FBAR and FATCA: What Every Expat Must Report

# FBAR and FATCA: What Every Expat Must Report

In 2014, a retired Beanie Baby tycoon named Ty Warner paid $53.5 million in penalties and pleaded guilty to tax evasion for failing to disclose a Swiss bank account that once held $107 million. He was not alone: the IRS Offshore Voluntary Disclosure Program has collected more than $11.1 billion from taxpayers who failed to report foreign accounts since 2009, according to the Treasury Inspector General for Tax Administration. For ordinary American expats, the stakes are lower but the rules are the same — and the penalty for a single non-willful FBAR violation is now $16,536 per account for violations assessed in 2024, adjusted annually for inflation (31 CFR 1010.821).

If you are a US citizen living abroad with a checking account at a local bank, you likely have two separate reporting obligations: the Report of Foreign Bank and Financial Accounts (FBAR, FinCEN Form 114) and the Foreign Account Tax Compliance Act disclosure (FATCA, IRS Form 8938). They sound redundant. They are not. They go to different agencies, have different thresholds, cover different assets, and carry different penalties.

The $10,000 Aggregate Trigger for FBAR

FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS. The legal authority is the Bank Secrecy Act of 1970, and the filing threshold has not changed since its introduction: you must file if the aggregate maximum value of all your foreign financial accounts exceeded $10,000 at any point during the calendar year (31 CFR 1010.350).

"Aggregate" is the word that catches people. If you had $6,000 in a Portuguese checking account and $5,000 in a Portuguese savings account on different days of the year, you crossed the threshold — even though neither account alone triggered it, and even if the money was the same $6,000 moved between accounts. The IRS FBAR Reference Guide confirms that each account must be reported on its highest value during the year, converted to US dollars using the Treasury's year-end exchange rate.

What counts as a "foreign financial account" is broader than most people assume. According to FinCEN guidance, it includes:

• Bank accounts (checking, savings, time deposits)
• Securities and brokerage accounts held at foreign institutions
• Mutual funds and pooled investment vehicles
• Most foreign pension accounts and foreign life insurance with cash value
• Accounts over which you have signature authority, even if you don't own the funds (think: a foreign employer's account you can sign on)

Cryptocurrency held in a foreign exchange account is not yet required on FBAR as of tax year 2023, per FinCEN Notice 2020-2, though FinCEN has proposed amending the regulations and expats should expect this to change. Foreign real estate held directly is excluded. Foreign real estate held through an entity is not.

FBAR is filed electronically through the BSA E-Filing System. The deadline is April 15, with an automatic extension to October 15 — no form required for the extension, per the FinCEN website. Filing is free.

FATCA: Different Thresholds, Different Form

FATCA was signed into law in 2010 as part of the HIRE Act. Its most visible effect on expats is the individual reporting requirement under Internal Revenue Code Section 6038D, codified in Form 8938, which is filed with your federal tax return.

The thresholds for Form 8938 are where expats get a real break compared to US-resident taxpayers. According to IRS instructions for Form 8938, a single filer living abroad does not have to file unless the aggregate value of specified foreign financial assets exceeds:

• $200,000 on the last day of the tax year, or
• $300,000 at any point during the year

Married filing jointly abroad: $400,000 / $600,000. To qualify for the higher foreign-resident thresholds, you must meet the tax home and physical presence tests described in IRC Section 911 — roughly, you lived abroad the full year or spent at least 330 full days in a foreign country during any 12-month period.

US-resident filers face much lower thresholds: $50,000 / $75,000 for single, $100,000 / $150,000 for joint. A newly-arrived expat who has not yet established a qualifying tax home still uses the domestic thresholds.

What Form 8938 covers overlaps with FBAR but is not identical. Per IRS guidance, Form 8938 captures "specified foreign financial assets," which includes foreign accounts plus:

• Foreign stock and securities held directly (not through an account)
• Interests in foreign partnerships and foreign trusts
• Foreign-issued life insurance and annuity contracts with cash value
• Foreign hedge funds and private equity interests

Form 8938 does not require reporting of foreign real estate held directly, physical currency, or precious metals held physically. It does require reporting of signature authority only if you have a financial interest — unlike FBAR, which requires filing for pure signature authority.

The Penalties That Actually Get Assessed

The penalty regime is where these forms differ most sharply from ordinary tax compliance.

**FBAR non-willful penalties**: Up to $16,536 per violation for 2024 assessments (31 CFR 1010.821). The Supreme Court's 2023 decision in *Bittner v. United States* clarified that the non-willful penalty is assessed per-form, not per-account — a significant win for taxpayers who had dozens of accounts.

**FBAR willful penalties**: The greater of $165,353 or 50% of the account balance at the time of the violation, per violation (31 USC 5321(a)(5)(C)).

**Form 8938 penalty**: $10,000 for failure to file, plus an additional $10,000 per 30 days after IRS notice, capped at $60,000 (IRC Section 6038D(d)). A 40% accuracy-related penalty applies to understatements attributable to undisclosed foreign assets (IRC Section 6662(j)).

Criminal penalties exist for willful FBAR violations under 31 USC 5322 — up to $250,000 in fines and five years in prison. The cases that get prosecuted typically involve active concealment, not mere oversight, but the authority exists.

Streamlined Procedures for Past Non-Compliance

Many expats discover these rules after years abroad. The IRS offers the Streamlined Foreign Offshore Procedures specifically for non-willful violations by expats, per IRS guidance updated in 2014 and still in effect.

To qualify, you must:

• Meet the non-residency requirement (physical presence outside the US for at least 330 days in one of the three most recent tax years)
• Certify under penalty of perjury that your failure to report was non-willful
• File amended returns for the last 3 years and FBARs for the last 6 years
• Pay any tax owed plus interest

The key benefit: no FBAR penalties and no 27.5% miscellaneous offshore penalty that applies to domestic Streamlined filers. According to IRS statistics released in 2020, more than 100,000 taxpayers have used Streamlined since its launch.

The program is closed to anyone under audit or criminal investigation, and the IRS reserves the right to deny certifications it deems not credible. Once you file Streamlined, you cannot use it again.

Common Expat Traps

A few situations generate outsized reporting problems relative to their apparent simplicity.

**Foreign pensions**: Most foreign employer pensions and government-mandated retirement accounts (Australian superannuation, UK SIPPs, Canadian RRSPs) are reportable on FBAR if you have signature authority and on Form 8938 if held through an account. Some also trigger Form 3520 or Form 8621 (PFIC) filings. The $10,000 per-form penalty for missing Form 3520 has generated particular controversy — the IRS Taxpayer Advocate flagged it in the 2023 Annual Report as disproportionate for non-willful failures.

**Foreign mutual funds**: Nearly every non-US mutual fund or ETF is treated as a Passive Foreign Investment Company (PFIC) under IRC Section 1297, triggering Form 8621 and punitive tax treatment unless a mark-to-market or Qualified Electing Fund election is made. Many expats hold PFICs without realizing it because their local bank's default investment products are structured this way.

**Joint accounts with non-US spouses**: The full balance is aggregated for your FBAR, not just your half. Form 8938 generally follows the same rule unless you file jointly, which creates its own consequences for the non-US spouse.

**Accounts you signed on years ago**: Signature authority over a former employer's account, an aging parent's foreign account, or a volunteer treasurer role at a foreign nonprofit all create FBAR obligations you may have forgotten.

Action Items for This Filing Season

1. **Pull a full year of statements from every foreign account you hold or can sign on.** Note the single highest balance in local currency for each account. Convert using the Treasury Reporting Rates of Exchange for December 31 of the tax year.

1. **Add them up.** If the aggregate max exceeds $10,000 at any point, you file FBAR. Do this before worrying about Form 8938.

1. **Check the Form 8938 thresholds against your bona fide foreign residency status.** If you qualify for the foreign thresholds ($200k/$300k single), confirm with your tax home documentation — a common area of IRS scrutiny.

1. **File FBAR at bsaefiling.fincen.treas.gov.** It is free, takes 20-30 minutes for a typical expat, and the automatic October 15 extension means there is no reason to miss the deadline.

1. **If you have missed prior years, do not file late FBARs without a plan.** Review the Delinquent FBAR Submission Procedures and Streamlined Foreign Offshore Procedures on IRS.gov, and consult a tax professional experienced with expat filings before submitting anything. Silent disclosure — quietly filing past forms without entering a formal program — has a worse track record than either alternative.

1. **Identify PFICs and foreign trusts early.** These require separate forms (8621, 3520, 3520-A) with their own deadlines and penalties that dwarf FBAR penalties in some cases.

The Bottom Line

FBAR and FATCA reporting are the price of US citizenship-based taxation, and neither is going away. The US is one of two countries in the world — Eritrea is the other — that taxes its citizens on worldwide income regardless of residence, per the Tax Foundation's 2022 international comparison. That regime is enforced through information reporting, and foreign financial institutions now routinely report US account holders directly to the IRS under FATCA intergovernmental agreements with 113 jurisdictions as of 2024, according to Treasury data.

In practice, this means your foreign bank already knows you are American and is likely already telling the IRS about your accounts. Your FBAR and Form 8938 filings are what reconcile that data with your side of the story. Filing them correctly, on time, is significantly cheaper than the alternatives.

The next step for most expats is straightforward: open the BSA E-Filing portal, file this year's FBAR before October 15, and schedule a 30-minute review with a cross-border tax professional if any of the trap situations above apply to you.