Foreign Bank Accounts Were Reported on FBAR but Form 8938 Was Missed

His FBARs had been filed, and the foreign interest was on his tax returns. A separate attachment to those returns was still missing.

The client's situation

The taxpayer lived in the United States and kept bank and investment accounts in his former home country. He understood the need for annual foreign account reporting and had submitted FinCEN reports electronically. He kept the acknowledgments and supplied the foreign income figures used on his income tax returns.

When Chirino USA reviewed his prior filings, the account values suggested that Form 8938 thresholds also needed testing. The client had assumed the FBAR system shared his information in a way that satisfied every reporting requirement. He had never compared the tax-return attachments with his separate FinCEN submissions.

What went wrong

The missing step was a Form 8938 analysis for each year, not another FBAR submission. FBAR and FATCA Form 8938 foreign accounts reporting are separate regimes with different filing locations, thresholds and asset coverage. Reporting income and filing an FBAR do not automatically satisfy Form 8938.

The tax or reporting requirement

The FBAR, FinCEN Form 114, is generally required for a U.S. person with a financial interest in or signature authority over reportable foreign financial accounts when their aggregate value exceeds $10,000 at any time during the calendar year. It is filed electronically with FinCEN, separately from the federal income tax return. The threshold is combined across accounts, not tested one account at a time.

Form 8938 is an IRS information return attached to the income tax return when required. For a single filer living in the United States, specified foreign financial assets generally must exceed $50,000 at year-end or $75,000 at any time. For married taxpayers filing jointly and living in the United States, the thresholds generally are $100,000 and $150,000. Married filing separately has its own rules. Higher thresholds apply to qualifying taxpayers living abroad, based on the applicable residence tests, not merely citizenship or a foreign mailing address.

The asset lists also differ. Directly held foreign stock or certain foreign partnership interests can be reportable on Form 8938 without being foreign financial accounts for FBAR purposes. Conversely, signature authority can create FBAR reporting without Form 8938 ownership reporting. Form 8938 generally is not required if no income tax return is required, but that does not remove a separate FBAR obligation. Special rules apply to assets reported on certain other international forms.

Forms potentially involved:

• FinCEN Form 114 — electronic foreign account report.
• Form 8938 — specified foreign financial assets attached to the return.
• Form 1040-X — amended individual income tax return.
• Schedule B — foreign account questions and interest reporting.

The potential IRS exposure

Failure to file a required Form 8938 can carry a $10,000 penalty, with up to $50,000 more for continued failure after IRS notice. The applicable assessment period for the return can remain open when required information is missing; its scope depends on the circumstances, including reasonable cause. Additional consequences may apply if income was also omitted.

Correct FBARs were useful evidence of the client's reporting history, but did not cancel Form 8938 exposure. We did not describe the absence of unreported income as an automatic penalty waiver. FBAR penalties belong to a separate regime and can be significant, adjusted for inflation, if FBAR compliance itself is deficient.

How Chirino USA analyzed the situation

We matched FBAR confirmations to the accounts on bank and brokerage statements, then checked foreign interest, dividends and other income against each tax return. We tested Form 8938 thresholds by filing status and residence, using the prescribed valuation and currency-conversion rules. We also asked about assets outside bank accounts, including direct ownership interests.

The review confirmed that the identified issue was missing Form 8938 rather than missing income on the returns under review. We documented how the misunderstanding arose, what information had been given to the prior preparer and when the client discovered it. Those facts matter more to a reasonable-cause analysis than simply writing that the omission was accidental.

How we addressed the issue

We recommended amended returns with complete Forms 8938 for the affected years, coordinated with the applicable delinquent international information return submission procedures. Because income had been reported, we evaluated a detailed reasonable-cause statement supported by the actual records. These procedures do not guarantee that the IRS will refrain from assessing penalties.

We also created two distinct annual checklist items: one for the FinCEN submission and one for the income-return attachment. The client was asked to retain both filing confirmations and complete copies of returns. An amended FBAR would be considered only if the FBAR itself needed correction, not merely because Form 8938 was missing.

The result

The client received an amended-return plan addressing the missing forms and a factual record for the reasonable-cause review. No penalty removal or IRS approval was claimed. Going forward, he could identify which assets belonged on each report and verify both submissions rather than treating one confirmation as proof of full compliance.

What other taxpayers in similar situations should know

• Compare thresholds separately every year, especially after a move or marriage.
• Report foreign income even when no asset-reporting threshold is met.
• Review directly held investments, not only foreign bank accounts.
• Keep FBAR acknowledgments and filed income-return attachments separately.

How Chirino USA can help

Chirino USA Accountants & Advisors specializes in U.S. international tax matters for foreign individuals, foreign-owned U.S. businesses, and Americans in the U.S. and abroad. If your situation sounds similar, we can review what was filed, identify any exposure, and help you decide on the appropriate next step. You can email us or message us on WhatsApp, in English or Spanish.

Sources and official references

• IRS — Comparison of Form 8938 and FBAR Requirements
• IRS — Instructions for Form 8938
• FinCEN — Report of Foreign Bank and Financial Accounts
• IRS — Delinquent International Information Return Submission Procedures