FBAR and FATCA: Foreign Account Reporting for US Expats

FBAR vs FATCA: understanding the distinction

Many expats hear "FBAR and FATCA" as if they were a single thing. They are not. They are two separate, parallel foreign account reporting regimes created under different laws, administered by different agencies, filed on different forms, with different thresholds and different penalties. Confusingly, they often cover the same accounts — so you may need to report the same bank account on both.

Here is the essential distinction:

• FBAR (Foreign Bank Account Report) — filed separately from your tax return with FinCEN (Financial Crimes Enforcement Network, part of the Treasury Department). It is a disclosure requirement, not a tax. The form is FinCEN 114.
• FATCA (Foreign Account Tax Compliance Act) — reported on Form 8938, filed as part of your annual tax return with the IRS. It was enacted to combat offshore tax evasion and requires disclosure of specified foreign financial assets to the IRS directly.

FBAR (FinCEN 114) explained

The FBAR requirement comes from the Bank Secrecy Act of 1970, codified at 31 U.S.C. § 5314. It requires any "United States person" — citizens, resident aliens (Green Card holders), and certain domestic entities — to file a report disclosing foreign financial accounts when the aggregate balance exceeds the threshold.

The FBAR is a disclosure form, not a tax form. Filing it does not create a tax liability. Its purpose is to give the US government visibility into foreign accounts that might be used for tax evasion, money laundering, or other financial crimes. The IRS and FinCEN cross-reference FBAR data against tax returns to identify discrepancies.

Key facts about the FBAR:

• Filed electronically via the BSA E-Filing System at bsaefiling.fincen.treas.gov — never with the IRS or attached to your tax return
• Due April 15, with an automatic (no-request-needed) extension to October 15
• No extension beyond October 15 is available
• Must be filed for each calendar year in which the threshold was met
• No filing fee
• The account holder's TIN (SSN or ITIN) is required

The FBAR threshold: $10,000 aggregate

You must file an FBAR if the aggregate maximum value of all your foreign financial accounts exceeded $10,000 at any point during the calendar year. Several important nuances:

• Aggregate, not per-account: You add up the maximum balances of all your foreign accounts. If you have three accounts that peaked at $3,000, $4,000, and $4,000 respectively, you must file — the aggregate $11,000 exceeds $10,000 even though no single account did.
• Maximum value, not year-end balance: You report the highest balance in each account at any point during the year — not the January 1 or December 31 balance. If an account spiked to $15,000 in March and was back to $2,000 by December 31, you still report $15,000.
• USD equivalent: Foreign currency balances must be converted to USD using the Treasury's Financial Management Service exchange rates for the last day of the calendar year (December 31). The rates are published annually at fiscal.treasury.gov.
• Signature authority: Even if you don't own a foreign account but have signature authority over it (e.g., a company account you can sign on), you may need to file an FBAR for that account.
• Joint accounts: If you are a joint account holder, you report the full balance of the account — not your share. Both account holders may need to file separately (though spouses may be able to file a joint FBAR in certain circumstances).

Which accounts count for FBAR

The FBAR covers "foreign financial accounts" — which is broader than just bank accounts. Specifically, you must report:

• Bank accounts: Checking, savings, time deposits (CDs), fixed deposits at foreign banks or branches of foreign banks
• Securities accounts: Brokerage accounts, investment accounts holding stocks, bonds, or mutual funds at a foreign institution
• Mutual fund accounts: Foreign mutual funds or unit trusts held in an account at a foreign institution
• Pension and retirement accounts: Many foreign employer pension plans where you have a direct beneficial interest — though the rules are nuanced and some treaty-exempt plans may be excluded
• Life insurance with a cash value: Foreign life insurance policies that have a cash surrender value
• Commodity futures accounts: Foreign accounts holding commodities or commodity futures contracts

What is NOT an FBAR account:

• Foreign real estate held directly (not through a foreign entity)
• Foreign currency held physically (cash in your wallet)
• Precious metals held personally (not in an account)
• US military banking facility accounts
• Correspondent or nostro accounts
• Certain accounts at US military banking facilities operated by US financial institutions

FATCA (Form 8938) explained

FATCA — the Foreign Account Tax Compliance Act — was enacted in 2010 and went into effect in 2011. It has two dimensions: the individual reporting requirement (Form 8938, what this section covers) and the institutional reporting requirement (foreign banks reporting US account holders to the IRS via intergovernmental agreements). This guide focuses on your individual obligation.

Form 8938 must be attached to your annual Form 1040 when you have "specified foreign financial assets" exceeding the applicable threshold. Unlike the FBAR, Form 8938 is filed with the IRS as part of your tax return, and the statute of limitations on your entire tax return can be extended when Form 8938 is required but not filed.

FATCA's scope is deliberately broader than the FBAR's. "Specified foreign financial assets" include:

• Foreign financial accounts (same accounts as FBAR)
• Foreign stocks and securities not held in a financial account (e.g., directly held shares in a foreign company)
• Foreign partnership interests
• Foreign-issued notes, bonds, debentures
• Interests in foreign trusts and foreign estates
• Foreign pension plans and deferred compensation plans (in some cases)
• Any financial instrument or contract with a foreign issuer or counterparty

FATCA thresholds for expats

Form 8938 thresholds are significantly higher than the FBAR's $10,000, and expats get a more generous threshold than US residents. The thresholds are based on the value at year-end OR at any point during the year:

Note: "Living abroad" means your tax home is in a foreign country and you meet either the Physical Presence Test or the Bona Fide Residence Test — the same tests used for the FEIE.

FinCEN 114 vs Form 8938: side-by-side

Penalties for non-compliance

This is where FBAR and FATCA become genuinely frightening. The US government takes foreign account non-disclosure extremely seriously, and the penalties are among the harshest in the tax code.

How to file the FBAR

The FBAR is filed electronically through the BSA E-Filing System at bsaefiling.fincen.treas.gov. Here is the step-by-step process:

1. Gather account information: For each foreign financial account, you need the account number, the name and address of the foreign bank or institution, the maximum value during the calendar year (in USD), and the account type.
2. Convert currencies: Use the Treasury's December 31 exchange rates (available at fiscal.treasury.gov) to convert all foreign currency balances to USD. If an account's highest balance occurred mid-year, you still use the December 31 rate for conversion.
3. Access BSA E-Filing: Go to bsaefiling.fincen.treas.gov. You can file without creating an account using the online fill-and-submit form, or you can use a third-party tax software that integrates FBAR filing.
4. Complete FinCEN Form 114: Enter filer information, then account information for each qualifying account. For accounts over $1,000,000, additional institution details are required.
5. Submit and save confirmation: After submission, save the confirmation number and the PDF copy of your completed form for your records. Keep records for at least 6 years (matching the FBAR statute of limitations).

For Form 8938 (FATCA): Complete Form 8938 and attach it to your Form 1040. Most tax software (TurboTax, H&R Block, TaxAct, Greenback, MyExpatTaxes) will prompt you for this if you indicate you have foreign assets. The form is divided into Part I (foreign deposit and custodial accounts) and Part II (other foreign financial assets).

Common mistakes expats make

After reviewing thousands of expat tax situations, these are the most frequent FBAR and FATCA errors:

1. Not knowing the requirement exists

Many 🇺🇸 Americans abroad simply don't know they are required to file the FBAR. Unlike a tax return (which at least gets discussed), the FBAR is a separate filing that nobody sends you a reminder about. Your foreign bank certainly isn't going to remind you to tell the US government about your account.

2. Misunderstanding "aggregate"

Many expats check each account individually, see that none of them hit $10,000, and conclude they don't need to file. But the test is aggregate — all accounts combined. Three accounts at $4,000 each = $12,000 aggregate = FBAR required.

3. Forgetting accounts with signature authority

If you are a director or authorized signatory on a company's foreign bank account — even a company you don't personally own — you may have an FBAR obligation for that account. This catches many expats working in senior roles at foreign subsidiaries.

4. Using the wrong exchange rate

The FBAR requires the Treasury's official December 31 exchange rate, not mid-year rates or rates from a financial website. Using the wrong rate can cause under-reporting that technically triggers a penalty.

5. Reporting year-end balances instead of maximum values

The FBAR asks for the maximum value during the year, not the December 31 balance. An account that had $25,000 in January but only $2,000 in December still needs to report $25,000 as the maximum value.

6. Skipping Form 8938 when FBAR is filed

Because the FBAR is filed separately, some expats assume they've satisfied all foreign account reporting requirements. They haven't — Form 8938 (if above the threshold) must still be attached to the tax return. These are separate obligations.

7. Omitting foreign investment and brokerage accounts

Expats often correctly report their foreign bank (checking/savings) accounts but forget that brokerage accounts, mutual fund accounts, and investment accounts at foreign institutions also count. A foreign stock trading account is an FBAR account.