U.S. Foreign Account Reporting Requirements

Living, working, or investing outside the United States as a U.S. person comes with specific and often confusing financial reporting obligations. The U.S. government requires its citizens, residents, and entities to report their foreign financial assets to prevent offshore tax evasion. Two of the most important reporting requirements are the FBAR (Report of Foreign Bank and Financial Accounts) and FATCA (Foreign Account Tax Compliance Act). Understanding the difference between these two overlapping yet distinct obligations is critical. Failure to comply can result in severe penalties, even if the omission was unintentional. This guide is designed to clarify your responsibilities and explain how professional guidance can ensure you remain compliant. As of July 24, 2025, these requirements remain largely unchanged, though penalty amounts for FBAR violations have been adjusted for inflation.

FBAR vs. FATCA: What's the Difference?

While both FBAR and FATCA deal with foreign asset reporting, they are administered by different government agencies, have different rules, and serve different purposes. It is common for taxpayers to be required to file both. Note that many taxpayers must file both forms if their foreign assets meet the respective thresholds, as FBAR focuses on accounts while FATCA covers a wider range of assets (e.g., foreign stocks, partnerships, or contracts). Duplicate reporting of the same asset on both forms is allowed and sometimes required.

FBAR (FinCEN Form 114): A tool to fight financial crime, filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury.

FATCA (Form 8938): A tool to enforce tax compliance, filed with the Internal Revenue Service (IRS) as part of your annual tax return.

Aspect	FBAR (FinCEN Form 114)	FATCA (IRS Form 8938)
Administered By	FinCEN (Treasury Department)	IRS (as part of tax return)
Purpose	Combat financial crimes	Enforce tax compliance on foreign assets
Threshold	Aggregate >$10,000 at any time	Varies by status/residency (e.g., >$200,000 end-of-year for single abroad)
Filing Deadline	April 15 (auto extension to Oct. 15)	With tax return (extensions apply)
Penalties (2025)	Non-willful: Up to $16,536; Willful: Greater of $165,353 or 50% of balance	$10,000 initial + up to $50,000 additional

FBAR: Report of Foreign Bank and Financial Accounts

The FBAR is the more common of the two requirements. It is a cornerstone of the Bank Secrecy Act, designed to provide the U.S. government with visibility into foreign accounts held by U.S. persons.

Who Must File an FBAR?

You must file an FBAR if you are a U.S. person (citizen, resident, green card holder, or entity) and the aggregate value of all your foreign financial accounts exceeded $10,000 at any point during the calendar year.

Foreign financial accounts include bank accounts, brokerage accounts, mutual funds, and certain insurance policies or pension plans held outside the U.S. Note that virtual currency or cryptocurrency held directly in a wallet is generally not reportable on FBAR, but if stored on a foreign exchange or platform that qualifies as a financial institution, it may need to be reported.

Key points:

• The $10,000 threshold is for the combined total of your accounts, not per account. If you have three accounts with $4,000 each, you meet the threshold.
• This applies even if the $10,000 level was reached for just one day.
• You must report accounts you have a financial interest in or signature authority over.

FATCA: Foreign Account Tax Compliance Act (Form 8938)

FATCA takes a broader approach, requiring you to report "specified foreign financial assets" as part of your annual tax filing.

Who Must File Form 8938?

FATCA filing thresholds are much higher than for the FBAR and depend on your filing status and whether you reside in the U.S. or abroad. You must file Form 8938 if you are required to file a U.S. tax return and your assets exceed certain thresholds. These thresholds apply to the total value of specified foreign financial assets, such as foreign bank accounts, stocks, securities, financial instruments, and interests in foreign entities. You must file if you meet either the year-end or anytime-during-the-year threshold.

FATCA filing thresholds vary by filing status and residency:

• Living in the U.S.:
  • Unmarried or married filing separately: More than $50,000 on the last day of the tax year or more than $75,000 at any time during the year.
  • Married filing jointly: More than $100,000 on the last day or more than $150,000 at any time.
• Living abroad (meeting the bona fide residence or physical presence test):
  • Unmarried or married filing separately: More than $200,000 on the last day or more than $300,000 at any time.
  • Married filing jointly: More than $400,000 on the last day or more than $600,000 at any time.

Penalties for Non-Compliance

The penalties for failing to file these forms are severe and can be financially devastating.

FBAR Penalties (as adjusted for inflation in 2025):

• Non-Willful: A penalty of up to $16,536 per violation (typically per form, not per account). 67
• Willful: A penalty of up to the greater of $165,353 or 50% of the account balance. Willful violations can also lead to criminal prosecution. 67

FATCA Penalties:

A failure-to-file penalty of $10,000, with additional penalties up to $50,000 for continued non-compliance after IRS notification. These amounts are fixed and not subject to annual inflation adjustments, unlike FBAR penalties.

How to Resolve Past Non-Compliance: Finding the Right Path

If you have unintentionally failed to file, it is crucial to come forward voluntarily. The IRS offers several programs to help taxpayers catch up and avoid the harshest penalties. Choosing the correct program is essential. These programs are subject to IRS discretion and may be updated; always check the latest IRS guidance before proceeding. If your non-compliance involves willful conduct or more complex issues (e.g., foreign trusts or large unreported income), consider the IRS Voluntary Disclosure Program, which offers protection from criminal prosecution but may involve higher penalties.

Option 1: Delinquent FBAR Submission Procedures

This is a specific remedy for a very particular situation. It is an excellent option for taxpayers whose only oversight was the failure to file an FBAR.

Who Qualifies for the Delinquent FBAR Submission Procedures?

This program is available to you if you meet all of the following conditions:

• You have no unreported income. You must have properly reported all income from your foreign financial accounts on your U.S. tax returns for the relevant years.
• You have paid all taxes. You must have paid all U.S. taxes due on the income generated from those foreign accounts.
• You do not need to file amended returns. Since all your income was reported, you do not need to amend your past tax returns (Form 1040).
• The IRS has not contacted you. You cannot be under an IRS civil examination or criminal investigation, nor can you have been previously contacted by the IRS about the delinquent FBARs.

How to File Under This Procedure:

• File All Delinquent FBARs: You must prepare and electronically file a separate FinCEN Form 114 for each year you missed. Filings are done through FinCEN's BSA E-Filing System.
• Select the Reason for Late Filing: On the first page of the electronic form, you will see a dropdown menu. You must select "Other" and provide a specific explanation.
• Provide a "Reasonable Cause" Statement: In the text box provided, you must explain why you are filing late. This statement is critical. It should be a concise, factual explanation of why your failure to file was due to reasonable cause and not willful neglect (e.g., "I was unaware of the FBAR filing requirement as a U.S. citizen residing in Germany" or "I received incorrect advice from a former tax preparer"). Keep the statement factual and concise (e.g., 1-2 paragraphs), avoiding emotional language. Include details like your residency history, when you learned of the requirement, and any reliance on professionals. Supporting documentation (e.g., emails or advisor notes) can strengthen your case, though it's not required for submission.

The primary benefit of this program is that the IRS will not impose a penalty for the failure to file the delinquent FBARs if you meet all the conditions.

Option 2: Streamlined Filing Compliance Procedures

This is a more comprehensive program for taxpayers who were non-willful but have more to correct than just a missing FBAR.

Who Should Use the Streamlined Procedures?

You must use this program instead of the Delinquent FBAR Procedures if:

• You have unreported foreign income and need to amend your past tax returns to report it.
• You need to file delinquent tax returns in addition to your FBARs.
• You failed to file other international information returns, such as Form 8938 (FATCA) or Form 3520 (Foreign Gifts/Trusts).

This program requires filing three years of tax returns (or amended returns) and six years of FBARs, along with a detailed certification of non-willful conduct.

Additional Important Notes

• Disclaimer: This guide reflects requirements as of July 24, 2025. Tax laws can change; consult the IRS website or a tax professional for the latest details. Penalty amounts are subject to annual inflation adjustments, and thresholds may be revised.
• Professional Advice: Navigating these reporting requirements can be complex. Consider consulting a tax advisor specializing in international taxation to ensure compliance and explore relief options.