The Foreign Account Tax Compliance Act (FATCA) requires certain Americans living abroad to report specified foreign financial assets to the IRS using Form 8938 when their total value exceeds applicable thresholds.
For qualifying single filers living abroad, reporting generally begins when specified foreign financial assets exceed $200,000 at year-end or $300,000 at any time during the year.
Americans living abroad often maintain foreign bank accounts, investment portfolios, retirement accounts, and other financial assets. While these are part of everyday financial life overseas, they can create additional US tax reporting obligations.
FATCA was introduced to improve transparency around foreign financial assets held by US taxpayers. It requires many foreign financial institutions to report information about US account holders and certain individuals to disclose their foreign assets directly to the IRS.
However, not every American abroad must file Form 8938. The requirements depend on your filing status, residency, and the combined value of your reportable assets.
For those who meet the filing requirements, professional FATCA reporting services can help ensure that the necessary foreign assets are properly disclosed.
KEY Summary: FATCA Reporting Requirements for US Expats
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FATCA requires foreign asset disclosure: Certain US taxpayers must report specified foreign financial assets on Form 8938.
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Reporting thresholds vary: Qualifying Americans living abroad generally have higher thresholds than taxpayers residing in the United States.
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More than bank accounts are covered: Certain foreign investments, pensions, and business interests may also be reportable.
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FATCA and FBAR are separate: Some Americans must file both Form 8938 and FinCEN Form 114.
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Penalties can be substantial: Failure to file Form 8938 can result in an initial $10,000 penalty and additional penalties for continued noncompliance.
FATCA Reporting: Quick Facts
| Requirement | Details |
|---|---|
| Full name | Foreign Account Tax Compliance Act |
| IRS form | Form 8938 |
| Who may need to file? | US taxpayers with specified foreign financial assets above applicable thresholds |
| Single filer threshold abroad | Over $200,000 at year-end or $300,000 during the year |
| Married filing jointly threshold abroad | Over $400,000 at year-end or $600,000 during the year |
| Filing deadline | With the annual US income tax return, including extensions |
| Initial failure-to-file penalty | Generally $10,000 |
| Separate from FBAR? | Yes |
What is FATCA and How Does It Work?
FATCA was enacted in 2010 to help the IRS identify foreign financial accounts and assets associated with US taxpayers.
It operates through two reporting systems.
- Foreign financial institution reporting: Many foreign banks, investment firms, and other financial institutions must identify US account holders and report certain account information to the IRS, either directly or through their local tax authorities.
- Individual taxpayer reporting: Certain US taxpayers must disclose specified foreign financial assets using Form 8938 when their total value exceeds the applicable reporting threshold.
These obligations are independent. Even if your foreign bank reports your account under FATCA, you may still need to file Form 8938.
The IRS maintains a searchable public database of all foreign financial institutions (FFI) which are in compliance with FATCA guidelines, which is updated monthly. If you are an expat considering opening an account with a foreign financial institution and want to know whether it is FATCA compliant, you can search the IRS FATCA FFI List here.
Unsure If You Need to File Form 8938?
Foreign asset reporting can be complicated, especially when you have multiple accounts or investments abroad. Our tax professionals can help you determine your filing obligations and ensure accurate reporting.
Who Must File Form 8938?
Form 8938 generally applies to specified US individuals, including:
- US citizens living abroad.
- US resident aliens.
- Certain nonresident aliens who elect to be treated as US residents for tax purposes.
- Certain other individuals covered by special residency rules.
Certain domestic entities may also have reporting obligations.
However, having a foreign bank account does not automatically mean Form 8938 is required.
You generally must be required to file a US income tax return and hold specified foreign financial assets exceeding the applicable threshold.
If you are not required to file an annual income tax return, Form 8938 generally is not required, although FBAR obligations may still apply.
FATCA Reporting Thresholds for US Expats
Form 8938 thresholds depend on filing status and whether you qualify as living abroad under IRS rules.
| Filing Status | Year-End Asset Value | Value at Any Time During Year |
|---|---|---|
| Single or married filing separately, living abroad | Over $200,000 | Over $300,000 |
| Married filing jointly, living abroad | Over $400,000 | Over $600,000 |
| Single or married filing separately, living in the US | Over $50,000 | Over $75,000 |
| Married filing jointly, living in the US | Over $100,000 | Over $150,000 |
You must generally file Form 8938 if your specified foreign financial assets exceed either threshold.
Example: Single American Living in Germany
Suppose you have:
- German savings account: $90,000
- Foreign investment account: $85,000
- Foreign brokerage account: $50,000
Your combined year-end value is $225,000.
Assuming you qualify as living abroad and are required to file a US tax return, you generally must file Form 8938 because your assets exceed the $200,000 year-end threshold.
To qualify for the higher foreign-residency thresholds, you generally must have a foreign tax home and meet the applicable bona fide residence or physical presence requirements.
Which Foreign Assets Are Reportable Under FATCA?
Form 8938 covers specified foreign financial assets, which can include:
| Foreign Asset | Generally Reportable? |
|---|---|
| Foreign checking and savings accounts | Yes |
| Foreign brokerage accounts | Yes |
| Foreign stocks and securities held directly | Yes |
| Certain foreign pension accounts | Depends on arrangement |
| Foreign life insurance with cash value | Generally yes |
| Interests in foreign corporations or partnerships | May be reportable |
| Foreign real estate owned directly | No |
Foreign assets held through certain companies, partnerships, or trusts may require additional reporting.
For example, Americans who own foreign corporations may also have foreign business reporting obligations, including Form 5471.
Some assets disclosed on other IRS information returns qualify for reduced duplicate reporting on Form 8938, although they may still count toward the filing threshold.
FATCA vs. FBAR: What’s the Difference?
FATCA and FBAR both involve foreign financial reporting, but they are separate requirements.
| Requirement | FATCA (Form 8938) | FBAR (FinCEN Form 114) |
|---|---|---|
| Threshold | Depends on residency and filing status | Aggregate foreign account value exceeds $10,000 |
| Covers | Specified foreign financial assets | Foreign financial accounts |
| Filed with | IRS | FinCEN |
| Filing method | Attached to income tax return | Separate electronic filing |
| Required without a tax return? | Generally no | Possibly |
For example, an American living in France with $25,000 in foreign bank accounts may not need Form 8938 but would generally need to file an FBAR.
Filing Form 8938 does not replace FBAR, and filing FBAR does not replace Form 8938.
Americans with foreign financial accounts should review the separate FBAR filing requirements.
How FATCA Affects Foreign Bank Accounts
FATCA can affect Americans even when they do not meet the personal Form 8938 filing threshold.
Foreign banks may request a US Social Security number, tax residency declaration, or additional documentation to determine whether an account is subject to FATCA reporting.
Some financial institutions also restrict certain banking or investment services for US citizens because of their compliance requirements.
However, FATCA does not prohibit Americans from maintaining foreign accounts.
Importantly, a foreign bank’s disclosure of your account does not eliminate any personal US reporting obligations.
Need Help With FATCA Reporting?
From foreign bank accounts to investment portfolios, Universal Tax Professionals can help you meet your FATCA reporting requirements.
How to File Form 8938: Step-by-Step Guide
Form 8938 is generally filed with your annual US income tax return. Follow these steps to complete your FATCA reporting requirements.
Step 1: Determine Whether You Need to File
Review your filing status, residency, and the combined value of your specified foreign financial assets. Compare these amounts against the applicable Form 8938 reporting thresholds.
Step 2: Gather Your Foreign Financial Information
Collect statements and records for your reportable foreign accounts and assets, including account numbers, financial institution details, ownership information, and asset values.
Step 3: Calculate Your Foreign Asset Values
Determine the maximum value of each reportable asset during the tax year. Convert foreign currency amounts into US dollars using the applicable IRS valuation and exchange-rate rules.
Step 4: Complete Form 8938
Enter the required information about your foreign financial assets, including their values and any associated income. Check whether assets reported on other IRS information returns qualify for reduced duplicate reporting.
Step 5: Submit Form 8938 With Your US Tax Return
Attach Form 8938 to your annual US income tax return and submit it by the applicable filing deadline, including any valid extensions. Form 8938 is generally not filed separately.
FATCA Penalties for Noncompliance
Failure to file a required Form 8938 can result in significant penalties.
The initial failure-to-file penalty is generally $10,000.
Additional penalties of up to $50,000 may apply if the taxpayer continues to fail to file after receiving an IRS notice.
Certain underpayments involving undisclosed foreign financial assets may also trigger a 40% accuracy-related penalty. Reasonable-cause relief may be available depending on the circumstances.
Americans who have missed previous reporting requirements should review their filing history before submitting late forms. Eligible taxpayers with non-willful compliance failures may qualify for the Streamlined Foreign Offshore Procedures.
Common FATCA Reporting Mistakes
Several mistakes can lead to incomplete or incorrect reporting:
- Confusing FATCA with FBAR: The forms have different thresholds and reporting rules.
- Overlooking foreign investments: FATCA can cover more than bank accounts.
- Ignoring maximum asset values: Year-end balances alone may not determine whether reporting is required.
- Assuming foreign taxes eliminate reporting: Paying taxes abroad does not automatically remove Form 8938 obligations.
- Relying on bank reporting: Financial institution disclosures do not replace individual filing requirements.
