment Company (PFIC) reporting — required for virtually all foreign mutual funds and ETFs. Punitive default tax regime under §1291 unless QEF or mark-to-market election made.
• Form 8865: U.S. persons with interests in foreign partnerships.

Worked example: dual citizen retiree

U.S. citizen, age 67, retired to Italy. Italian bank account: peak value €120,000 (~$130,000). Italian brokerage with €350,000 in EU-domiciled mutual funds. U.K. employer pension worth £200,000.

• FBAR: Required. Aggregate exceeds $10,000. Report Italian bank, Italian brokerage, and U.K. pension separately on Form 114 by October 15.
• Form 8938: Required (resident-abroad threshold $400,000 MFJ exceeded). Report all three on Form 8938 attached to Form 1040.
• Form 8621 (PFIC): The Italian mutual funds are PFICs. Annual Form 8621 per fund. Without timely QEF elections at acquisition, the §1291 default regime applies — distributions and gains spread over the holding period and taxed at the highest ordinary rate for each prior year plus interest.
• U.K. pension treaty: The U.S.–U.K. tax treaty preserves deferral of U.K. pension earnings, but reporting (FBAR and 8938) is still required.

Common mistakes

• Signature authority counts. An officer of a company with foreign accounts must file an FBAR even with no beneficial ownership.
• Foreign retirement accounts. Most foreign pensions are reportable on both FBAR and 8938, regardless of whether earnings are currently taxable in the U.S.
• Foreign mutual funds are PFICs. Holding a single overseas ETF without Form 8621 attention can produce decades of compounding penalty tax.
• Misusing the Streamlined Filing Compliance Procedures. The Streamlined procedures remain available but require certification of non-willfulness; willful conduct routes the taxpayer to the broader Voluntary Disclosure Practice through IRS Criminal Investigation, with substantially harsher terms. Misclassification is the most common error.
• Foreign inheritance not reported. A $200,000 inheritance from a parent in Korea is not subject to U.S. estate or gift tax — but the recipient owes a Form 3520 with potentially severe penalties for failure.

Sources

• Bank Secrecy Act, 31 U.S.C. §5314: law.cornell.edu/uscode/text/31/5314
• Internal Revenue Code §6038D, FATCA reporting: law.cornell.edu/uscode/text/26/6038D
• Bittner v. United States, 598 U.S. 85 (2023): supremecourt.gov 21-1195
• FinCEN BSA E-Filing System: bsaefiling.fincen.treas.gov
• IRS Form 8938 Instructions: irs.gov/pub/irs-pdf/i8938.pdf

Foreign-account reporting interacts with retirement-account location decisions. Explore the free educational tool.