Under the Foreign Account Tax Compliance Act (FATCA), U.S. citizens, including Americans living abroad, are generally required to report their foreign assets to the Internal Revenue Service (IRS) if they exceed a certain threshold amount. The FATCA requirement is in addition to the well-established Foreign Bank Account Report (FBAR). Taxpayers who fail to file when required may face penalties, subject to applicable exceptions.
This article explores the FATCA filing and reporting requirements including who needs to file and what kind of foreign assets are involved, as well as the penalties associated with noncompliance.
FATCA Filing Requirements
FATCA was enacted to combat tax evasion by requiring the disclosure of offshore accounts and foreign assets owned by U.S. citizens. Under FATCA, certain U.S. persons will have to report their foreign assets to the IRS under Form 8938, Statement of Specified Foreign Financial Assets along with their U.S. income tax return.
Form 8938 applies to specified individuals and specified domestic entities with reportable interests exceeding the applicable threshold. Specified individuals include U.S. citizens and qualifying resident aliens; certain nonresident elections and territorial rules also apply. Only domestic entities meeting the detailed regulatory tests qualify as specified domestic entities. Ownership of 10% of a foreign entity does not itself make that entity a U.S. person or establish a Form 8938 obligation. Other international forms may separately apply. If you do not have to file an income tax return for the tax year, you do not have to file Form 8938 even if the asset value exceeds the reporting threshold.
FBAR generally concerns reportable foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year. Form 8938 also covers specified non-account assets and uses different thresholds.
The thresholds below apply to specified individuals and depend on filing status and qualifying residence abroad. Different rules apply to specified domestic entities. Filing exceptions must also be considered.
- Single Taxpayers Living in the United States: $50,000 on the last day of the tax year or $75,000 at any point during the year;
- Married Filing Jointly, Living in the United States: more than $100,000 at year end or $150,000 at any time. Married filing separately uses the $50,000/$75,000 thresholds.
- Single Taxpayers Living Abroad: $200,000 on the last day of the tax year or $300,000 on any day of the year;
- Married Filing Jointly, Qualifying as Living Abroad: more than $400,000 at year end or $600,000 at any time. Married filing separately uses $200,000/$300,000. The higher overseas thresholds require the applicable tax-home and residence or presence conditions.
The Act defines “Specified Foreign Financial Assets” as those that include:
- Foreign accounts held at foreign financial institutions;
- Foreign stock and securities not held in a financial account;
- Foreign partnership interests;
- Foreign mutual funds;
- Foreign hedge funds and private equity funds;
- Financial instruments or contracts held for investment, not held in a financial account, with a non-U.S. issuer or counterparty;
- A specified person treated as owner of a trust generally reports its specified foreign financial assets, subject to applicable exceptions including timely Form 3520/3520-A reporting
Many assets are excluded from FATCA such as foreign currency, personal property or precious metals held outside of an account or an interest in a social security or similar program of a foreign government. Also, assets timely reported on specified other forms may be excepted from detailed Form 8938 reporting, but generally still count toward its filing threshold and the other forms must be identified in Part IV. FBAR filing alone does not supply this exception. You are encouraged to consult with a tax attorney to determine whether your interests abroad require that you file under FATCA. Specified domestic entities instead exclude qualifying assets already reported on the listed forms when testing the threshold.
Foreign Asset Valuation to Evaluate FATCA Requirements
The IRS sets forth guidance as to how to properly place a value on your specified foreign financial asset in order to determine whether it exceeds the threshold applicable to you.
The general rule is to use a reasonable estimate of the highest fair market value of the asset during the tax year that it is reported. It is acceptable to rely on financial account statements as long as the values therein reasonably approximate the maximum value of the asset during the tax year. It is also acceptable to rely on publicly available information from reliable sources. If there are no financial statements or reliable publicly available information from which to approximate maximum asset value, a reasonable estimate of the fair market value of the asset will suffice.
Your tax attorney or tax professional can assist you in determining whether your foreign interests and assets exceed the FATCA thresholds and trigger filing requirements.
Harsh Penalties for FATCA Noncompliance
Failure to file a required Form 8938 can carry an initial $10,000 penalty and up to $50,000 in additional continuation penalties after IRS notification. A 40% penalty may apply to a qualifying tax underpayment attributable to an undisclosed asset. Reasonable-cause rules and the facts matter; penalties are not automatic in every case.
Missing required international information can extend the income-tax assessment period; reasonable cause may limit the extension to related items. Omitting more than $5,000 of income attributable to specified foreign financial assets can trigger a six-year assessment period. Tax and penalty limitation periods require separate analysis.
Given that the penalties can be excessive, it is prudent to speak with a tax attorney to determine whether you are required to file Form 8938 as per FATCA and how to remedy any noncompliance issues.
Do You Need a Tax Attorney?
A tax attorney can help you determine whether your financial interests abroad require that you file Form 8938 as per FATCA and determine to what extent penalties may have already been assessed.
An attorney can assess whether a corrective filing or a compliance procedure fits the facts. Streamlined procedures include domestic and foreign offshore routes for eligible nonwillful taxpayers; living abroad alone does not establish eligibility.
If the voluntary disclosure and streamlined filing compliance procedures do not apply, a tax attorney can determine whether you have a viable penalty abatement request. If the taxpayer can establish that any failure to disclose is due to reasonable cause and not willful neglect, no penalty will be imposed for failure to file Form 8938.
The experienced tax attorneys at Segal, Cohen & Landis (SCL) have helped clients with financial interests, accounts and assets abroad by providing the following services:
- Counsel on FATCA filing requirements;
- Assist with Form 8938 completion and submission;
- Filing compliance and penalty avoidance or reduction via participation in a streamlined compliance procedure.
If you are interested in having a complimentary consultation with one of our partner attorneys regarding your tax matter, please feel free to contact us at (310) 285-3999. We would be happy to advise you as to how we can resolve your case and how much it would cost.
Sources checked October 2, 2026: IRS Instructions for Form 8938 and IRS FBAR guidance.
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Segal, Cohen & Landis, P.C. — Beverly Hills. Serving clients nationwide.
Samuel Landis, Esq.
LL.M. (Tax) · Selected to Super Lawyers®
Sam Landis is a Beverly Hills IRS tax attorney specializing in IRS collection defense, audit representation, and international tax compliance for foreign nationals and US expats.