Which Foreign Accounts and Assets Do I Need to Disclose to the IRS Under FATCA?

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Owning an overseas bank account, investment or pension does not necessarily create additional U.S. tax, but it can create a reporting obligation. The rules become particularly important when taxpayers hold multiple accounts or assets across countries because reporting thresholds generally consider their combined value.

Even as financial institutions increasingly use technologies such as Artificial Intelligence in compliance processes, taxpayers remain responsible for understanding what they personally must disclose.

What FATCA Requires and Who It Applies To

The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, is designed to improve reporting of offshore financial assets held by U.S. taxpayers. For individuals, FATCA generally requires U.S. citizens, resident aliens, certain nonresident aliens and some specified domestic entities to report specified foreign financial assets on IRS Form 8938 when applicable thresholds are exceeded. The form is filed with the taxpayer’s federal income tax return. If a taxpayer is not required to file an income tax return for the year, Form 8938 generally is not required. FATCA also imposes separate reporting duties on many foreign financial institutions that maintain accounts for U.S. persons.

Which Foreign Accounts and Assets Trigger a FATCA Disclosure Obligation

Reportable assets can include foreign bank and brokerage accounts, stock or securities issued by non-U.S. persons, interests in foreign partnerships or corporations, foreign pensions and certain foreign-issued life insurance or annuity contracts with cash value. Directly held foreign real estate generally is not a specified foreign financial asset, although an interest in a foreign entity that owns real estate may be reportable. For U.S. residents, thresholds begin at $50,000 at year-end or $75,000 at any time for unmarried or separate filers, and $100,000 or $150,000 for joint filers. Higher thresholds apply to qualifying taxpayers living abroad.

For taxpayers living abroad, the thresholds rise substantially. A filer other than a married couple filing jointly generally files when specified assets exceed $200,000 at year-end or $300,000 at any point during the year. For married taxpayers filing jointly, those amounts are $400,000 and $600,000, respectively.

How FATCA and FBAR Differ and Why You May Owe Both

IRS Form 8938 and Foreign Bank Account Reporting (FBAR) are separate filings under different laws. Form 8938 is filed with the IRS as part of the federal income tax return and can cover foreign accounts plus other specified financial assets. The FBAR, FinCEN Form 114, is filed electronically with the Financial Crimes Enforcement Network and generally applies when aggregate foreign financial accounts exceed $10,000 at any point during the calendar year. Because the definitions and thresholds differ, the same foreign account can require both filings. Filing one does not satisfy the other, which is why understanding FBAR vs FATCA matters.

For example, a U.S. resident with $60,000 in a foreign bank account could exceed the Form 8938 year-end threshold applicable to an unmarried filer while also exceeding the $10,000 FBAR threshold. Conversely, an account could require an FBAR while remaining below the taxpayer’s applicable Form 8938 threshold.

What the Penalties Look Like for Failing to File Under FATCA

Failing to file a required Form 8938 can trigger a $10,000 penalty. If the taxpayer still does not file a complete and correct form within 90 days after the IRS sends notice, additional penalties can accrue at $10,000 for each 30-day period, up to $50,000 more. That means the Form 8938 filing penalty alone can reach $60,000 for a return. A 40% accuracy-related penalty may also apply to an underpayment attributable to an undisclosed specified foreign financial asset. The IRS can waive the failure-to-file penalty when the taxpayer establishes reasonable cause and shows the failure was not due to willful neglect.

The reporting issue can also affect how long a tax year remains open. The IRS states that certain omissions of income attributable to specified foreign financial assets can extend the statute of limitations to six years, while failure to properly report an asset can keep the assessment period open until three years after the required information is provided, subject to reasonable-cause rules.

How to Get Into Compliance If You Have Unreported Foreign Assets

The right correction path depends heavily on whether the failure was willful. The IRS Streamlined Filing Compliance Procedures remain available in 2026 to qualifying individuals who certify that their failures were non-willful. Separate procedures apply to taxpayers residing in the United States and abroad, and they can require delinquent or amended returns, information returns and FBARs. Taxpayers whose noncompliance was willful may instead consider the IRS Criminal Investigation Voluntary Disclosure Practice, which requires a truthful, timely and complete disclosure. Because eligibility and penalty treatment vary materially, taxpayers should evaluate the facts before filing amended returns or making a voluntary disclosure.

For taxpayers discovering an old foreign account in 2026, the first step is not simply to file whatever form appears to have been missed. The better starting point is determining which reporting obligations applied in each year, whether income associated with the asset was properly reported and whether the original failure was willful or non-willful. Those facts can determine which IRS compliance procedure is available and the potential penalty treatment.

How BT Can Help

For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Bennett Thrasher’s International Tax practice, or call us at 770.396.2200.

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