1. Two regimes, not one
U.S. persons — citizens, green card holders, and tax residents — report foreign financial accounts under two separate systems:
- FBAR (FinCEN Form 114): a Bank Secrecy Act filing, submitted electronically to FinCEN (not with your tax return). Required if the aggregate value of all foreign financial accounts exceeded $10,000 at any moment during the year — even for one day, and even if no single account crossed the line.
- FATCA (Form 8938): attached to your income tax return. Thresholds are higher and depend on filing status and residence — for U.S.-resident taxpayers, $50,000 at year-end / $75,000 at any time (single), doubled for joint filers, and substantially higher for those living abroad. It covers "specified foreign financial assets," which is broader than accounts: foreign stock held directly, foreign partnership interests, and certain foreign pensions and insurance products with cash value.
Meeting one regime's threshold does not satisfy the other. Many clients file both every year.
2. What counts as a "foreign financial account"
More than most people expect: bank and savings accounts, securities and brokerage accounts, most foreign mutual funds, cash-value life insurance and annuity policies, and accounts you don't own but hold signature authority over (a parent's account, a company account you can sign on). Sub-accounts under one bank relationship — common at Taiwanese and Hong Kong banks and at HSBC — are counted separately for reporting purposes.
3. Deadlines and mechanics
- FBAR is due April 15 with an automatic extension to October 15 — no extension request needed.
- It is filed through FinCEN's BSA e-filing system, separate from the Form 1040 package.
- Use each account's maximum value during the year, converted at the applicable year-end Treasury exchange rate.
4. Penalty exposure — and why "non-willful" matters
Non-willful FBAR violations carry a civil penalty of up to $10,000 (inflation-adjusted upward) — and after the Supreme Court's 2023 Bittner decision, that penalty applies per unfiled report, not per account, which materially changed the math for people with many accounts. Willful violations are a different world: the greater of $100,000 or 50% of the account balance, per year, with potential criminal exposure. "Willful" includes reckless disregard — checking "No" on Schedule B's foreign-account question year after year is exactly the kind of fact the IRS uses to argue willfulness.
5. Behind on filings? The Streamlined Procedures exist for this
For taxpayers whose non-compliance was non-willful, the IRS Streamlined Filing Compliance Procedures offer a structured path back:
- Streamlined Domestic Offshore Procedures (SDOP) for U.S. residents: 3 years of amended returns, 6 years of FBARs, a certified non-willfulness narrative on Form 14654, and a single 5% Title 26 miscellaneous offshore penalty on the highest year-end balance of the penalty base — instead of the full penalty stack.
- Streamlined Foreign Offshore Procedures (SFOP) for those meeting the non-residency test: same filings, 0% penalty.
The non-willfulness narrative is the heart of the submission — it is a signed certification under penalties of perjury, and a thin or inconsistent narrative is the most common way these submissions go wrong. Quiet disclosure (just amending returns without the program) leaves the full penalty exposure on the table and is generally a mistake.
6. A practical self-check
- List every foreign account you owned or could sign on during the last 6 years, including closed ones.
- Pull maximum balances per year; check whether the $10,000 aggregate was crossed in any year.
- Identify income those accounts produced (interest, dividends, fund distributions) and whether it appeared on your U.S. returns.
- Flag any foreign mutual funds or insurance products for PFIC review.
- If anything is missing, get a willfulness assessment done before filing anything.