Check your foreign accounts right now. If you’re a U.S. citizen or resident with overseas financial accounts, you face two separate federal reporting requirements that carry penalties severe enough to wipe out those accounts entirely. I’m talking about FBAR and FATCA requirements – two reporting obligations that confuse even sophisticated taxpayers but demand absolute precision.
After fifteen years of handling international tax compliance for clients across 25 countries, I’ve seen the IRS pursue these penalties with increasing aggression. The distinction between these two requirements trips up dual citizens constantly. One is filed directly with FinCEN. The other goes on your tax return. Both carry penalties that escalate quickly. Miss either filing, and you’re facing potential penalties starting at $10,000 and climbing to hundreds of thousands.
Here’s what you need to understand about FBAR and FATCA requirements right now. FBAR (Foreign Bank Account Report, FinCEN Form 114) must be filed by anyone with financial interest in or signature authority over foreign accounts exceeding $10,000 in aggregate at any point during the year. FATCA (Foreign Account Tax Compliance Act, Form 8938) has higher thresholds that vary by filing status and location, but it captures broader categories of foreign assets beyond bank accounts.
The critical difference? FBAR focuses on accounts – checking, savings, investment accounts held at foreign financial institutions. FATCA casts a wider net to include foreign stocks, securities, interests in foreign entities, and certain foreign insurance policies. Different forms, different filing locations, different penalties. And if you qualify for both, you file both. There’s no consolidated reporting option that satisfies both requirements simultaneously.
I’ve walked dual citizens through countless situations where they assumed one filing covered their obligation or where they didn’t realize U.S. tax residency triggered these requirements at all. A client with UK and U.S. citizenship inherited £200,000 from his grandmother. He knew about UK inheritance tax. He had no idea that the inherited funds sitting in his London bank account triggered immediate FBAR filing requirements the moment his aggregate foreign accounts crossed $10,000. His “I didn’t know” defense bought him nothing when the IRS came calling three years later.
The thresholds seem straightforward until you apply them to real-world situations. Currency conversions on December 31st. Multiple accounts at different institutions. Joint accounts where you’re not the primary owner but have signature authority. Retirement accounts in your home country. These complications multiply quickly, and the IRS expects you to navigate them correctly without margin for error.
What makes these requirements particularly treacherous for dual citizens is the automatic information exchange agreements the U.S. has established with over 100 countries. Your foreign banks are already reporting your account information to the IRS through FATCA channels. When those reports arrive and the IRS sees no corresponding FBAR or Form 8938 from you, they don’t send a friendly reminder. They send a notice proposing penalties.
The penalties deserve your immediate attention. Non-willful FBAR violations carry $10,000 penalties per year. Willful violations trigger the greater of $100,000 or 50% of your account balance per year. FATCA penalties start at $10,000 and increase by $10,000 every 30 days after IRS notice, capping at $60,000 per year. These aren’t theoretical numbers – I’ve seen the IRS assess them against taxpayers who thought they had reasonable explanations for non-filing.
Who Must File an FBAR?
The FBAR filing requirement applies to U.S. persons with financial interest in or signature authority over foreign financial accounts when the aggregate value exceeds $10,000 at any time during the calendar year. That definition of “U.S. persons” includes more people than most realize.
You’re a U.S. person for FBAR purposes if you’re a U.S. citizen regardless of where you live, a U.S. resident including green card holders, or any domestic entity like a corporation, partnership, LLC, trust, or estate formed under U.S. law. The citizenship piece catches dual citizens who’ve lived abroad for decades and mistakenly believe their foreign residence exempts them from U.S. reporting. It doesn’t. Your U.S. citizenship triggers the requirement no matter where you physically reside or which passport you use for travel.
The $10,000 threshold is aggregate, not per account. Add up the maximum values reached in all your reportable foreign accounts at any point during the year. If that total exceeds $10,000 even for a single day, you have a filing requirement. I’ve seen clients miss this because they looked at year-end balances instead of maximum values. A client received a $300,000 property sale proceeds in his French account in June, transferred most of it to the U.S. in July, and figured his December 31st balance of $8,000 meant no filing requirement. Wrong. That June balance triggered FBAR filing for the entire year.
Foreign financial accounts include more than just checking and savings accounts. You’re reporting bank accounts, brokerage accounts, mutual funds, and certain retirement accounts held at foreign financial institutions. The term “foreign” means outside the United States – so accounts in Canada, the UK, Switzerland, Singapore, anywhere beyond U.S. borders. If a Canadian bank holds your account, it’s foreign for FBAR purposes regardless of the currency denomination.
Signature authority complicates the analysis significantly. You have signature authority when you can control the disposition of funds in an account through communication to the financial institution, whether or not you have a financial interest in the account. This captures business owners with authority over company accounts, trustees with control over trust accounts, and employees with signing power on employer accounts. Many dual citizens serve as directors for foreign companies or control business accounts without realizing this creates personal FBAR filing obligations separate from the company’s reporting requirements.
The financial interest test is equally broad. You have a financial interest if you’re the owner of record, the account was established for your benefit, or you have more than 50% ownership in an entity that owns the account. Joint accounts with your spouse? You both have a financial interest. Your name appears on your elderly parent’s account for emergency access? Financial interest. These situations require careful analysis because the IRS doesn’t accept “I was just helping” as an excuse for non-filing.
Who Must File FATCA Form 8938?
FATCA filing requirements depend on your filing status, where you live, and the total value of your specified foreign financial assets. The thresholds are higher than FBAR, but the asset categories are broader. Form 8938 gets filed with your tax return, making it part of your annual Form 1040 rather than a separate FinCEN submission.
Your filing threshold varies dramatically based on residence. If you live abroad and file as single or married filing separately, you must file Form 8938 when your specified foreign financial assets exceed $200,000 on the last day of the tax year or $300,000 at any time during the year. Married couples filing jointly abroad face thresholds of $400,000 at year-end or $600,000 at any point during the year.
Those thresholds drop by 75% if you live in the United States. U.S. residents filing as single hit the requirement at $50,000 on December 31st or $75,000 at any time during the year. Married filing jointly residents must file at $100,000 year-end or $150,000 anytime. This creates situations where moving from New York to London in the same year changes your filing threshold mid-stream, requiring careful tracking of when you established foreign residence for tax purposes.
Specified foreign financial assets include everything reportable on FBAR plus additional categories. You’re capturing foreign stock and securities not held in financial accounts, interests in foreign entities like ownership in foreign corporations or partnerships, foreign-issued life insurance with cash value, and foreign hedge funds or private equity interests. This broader definition means you might escape FBAR filing because your foreign bank accounts don’t hit $10,000, but still face FATCA filing because your total specified foreign assets – including that interest in your spouse’s family business in Ireland – exceed the threshold.
The key difference between FBAR and FATCA that trips up dual citizens is asset scope versus account scope. FBAR wants to know about accounts at foreign financial institutions. FATCA wants to know about foreign assets more broadly. A client held £100,000 in shares of his former UK employer – actual share certificates, not held in any brokerage account. No FBAR requirement because no foreign financial account existed. Definite FATCA requirement because those shares qualified as specified foreign financial assets exceeding his threshold.
Form 8938 also requires more detailed information than FBAR. You’re reporting maximum account values, but also the name and address of the foreign financial institution, the type of account, and for non-account assets, detailed information about the foreign entity or asset. This means tracking down EIN equivalents for foreign corporations, understanding the ownership structure of foreign partnerships, and documenting the value of assets that don’t have monthly statements.
The “specified” part of specified foreign financial assets creates additional complexity. Assets held in U.S. financial institutions don’t count, even if they’re foreign stocks or securities. Your shares in Toyota held at Fidelity? Not reportable on Form 8938. Those same shares held at Nomura in Tokyo? Reportable. The location of the financial institution holding the asset determines whether it’s specified foreign financial asset, not the foreign nature of the underlying investment.
FBAR and FATCA Thresholds You Need to Know
The threshold calculations for both FBAR and FATCA create confusion because they use different measurement points and different valuation methods. Getting these calculations wrong doesn’t just mean a late filing – it can mean the difference between no filing requirement and massive penalties for willful non-compliance.
FBAR uses one consistent threshold regardless of your situation. $10,000 aggregate maximum value across all reportable foreign financial accounts at any point during the calendar year. You check the highest balance in each account during the year, add them up, and if the total exceeds $10,000, you file. The simplicity of this single threshold doesn’t make the calculation simple when you’re dealing with currency conversions, accounts opened or closed mid-year, and fluctuating balances.
Currency conversion for FBAR uses Treasury’s Financial Management Service rate for December 31st, even when measuring maximum values from earlier months. An account hitting €9,500 in May might look under threshold using May rates, but December 31st conversion could push it to $10,400, triggering filing retroactively.
FATCA thresholds depend on filing status and residence. Living abroad roughly quadruples thresholds versus U.S. residence. “Living abroad” requires tax home in foreign country with 330+ days physical presence – mirroring the foreign earned income exclusion test. A client in Germany 320 days faced lower U.S. resident thresholds despite maintaining a Frankfurt apartment.
Here’s the complete 2025 FATCA threshold breakdown:
- Single taxpayers living abroad – $200,000 on December 31st OR $300,000 at any time during the tax year
- Married filing jointly living abroad – $400,000 on December 31st OR $600,000 at any time during the tax year
- Single taxpayers living in the U.S. – $50,000 on December 31st OR $75,000 at any time during the tax year
- Married filing jointly living in the U.S. – $100,000 on December 31st OR $150,000 at any time during the tax year
Aggregating accounts for FBAR requires adding maximum values even when maximums occurred on different dates. French account peaks at €8,000 in March, UK account at £4,000 in September, German account at €3,000 in November. Add those maximum values using December 31st rates, even though the peaks never coexisted. This methodology consistently catches taxpayers reviewing single statement dates.
FATCA’s dual-threshold structure – year-end versus anytime – creates traps. You might stay under year-end but exceed “anytime” due to temporary spikes. A client inherited AUD $450,000 in August, held it three months, then transferred most to the U.S. December 31st balance: AUD $85,000, under his $200,000 year-end threshold as single expat. But August’s AUD $450,000 exceeded his $300,000 “anytime” threshold, triggering Form 8938. Temporary spikes control the analysis.
The Penalties That Keep CPAs Up at Night
FBAR and FATCA penalties represent some of the most severe in the entire Internal Revenue Code. The structure of these penalties – particularly FBAR penalties – gives the IRS power to assess amounts that exceed the total value of the unreported accounts. I’ve seen compliance failures turn into financial catastrophes because taxpayers underestimated the government’s willingness to pursue maximum penalties.
FBAR penalties split into two categories. Non-willful violations carry penalties up to $10,000 per violation per year. A five-year period of non-willful non-filing generates $50,000 in penalties regardless of account balances. That $10,000 penalty applies even to a $15,000 account.
Willful FBAR violations destroy financial security. The penalty is the greater of $100,000 or 50% of the account balance at the time of the violation, per year. A taxpayer with $500,000 in unreported accounts faces $250,000 in penalties annually. Five years of willful non-filing means $1.25 million in penalties on a $500,000 account. The IRS consistently pursues and wins these maximum penalty cases.
Willfulness doesn’t require knowledge of FBAR requirements specifically. The IRS must prove you voluntarily violated a known legal duty or acted with reckless disregard. Courts find willfulness when taxpayers check “no” on Schedule B about foreign accounts, when sophisticated taxpayers fail to inquire about reporting requirements, or when taxpayers conceal accounts through multiple transfers between foreign banks.
FATCA penalties start at $10,000 for failing to file Form 8938. If the failure continues more than 90 days after IRS notice, add $10,000 for each 30-day period, up to $50,000 additional. Total potential: $60,000 per year. FATCA violations also trigger 40% penalties on tax understatements attributable to undisclosed foreign assets – double the standard 20% accuracy penalty.
Criminal penalties exist for both requirements but apply primarily to egregious cases. FBAR criminal violations carry fines up to $250,000 and imprisonment up to five years, increasing to ten years for violations exceeding $100,000. The statute of limitations for FBAR penalties is six years for non-willful violations. For willful violations, there’s no statute of limitations – the IRS can assess penalties indefinitely.
Recent enforcement shows the IRS pursuing FBAR penalties more aggressively. The 2020 Bittner Supreme Court decision clarified that non-willful penalties apply per year, not per account. But IRS appeals has become less willing to compromise, particularly where indicators of willfulness exist. You can face penalties under both regimes for the same underlying accounts when FATCA captures additional foreign assets beyond FBAR’s scope.
Filing Timelines and Deadlines
FBAR and FATCA follow different filing schedules, different extension rules, and different procedures for late compliance. Understanding these timing rules matters because missing deadlines triggers the penalty provisions immediately, and the procedures for fixing late filings vary significantly between the two requirements.
FBAR deadlines mirror tax returns but file separately. Due date is April 15th following the reporting year. You get automatic extension to October 15th without requesting it – FinCEN automatically grants six months. You don’t file Form 4868 for FBAR. This automatic extension creates confusion about actual late status, but doesn’t eliminate penalties if IRS determines April 15th filing was required.
FBAR gets filed electronically through FinCEN’s BSA E-Filing System, not through the IRS website or with your tax return. You create a FinCEN account, complete Form 114 online, and submit it directly to the Financial Crimes Enforcement Network. There’s no paper filing option. This separate filing system means your FBAR doesn’t get processed by IRS employees reading your tax return – it goes to a completely different federal agency that shares information with the IRS later.
FATCA Form 8938 gets filed with your income tax return – identical deadlines to Form 1040. April 15th or October 15th with extension. Form 4868 extension request covering your return automatically covers Form 8938. It attaches to your return as additional schedule, not filed separately. Missing Form 8938 while filing creates incomplete return, triggering IRS inquiries.
Late FBAR filing follows specific procedures. If you’re within the statute of limitations but past the deadline, file through BSA E-Filing System with an explanation for delay. The Delinquent FBAR Submission Procedures allow late filing with a reasonable cause statement certifying non-willful failure. Requirements: You must have filed compliant tax returns reporting all foreign account income, face no civil examination or criminal investigation, and received no IRS contact about unreported accounts. Meeting these tests generally avoids penalties, though the IRS reserves discretion.
The Streamlined Filing Compliance Procedures offer alternatives for taxpayers with unreported foreign income. File or amend three years of returns, file six years of FBARs, and pay 5% of highest aggregate foreign account balance. This 5% penalty beats potential 50% willful FBAR penalties substantially.
Timing your compliance matters strategically. Every day that passes with unfiled FBARs is another day within the statute of limitations for penalty assessment. The IRS receives account information from foreign financial institutions through FATCA reporting channels. When they match that information to your returns and see no corresponding FBAR, they initiate inquiries. Filing delinquent FBARs before receiving IRS contact provides access to penalty relief programs. Filing after IRS contact eliminates many protective procedures and leaves you negotiating from a weaker position.
Real-World Examples for Dual Citizens
Dual citizenship creates unique FBAR and FATCA complications because you’re navigating reporting requirements based on U.S. tax status while maintaining financial relationships in your other country of citizenship. These examples reflect situations I’ve handled directly, showing how threshold calculations, aggregation rules, and timing issues play out in practice.
Example 1: UK/US Dual Citizen With Inheritance
Sarah holds UK and U.S. citizenship, works in London, maintains only UK bank accounts. She inherited £180,000 in March 2024, added to her existing £25,000 Barclays balance. By December 31st, she’d used £90,000 for a house down payment, leaving £115,000 year-end.
FBAR analysis: Maximum balance of £205,000 (£25,000 + £180,000 inheritance) occurred in March. Using December 31st exchange rate of 1.28, that converts to $262,400. She files FBAR for 2024.
FATCA analysis: As single filer abroad, thresholds are $200,000 year-end or $300,000 anytime. December 31st balance of £115,000 converts to $147,200 – under year-end threshold. March maximum of £205,000 converts to $262,400 – under $300,000 “anytime” threshold. FBAR filing required, but no Form 8938.
Critical lesson: FBAR’s lower $10,000 threshold captures her when FATCA doesn’t. Many dual citizens assume under FATCA thresholds means no reporting requirements. Wrong.
Example 2: Canadian/US Dual Citizen With Business Accounts
Michael holds Canadian and U.S. citizenship, lives in Toronto, owns a consulting business organized as a Canadian corporation. He has personal checking at RBC (CAD $45,000 average), personal investment account at TD (CAD $125,000 year-end), and business operating account (CAD $180,000 maximum, CAD $95,000 year-end).
FBAR analysis: Michael has financial interest in personal accounts and signature authority over the business account. Aggregating all three accounts: Personal checking CAD $52,000, investment CAD $135,000, business CAD $180,000. Total CAD $367,000 converts to approximately $271,000. He must file FBAR reporting all three accounts.
FATCA analysis: Married filing jointly abroad gives him $400,000 year-end and $600,000 “anytime” thresholds. Year-end specified assets total $195,000. Maximum anytime: $271,000. Both under thresholds – no Form 8938 requirement. But if Michael’s wife has signing authority on the business account, she files separate FBAR. The corporation also files FBAR. Three separate filings for one account.
Example 3: Australian/US Dual Citizen With Investment Portfolio
Jennifer holds Australian and U.S. citizenship, moved from Sydney to New York in July 2024. She maintained Commonwealth Bank account (AUD $85,000) and Macquarie portfolio (AUD $165,000 in Australian shares), plus direct BHP Billiton shares worth AUD $42,000.
FBAR analysis: Maximum aggregate in foreign financial accounts was AUD $250,000 (bank plus Macquarie portfolio), converting to approximately $167,000. She files FBAR. Direct BHP shares don’t get reported on FBAR – not held in financial accounts.
FATCA analysis: Her mid-year move complicates this. Status on December 31st controls – she’s U.S. resident. Single U.S. resident thresholds: $50,000 year-end or $75,000 anytime. December 31st specified assets: Bank AUD $85,000 ($57,000), Macquarie AUD $165,000 ($110,000), direct BHP AUD $42,000 ($28,000). Total: $195,000, exceeding her $50,000 threshold substantially. She files Form 8938.
The timing trap: Had Jennifer stayed in Australia through December 31st, her $200,000 year-end threshold might have avoided Form 8938. Her U.S. move changed filing requirements mid-year. Residence status on December 31st determines thresholds for the entire year.
Common Dual Citizen Pitfalls
Dual citizens often maintain accounts in their other country of citizenship for family, property, or business. They don’t think of these as “foreign” because that country is home. The U.S. classifies anything outside the United States as foreign, regardless of your citizenship.
Retirement accounts in your other country trigger reporting despite locked status. Joint accounts with non-U.S. citizen family members create dual obligations – your signature authority on elderly parents’ accounts creates FBAR requirements even for entirely their funds.
Take Action Before the IRS Does
Every month with unfiled FBARs or missing Forms 8938 increases penalty exposure. The IRS receives foreign account information through automatic exchange with over 100 countries. They’re matching that data against your filings now. Discrepancies trigger penalty notices, not friendly reminders.
Gather complete foreign account information for six years. You need statements showing maximum balances, year-end values, and institution details for every reportable account. Include closed accounts – closing doesn’t eliminate reporting for years they existed. For non-account assets, document fair market values.
Calculate aggregate balances using Treasury December 31st exchange rates. Determine filing requirements for each year separately based on that year’s thresholds and facts. If you’ve missed filings, assess qualification for delinquent submission or streamlined procedures before filing – these provide penalty protection but require meeting specific criteria. Filing without following protective procedures eliminates penalty relief eligibility.
For current compliance, file FBAR through FinCEN’s BSA E-Filing System before October 15th. Complete Form 8938 with your tax return. When dealing with both requirements, list all foreign accounts and assets first, then determine what goes where. The IRS compares these filings – inconsistencies trigger inquiries.
Professional help costs far less than penalty exposure. FBAR penalties start at $10,000 per year and reach 50% of account balance. Form 8938 penalties start at $10,000 and escalate $10,000 every 30 days after notice. Don’t wait for IRS contact. Foreign institutions report your information quarterly through FATCA channels. Discovery after IRS identifies violations eliminates voluntary disclosure program access.
If you’re uncertain about requirements, missed prior filings, or need threshold calculation guidance, schedule a consultation. We handle FBAR and FATCA compliance for clients across 25 countries, know voluntary disclosure procedures, and negotiate directly with IRS examiners on foreign account issues. Getting this right costs far less than getting it wrong.