Foreign Asset Reporting
Foreign Bank Accounts: Understanding FBAR and Form 8938
Two overlapping disclosures, two different rulebooks. How to tell which one applies to your accounts — and often, why both do.
- Author
- Roger I. Chirino
- Published
- Last reviewed
Taxpayers often assume that reporting a foreign account once is enough. In practice, two separate regimes may apply to the same account, administered by two different parts of the federal government, with different rules for who files and when.
FBAR: FinCEN Form 114
The FBAR is filed with the Financial Crimes Enforcement Network, not with your tax return. It generally applies to U.S. persons with a financial interest in — or signature authority over — foreign financial accounts whose aggregate maximum value exceeds the threshold at any point during the year. Signature authority alone can create the obligation even with no ownership interest, which catches many employees who sign on an employer's foreign account.
Form 8938: Statement of Specified Foreign Financial Assets
Form 8938 is filed with the income tax return under a different statute. Its thresholds vary by filing status and by whether the taxpayer lives in the United States or abroad, and they are considerably higher for taxpayers living overseas. Its definition of a reportable asset is broader in some respects than the FBAR's — it can reach certain foreign interests that are not accounts at all — and narrower in others.
Practical differences worth knowing
- Aggregate value is measured differently, so an account can pass one threshold and not the other.
- The FBAR covers signature authority; Form 8938 generally centers on ownership interests.
- The FBAR is filed electronically with FinCEN; Form 8938 attaches to the return.
- Reporting on one form does not excuse the other.
- Penalty regimes differ, and both are tied to the failure to file rather than to unpaid tax.
Where people go wrong
The most common errors are not exotic. They are forgotten accounts from a previous country of residence, joint accounts held with a parent or spouse abroad, accounts held for a family business, and pension-style accounts assumed to be exempt. The safest approach is to inventory every non-U.S. account and interest once, at full detail, and then determine which form each falls under.
If a year was missed
Corrective options exist and are generally more favorable when the taxpayer comes forward before the IRS raises the issue. The right path depends on the facts, including whether income was reported on the return itself.
Sources and official references
Educational information only
This article is general and educational and is not individualized tax, accounting, or legal advice. Tax law changes frequently, and the outcome of any situation depends on its specific facts. Please consult our firm or another qualified professional before acting.