FBAR & FATCA Compliance Specialists: What Every US Taxpayer With Foreign Accounts Needs to Know
The United States is one of only two countries in the world that taxes its citizens on their worldwide income, regardless of where they live. To enforce this extraterritorial reach, Congress has created two parallel reporting systems — the Foreign Bank Account Report (FBAR) and the Foreign Account Tax Compliance Act (FATCA) — that together represent the most sophisticated international tax information exchange network ever constructed. Our FBAR and FATCA compliance specialists navigate these systems daily for clients ranging from dual nationals with home-country bank accounts to UHNW families with complex offshore investment structures.
The Penalty Reality
FBAR penalties are structurally designed to be catastrophic. For non-willful violations, the penalty is up to $10,000 per account per year — meaning a taxpayer with three foreign accounts who failed to file FBARs for six years can face penalties of up to $180,000 before a single tax dollar is assessed. For willful violations, the penalty is the greater of $100,000 or 50% of the highest account balance per account per year. A single Swiss bank account with $500,000 balances over six years can generate $1.5 million in willful FBAR penalties. This is not a hypothetical — these numbers arise routinely in our practice. The earlier a taxpayer acts, the more options remain available.
FBAR: Who Must File, What Must Be Reported
The FBAR — formally the FinCEN Form 114, filed electronically with the Financial Crimes Enforcement Network — must be filed by every US person who has a financial interest in, or signature authority over, one or more foreign financial accounts with an aggregate maximum value exceeding $10,000 at any point during the calendar year. The $10,000 threshold applies to all accounts combined, not per account — meaning a taxpayer with six foreign accounts each holding $2,000 must still file an FBAR disclosing all six accounts.
The definition of "financial account" under FBAR is remarkably broad. It includes checking accounts, savings accounts, securities accounts, mutual fund accounts, futures accounts held at foreign institutions, and life insurance policies with cash surrender value issued by a foreign insurer. It includes accounts over which a US person has only signature authority — such as an attorney authorized to manage a foreign client's account, or an employee with authorization to access their employer's foreign operating account. It does not matter whether the account generates any US-taxable income; the reporting obligation exists regardless. Our foreign account specialists conduct comprehensive account identification reviews to ensure every reportable account is included in the FBAR filing.
FATCA Form 8938: The Parallel Income Tax Reporting Obligation
While the FBAR is filed separately with FinCEN, Form 8938 — the Statement of Specified Foreign Financial Assets — is attached directly to the taxpayer's annual Form 1040 and submitted to the IRS. FATCA reporting applies to US taxpayers who hold "specified foreign financial assets" exceeding threshold amounts that vary based on filing status and residency: $50,000 at year-end or $75,000 at any point during the year for US residents filing as single; $200,000 at year-end or $300,000 at any point for US residents filing jointly; and higher thresholds for taxpayers living outside the US.
Specified foreign financial assets for FATCA purposes include not only foreign financial accounts reported on the FBAR, but also foreign stock and securities held directly (not through a foreign financial institution), foreign partnership interests, foreign trusts in which the taxpayer has interests, and foreign retirement accounts. The penalty for failure to file Form 8938 begins at $10,000 and escalates to $50,000 for continuing failure after IRS notice. Critically, the statute of limitations for tax returns that fail to include a required Form 8938 does not begin to run until the Form 8938 is filed — meaning the IRS retention of taxing authority is effectively indefinite for taxpayers who have never filed Form 8938 for years when it was required.
Coming Into Compliance: Streamlined Procedures vs. Delinquent Filing Procedures
For taxpayers who have failed to file FBARs or Form 8938 in past years, the path to compliance depends critically on whether the failure was willful or non-willful. For non-willful failures, the IRS Streamlined Filing Compliance Procedures provide a formal program for coming into compliance with a defined, reduced penalty structure. Non-willful failures where the taxpayer has no unreported income — because the foreign account held only previously-taxed US dollars, for example — may qualify for the Delinquent FBAR Submission Procedures, which allow late filing of FBARs with a reasonable cause statement and no monetary penalty at all.
For taxpayers with potential willful exposure, the IRS Voluntary Disclosure Practice — a separate program from the streamlined procedures — provides a vehicle for coming into compliance with civil penalty exposure but with an explicit IRS commitment not to make a criminal referral in exchange for complete, accurate, and timely disclosure. Selecting the correct compliance path is the most consequential decision in an offshore matter and requires experienced IRS representation counsel to navigate correctly.
Related Resources
Foreign Income & FBAR
Annual FBAR and Form 8938 preparation and compliance monitoring.
IRS Streamlined Filing
Non-willful offshore compliance with penalty reduction procedures.
International Tax
CFC, PFIC, and multi-jurisdictional tax planning for global families.
IRS Representation
Offshore penalty defense and IRS Voluntary Disclosure guidance.