Understanding U.S. Informational Reporting of Foreign Financial Assets

Many U.S. taxpayers are surprised to learn that even if their foreign accounts or investments generate little or no income, they may still have important reporting obligations under U.S. law.

The U.S. government requires extensive disclosure of foreign financial accounts and assets to combat tax evasion and increase transparency. Failure to comply can result in steep penalties, even if no tax is ultimately owed.

Here’s a breakdown of the key forms and when they apply.

FBAR (FinCEN Form 114)

The FBAR — officially known as the Report of Foreign Bank and Financial Accounts — is filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), not the IRS.

  • Who must file?
    Any U.S. person (citizen, resident, entity) with a financial interest in or signature authority over one or more foreign accounts if the aggregate value exceeds $10,000 at any time during the calendar year.

  • Examples of reportable accounts:
    Bank accounts, brokerage accounts, foreign retirement plans, foreign mutual funds, some life insurance or annuity policies with cash value.

  • Deadline: April 15 (automatic extension to October 15).

  • Penalties: Failure to file can result in civil penalties of up to $10,000 for non-willful violations, and much higher for willful violations.

Form 8938 (FATCA Reporting)

Under the Foreign Account Tax Compliance Act (FATCA), certain U.S. taxpayers must file Form 8938 with their annual IRS tax return to report specified foreign financial assets.

  • Who must file?
    U.S. taxpayers with foreign assets that exceed IRS thresholds, which vary depending on filing status and whether the taxpayer lives in the U.S. or abroad.

    • For single filers living in the U.S.: over $50,000 on the last day of the year or $75,000 at any time during the year.

    • Higher thresholds apply for married taxpayers and those living abroad.

  • What’s reported?
    Foreign accounts, stock or securities issued by foreign persons, foreign partnership interests, foreign trusts, and some other assets.

  • Overlap with FBAR:
    Even if you report accounts on an FBAR, you may still need to file Form 8938.

Other Foreign Reporting Forms

Depending on the type of foreign asset or arrangement, other forms may apply, including:

  • Form 5471 — for U.S. persons who own certain interests in foreign corporations.

  • Form 8865 — for U.S. persons involved in foreign partnerships.

  • Form 3520 / 3520-A — for U.S. persons involved with foreign trusts or who receive large foreign gifts or inheritances.

The forms are covered in more depth on the Foreign Entities Reporting page of this website.

Why This Reporting Matters

The U.S. operates under a citizenship-based taxation system, meaning that U.S. citizens and residents must report worldwide income and assets, even if they live permanently abroad.

Failing to comply with informational reporting obligations can lead to:

  • Severe financial penalties.

  • Possible IRS audits or investigations.

  • Loss of eligibility for certain tax benefits or statute of limitations protections.

It’s critical to understand that informational reporting is separate from tax liability — you might owe no additional tax but still face penalties simply for failing to report.

Key Takeaways

  • FBAR: Treasury filing for foreign accounts over $10,000.

  • Form 8938: IRS filing for broader foreign asset reporting under FATCA.

  • Other forms: May apply for foreign corporations, partnerships, or trusts.

  • Penalties: High penalties apply even for unintentional noncompliance.

If you have foreign accounts or assets, don’t assume you’re exempt from U.S. filing. Review your situation carefully, and consider consulting a tax professional to ensure full compliance.

For detailed thresholds, examples, and filing guidance, refer to IRS instructions and FinCEN guidelines or click Contact to schedule a call to speak with a cross-border tax specialist.