FATCA and Form 8938: what your foreign bank tells the IRS, and what you tell it

FATCA is a two-way street. Your foreign bank reports your account to the US, and you report your foreign assets on Form 8938 once they cross a threshold. The good news: for people living abroad, that threshold is a lot higher than for folks back in the States.

The short version

• FATCA, the Foreign Account Tax Compliance Act, requires foreign financial institutions to report accounts held by US taxpayers [1][2].
• Your side of FATCA is Form 8938, Statement of Specified Foreign Financial Assets. You attach it to your Form 1040, and you only file it if you have to file a tax return [3][4].
• If you live abroad, you file when foreign assets exceed $200,000 at year-end or $300,000 at any time (single), or $400,000 / $600,000 (married filing jointly) [3].
• Form 8938 doesn't replace the FBAR. Many people file both and list the same accounts twice [3][4].
• The penalty for not filing starts at $10,000 and can reach $60,000 after IRS notices, and the IRS can keep your return open for audit longer [3][5].

What FATCA asks of foreign banks

FATCA was enacted in 2010. It handed reporting duties to banks, brokers, funds and some insurers outside the US, which turned them into a long arm of the IRS. Participating foreign financial institutions must identify which account holders are US persons, run due diligence on them and report yearly on those accounts. They must also withhold 30% of certain US-source payments to institutions and account holders that don't cooperate [1].

Most countries didn't make every bank sign its own deal with the IRS. Instead, they signed an intergovernmental agreement (IGA) with the US Treasury. Treasury's list totals 114 jurisdictions [2]. There are two models:

What this means for you:

• Expect the citizenship question. When you open an account, most banks ask for your citizenship and place of birth. If you're a US person, they ask for a US taxpayer identification number (usually your Social Security number) and often a Form W-9 or a self-certification. Being born in the US flags you even if you hold another passport and haven't been stateside since you were a toddler.
• Your bank reports identifying details and balances. The bank sends your account holding, together with identifying details, to the US every year. In other words, the IRS already knows the account exists before you file. Leaving it off isn't a secret, it's a mismatch.
• Some banks avoid Americans. Compliance costs push some smaller banks and fund platforms to turn away US clients, passport in hand or not. That's why banking as an American abroad gets its own guide.

Form 8938: who files

You file Form 8938 if you're a "specified individual" (a US citizen or resident, plus some nonresidents), you must file an income tax return for the year, and your specified foreign financial assets exceed the threshold that applies to you [3][4]. If you don't need to file a return, you don't file Form 8938 [4]. Simple as that.

The thresholds for people living abroad

You count as living abroad for Form 8938 if your tax home is in a foreign country and you meet either test [5]:

• Bona fide residence: a US citizen who was a bona fide resident of a foreign country for an uninterrupted period covering the entire tax year.
• Physical presence: present in a foreign country at least 330 full days in any 12 consecutive months ending in the tax year.

Sound familiar? These are the same tests used for the foreign earned income exclusion.

Source: IRS comparison of Form 8938 and FBAR requirements [3]. The IRS publishes these as fixed dollar figures, not yearly inflation-adjusted amounts, so they apply to both tax year 2025 and tax year 2026 returns.

You meet the threshold if either test is crossed, so don't just glance at your December 31 statements. For example, a single expat whose accounts peaked at $320,000 in June but fell to $180,000 by December still files.

What counts as a specified foreign financial asset

Form 8938 is both broader and narrower than the FBAR, which is exactly why people get tangled up [3][4][5]:

• Included: foreign bank and brokerage accounts, foreign mutual funds, foreign-issued life insurance or annuities with a cash value, foreign stock or securities you hold directly (not through an account), interests in foreign partnerships and entities, and your interest in a foreign pension plan. For a foreign pension, you report the plan itself in Part VI, not its separate assets [5].
• Not included: foreign real estate you hold directly, foreign currency you hold directly, and accounts where you only have signature authority [3]. Foreign Social Security-type rights are not specified foreign financial assets [4].
• Value: report the maximum value during the year. Convert to dollars using the year-end exchange rate [3].

Form 8938 vs the FBAR, side by side

Based on the IRS comparison page [3].

Filing it, step by step

1. List every foreign asset you held during the year: accounts, pensions, directly held shares and interests in foreign companies or partnerships.
2. Find each asset's maximum value and convert it at the year-end exchange rate.
3. Check your threshold: are you living abroad, and are you filing jointly or not?
4. If you're over, fill in Part V for accounts and Part VI for other assets. Note any income from each asset and where it appears on your return.
5. Attach it to Form 1040. It shares your return's deadline: June 15 automatically for people abroad, or October 15 with Form 4868.
6. File the FBAR separately with FinCEN [6], because Form 8938 "does not relieve" you of it [4].

Penalties and the open statute

Failing to file Form 8938 can cost $10,000, plus $10,000 for every 30 days you don't file after an IRS notice, up to $60,000 [3]. An underpayment of tax linked to an undisclosed foreign asset can draw a 40% penalty [5]. Criminal penalties can apply in serious cases [3].

There's a quieter cost too, and it's the one that keeps tax pros up at night. If you don't file a required Form 8938, the time the IRS has to assess tax for that year can stay open until three years after you finally file it. If you leave out more than $5,000 of income from these assets, the IRS gets six years [5]. No penalty applies if you can show reasonable cause and not willful neglect, but you must show the facts yourself [5].

If you missed Form 8938 along with returns or FBARs, don't panic: the Streamlined Foreign Offshore Procedures are usually the way back. A US expat tax preparer can check your situation.

Sources

1. IRS: Summary of key FATCA provisions
2. US Treasury: Foreign Account Tax Compliance Act
3. IRS: Comparison of Form 8938 and FBAR requirements
4. IRS: Basic questions and answers on Form 8938
5. IRS: Instructions for Form 8938
6. IRS: Report of Foreign Bank and Financial Accounts (FBAR)

Keep reading

• FBAR: reporting your foreign bank accounts
• Banking as an American abroad: when banks say no
• PFICs: why foreign funds hurt Americans
• US brokerage accounts while living abroad