FATCA and Form 8938: Who Must File and the Penalties

What FATCA Is, and Where Form 8938 Fits

FATCA is short for the Foreign Account Tax Compliance Act, a law passed in 2010. The law works on two levels, and keeping them straight makes everything else clearer.

The first level runs through the banks. Foreign financial institutions (foreign banks, brokerages, and insurers) report their US account holders to the IRS every year, either directly or through an agreement between their country and the US Treasury. More than 100 countries take part, Israel among them, so a US person with an account abroad is no longer invisible. The bank reporting is the detection engine.

The second level is your own report, Form 8938. You attach it to your yearly income-tax return and list your foreign financial assets once they cross the threshold for your situation. Form 8938 is the half of FATCA you control. The two levels feed a matching system. If a foreign bank reports your account but no Form 8938 arrives with your return, the mismatch is easy for the IRS to spot. So the practical question is never whether the IRS could find out. The question is whether your own filing lines up with what your bank already sent.

Who Has to File Form 8938

Form 8938 applies to what the law calls a "specified person," which for most people means an individual in one of these groups.

• US citizens, wherever in the world you live. A citizen who moved to Israel, Canada, or Germany still files.
• Green-card holders and other US residents. The group includes someone who became a US resident partway through the year by spending enough days here (the substantial-presence test), measured only for the part of the year they qualified.
• A nonresident alien who elects to be taxed as a US resident jointly with a citizen or resident spouse, for the period of that election.

A nonresident alien who makes no such election generally does not file. And there is a relieving rule at the front end. If you are not required to file a US income-tax return for the year at all, you do not file a Form 8938 for that year either. One more point trips people up and is worth flagging now. A foreign account you can only sign on but do not own (a parent's account, an employer's account) is not reported on Form 8938, even though it would be on the FBAR. The difference is explained below.

Beyond individuals, certain closely-held US companies and trusts that are set up or used to hold foreign assets can have their own Form 8938 duty. The entity rule is a narrower, fact-specific analysis we run when it comes up, not something most families need to worry about.

The Reporting Thresholds, Tier by Tier

Whether you file turns on two numbers rather than one, the value of your foreign assets on the last day of the year and the highest value at any point during the year. Cross either one and you file. The numbers themselves depend on your filing status and whether you live in the US or abroad.

• Single or married-filing-separately, living in the US. File if your foreign assets top $50,000 at year-end, or $75,000 at any point during the year.
• Married filing jointly, living in the US. $100,000 at year-end, or $150,000 at any point.
• Single or married-filing-separately, living abroad. $200,000 at year-end, or $300,000 at any point.
• Married filing jointly, living abroad. $400,000 at year-end, or $600,000 at any point.

Clients are often confused about the joint-return numbers, and ask me, "Is it $100,000 or $150,000 for a married couple?" The answer is both, because the $100,000 test looks at December 31 and the $150,000 test looks at the highest point during the year, and crossing either one means you file.

The higher "living abroad" tiers are the reason many olim and Americans overseas end up under the line even with a real portfolio. You generally qualify as living abroad if your main home is in another country and you either live there for a full tax year or spend at least 330 days abroad in a twelve-month stretch. The test is the same one used for the foreign earned income exclusion, and you do not have to actually claim that exclusion to use the higher threshold.

Two counting rules catch people. First, under the any-point-in-the-year trigger, an account that peaked at $76,000 in the summer and fell to $48,000 by December still crosses the US single-filer line. Second, if you own an asset jointly, you generally count its full value toward your own threshold, not half, so a shared account can push one spouse over on its own.

What Counts as a Foreign Financial Asset

The law's term is a "specified foreign financial asset," and it comes in two buckets.

The first bucket is any financial account held at a foreign institution, meaning a foreign bank account, a foreign brokerage account, a foreign pension or savings arrangement, cash-value foreign life insurance, and foreign annuities. If an asset sits inside one of these accounts, you do not list it separately; reporting the account covers what is in it.

The second bucket is foreign assets you hold for investment outside of any account, such as stock or securities issued by a non-US person, an interest in a foreign company, partnership, or trust, and financial contracts with a foreign party. A beneficial interest in a foreign trust or estate also counts once you know, or have reason to know, about it, and receiving a distribution counts as knowing.

Just as important is what is left off, because this is where the form differs sharply from what people assume.

• A foreign home held directly in your own name is not reported. But if you hold that same home through a foreign LLC, corporation, or trust, your interest in the entity is reportable.
• Directly-held tangible things, including art, foreign cash (actual banknotes), gold and other precious metals held as bullion, and jewelry.
• Assets already inside a foreign account you are reporting.
• A US retirement account, like a 401(k) or IRA, even when it holds foreign funds.
• An account you only have signature authority over, with no ownership stake.

What Accounts Require FATCA Form 8938, and Does a Workplace Pension Count?

A common question I hear is, "What accounts require FATCA Form 8938, and does my workplace pension count?" Any account at a foreign bank, brokerage, or insurer counts, and a foreign pension counts too, whether it is a UK workplace pension, a self-invested personal pension, or an Israeli keren pensia. A pension whose value you can read off a statement is reported at that value. A pension whose value cannot be known, the older defined-benefit kind, is reported at the amount the plan actually paid you during the year, which can be zero. A foreign social security entitlement with no account behind it is different and is not reported. Two more that surprise people are a foreign life insurance policy with cash value and a foreign annuity, and both count. What the value question decides is whether the pension alone pushes you over your tier, and a workplace pension built up over a career often does that by itself for someone living in the US, where the line is $50,000.

How Form 8938 Differs From the FBAR

Form 8938 has a close cousin, the FBAR, and confusing the two starts at $10,000 a form. The two are separate reports, under different laws, filed in different places, and you can owe both for the very same account.

The FBAR is FinCEN Form 114. You file it online, separately from your tax return, once all your foreign accounts combined top $10,000 at any point in the year. The FBAR includes accounts you can merely sign on. Form 8938 is attached to your tax return, kicks in at the higher thresholds above, and reaches assets the FBAR does not, such as foreign stock or a foreign partnership interest you hold directly. The FBAR captures a foreign house held through a company only as an account question; a directly-held foreign house appears on neither form.

The rule to remember is to file both when both apply. A person coming into compliance is usually behind on both, and cleaning up one while leaving the other open just leaves the exposure in place. For a side-by-side of which asset triggers which form, see our Form 8938 vs FBAR comparison, and for the penalty tiers and cleanup on the FBAR side, our page on FBAR penalties and how to fix late FBARs.

The Penalties, and Why a Missed Form Is Worse Than It Looks

The dollar penalty for not filing Form 8938 starts at $10,000 for the year. If you still have not filed 90 days after the IRS mails you a notice, it adds another $10,000 for each 30-day period that passes, up to an extra $50,000. So a single year can reach $60,000. The 90 days after the notice is a grace period, and the add-on does not start running until then, which is a real window to act once you get that letter.

A second penalty hits when a missed asset also hid income. If you left income off your return that came from a foreign asset you should have reported, the ordinary 20% accuracy penalty doubles to 40%. Unlike the FBAR, Form 8938 has no innocent-versus-willful split and no "per account" multiplier. The only way out of the penalty is to show reasonable cause, which you have to establish with real facts. Foreign bank-secrecy law, by the way, is not reasonable cause; the IRS has rejected that argument for years.

Now comes the part practitioners consider the real danger, because it dwarfs the dollar figures. Under US law, the clock the IRS has to audit your return does not even start until you file the required Form 8938. Leave it unfiled and your entire tax return stays open for audit with no deadline, and not just the foreign piece. Every item on the return, your ordinary income, your deductions, your credits, sits exposed indefinitely. Filing the form starts the normal three-year clock. And separately, if you omitted more than $5,000 of income tied to a foreign asset, the IRS gets six years instead of three. The open-return effect is the argument that tends to get attention, because a client who treats the 8938 as a technicality is leaving their whole return unprotected.

How to Fix a Late or Missing Form 8938

Being behind is fixable, and the path scales to your situation. Because Form 8938 is part of your income-tax return rather than a stand-alone filing, you correct a missing one by filing an amended return for each open year with the form attached and a short reasonable-cause statement. The three practical questions that decide your route are whether you lived abroad, whether you reported the foreign income, and whether the IRS has already contacted you.

• Only the form was missed, income was reported. The delinquent-filing route lets you file the late forms with a reasonable-cause explanation, and the penalty is ordinarily waived.
• Foreign income was also left off, and the miss was innocent. The streamlined programs are usually the fix, and they cover three years of tax returns (with the Forms 8938 attached) plus six years of FBARs. The version for people who lived abroad can carry no penalty; the version for US residents costs 5% of the highest year-end value of the unreported assets.
• The conduct was willful. Willful conduct belongs in the voluntary-disclosure track rather than streamlined, because signing an innocence certification you cannot support is its own serious problem.

The streamlined window does not solve one thing on its own. Because an unfiled Form 8938 keeps a return open with no deadline, years that fall outside the three-year streamlined period can still be open, so the whole history needs a look, not just the covered years. And do not file the old forms quietly on your own outside a program; that forfeits the protections these paths give you. For the step-by-step on eligibility and the forms each path needs, see our guide to the streamlined filing compliance procedures.

How We Work, and What We Refer Out

Foreign-asset cleanup ranges from a single late form to a multi-entity willful disclosure, so we are honest about where our role sits. The legal side is handled here, meaning the screening that tells you which forms you actually owe, the willful versus non-willful call, the Voluntary Disclosure Practice when the exposure is willful, penalty defense, and the Florida estate side, all under attorney-client privilege. The accounting side goes to people who do it every day, so the streamlined submissions, the return preparation, complex valuation questions, and the closely-held-entity computations are referred to an international tax preparer, with the legal strategy staying here.

Where this meets our Florida practice is the estate. Foreign accounts and foreign trust interests surface constantly when a family settles an estate, and a decedent who never filed can leave exposure the estate has to clear before assets go out the door. Most of this runs by phone and video, which fits clients who are out of state or out of the country, including the many Americans living in Israel. The first and most valuable step is the screen, because it decides everything that follows. See our foreign account reporting guide for the full form-by-form map, or the international and cross-border overview →

Frequently Asked Questions

Common Situations

The oleh with Israeli accounts and a pension. An American who made aliyah keeps ordinary Israeli bank accounts, a keren hishtalmut, and a pension arrangement, and worries she should have been filing Form 8938. Because she lives abroad, her threshold is $200,000, not $50,000, and once the accounts are added up she is comfortably under it for most years. Where a year does cross, the fix is a straightforward late filing rather than a penalty fight, and knowing the right tier is what turned a scare into a small task.

The green-card holder in Florida with a home-country brokerage. A professional who moved to Miami kept a brokerage account back home and assumed a US form could not reach it. As a US resident, his threshold is $50,000, the account is well over it, and several years of Form 8938 were missed. He reported all his income, so a delinquent filing with a reasonable-cause statement brings him current, and he pairs it with the matching FBAR cleanup so neither form is left open.

The heir who inherited a foreign trust interest. While settling a parent's Florida estate, the family finds the parent held an interest in a foreign trust, and a distribution came through to a US child. The distribution counts as knowing about the interest, so the child now has a Form 8938 asset and likely a separate foreign-trust form too. The estate's own foreign-reporting history is reviewed before distribution, and the heir is set up to report correctly going forward.

Sources of Law

• Form 8938 authority and the FATCA framework: 26 U.S.C. §6038D; Treas. Reg. §§1.6038D-1 to 1.6038D-8 (who files, thresholds, specified foreign financial assets, valuation, duplicative reporting, penalties). FATCA enacted as Pub. L. 111-147 (2010); the foreign-institution reporting and 30% withholding regime, 26 U.S.C. §§1471 to 1474.
• Thresholds: Treas. Reg. §1.6038D-2(a) (US-resident single or MFS $50,000 year-end / $75,000 any time; US-resident MFJ $100,000 / $150,000; living abroad single or MFS $200,000 / $300,000; living abroad MFJ $400,000 / $600,000). "Living abroad" qualified-individual test, 26 U.S.C. §911(d)(1).
• What is a specified foreign financial asset, and what is excluded: 26 U.S.C. §6038D(b); Treas. Reg. §1.6038D-3 (financial accounts at foreign institutions and other foreign investment assets; directly-held real estate and signature-authority accounts excluded).
• Penalties: 26 U.S.C. §6038D(d) ($10,000 initial; additional $10,000 per 30-day period after 90-day notice, capped at $50,000; $60,000 per year maximum); §6038D(e) value presumption; §6662(j) 40% accuracy-related penalty on an undisclosed-asset understatement; reasonable-cause defense, §6038D(g); Treas. Reg. §1.6038D-8.
• Statute of limitations: 26 U.S.C. §6501(c)(8) (the whole income-tax return stays open until Form 8938 is furnished); §6501(e)(1)(A)(ii) (6-year period where over $5,000 of income tied to a foreign asset is omitted).
• Companion FBAR report: 31 U.S.C. §5314; 31 C.F.R. §1010.350. FATCA upheld against constitutional challenge: Crawford v. United States Dep't of the Treasury, 868 F.3d 438 (6th Cir. 2017); FBAR non-willful penalty is per form: Bittner v. United States, 598 U.S. 85 (2023); civil FBAR willfulness includes recklessness: United States v. Horowitz, 978 F.3d 80 (4th Cir. 2020). (retrieved 2026-07-16)

What I Check Before Anyone Files a Form 8938

I ask questions at the front end that come directly from fights I have handled at the back end. On this form the questions are short. I ask how many accounts, in which countries, since what year, and what the return for each of those years said about the income. I handle the voluntary disclosure work myself and refer the streamlined return preparation out, so the first thing I decide on any foreign-asset file is which of those two roads the facts allow, and I decide it before a single form is filed.

I see this all the time in the files of people who worked abroad for years, and one published case shows the shape of it. An anesthesiologist and his wife, a clinical social worker, moved to Saudi Arabia in 1984 for his hospital job, which paid $120,000 a year. The Saudi bank paid no interest on their savings, so after about three years they opened an account in Switzerland and treated it as the family's retirement nest egg, traveling there twice to look after it. Every year they paid US tax on the Saudi salaries through their accountant back home. They never mentioned the Swiss account or its interest to him, because friends in Saudi Arabia had told them Swiss interest was not taxable, and they signed twenty years of returns declaring them accurate. Back in the United States from 2001, they kept the account, which had grown to about $1.6 million, never gave the bank a US address, and in 2008 moved nearly $2 million into a numbered account at a second Swiss bank with a paid hold-mail service. After the bank warned them of an IRS request in 2009, they went to a tax attorney, entered the voluntary disclosure program, filed the missing reports and amended returns for 2003 through 2008, reported $215,126 of extra income and paid over $100,000 in back taxes, and then opted out. The IRS assessed willful penalties of $247,030 per spouse for each of 2007 and 2008, and in 2020 the Fourth Circuit upheld judgments of $654,568 against the husband and $327,284 against the wife. The fact that decided it was the accountant. The court reasoned that a question worth discussing with friends was worth asking the man who prepared their returns, and twenty years of never asking him was reckless, and reckless is willful for this penalty. Had the Swiss account gone to their accountant in the first year, the interest would have gone on the return, the report would have been filed, and there would have been nothing to disclose in 2010. That question, what does your preparer know about your foreign accounts, is the screen I run first on every foreign-asset file, and it is a flat fee quoted at consult.

Their fight was on the FBAR side. The Form 8938 side is where the question they never asked now lives, because the form attaches to the return the accountant prepares, and Schedule B of the same return asks in plain words whether you had a foreign account during the year. A preparer who is never told about the account answers no on Schedule B, attaches no Form 8938, and hands over a return the client signs as accurate. That return then stays open with no deadline, and it is the first document I ask for.

In reading that opinion next to the files that reach me, I have a few take-home points.

The first is the accountant. The couple paid tax through him for twenty years and never mentioned the account, so the return he prepared was accurate as far as he knew and wrong as a matter of fact, which is the shape I see most often in these files. Practice pointer. Before I look at a single statement, I ask what the return preparer was told about the foreign accounts and when, because that answer is what separates a late form from a willful one.

Second, the return is the document that carries the risk. Form 8938 attaches to the return, one per year, and the $10,000 penalty attaches to the missing form rather than to each account, but the return itself stays open with no deadline until the form is furnished. Practice pointer. I write the cleanup list by tax year, and I do not sign off on a year until the return, the Schedule B answer, and the report for that year all say the same thing.

Third, the program you enter sets the terms you leave under. The couple entered voluntary disclosure in 2010, paid the back tax, and then opted out, and the willful penalties were assessed after they left. Today the choice between voluntary disclosure and the streamlined route is made once, at the start, on a willfulness call, and it is hard to reverse afterward (the streamlined route asks you to certify in writing that the miss was not willful, and a false certification has been prosecuted). Practice pointer. I make that call under privilege before anything is filed, because the facts are fixed the day the first form goes in.

Avoid fixing the FBAR and leaving the return alone, because the return is the document with no deadline on it, and the FBAR fix does nothing to close it.

Whether reasonable cause excuses a particular missed Form 8938 turns on facts the IRS weighs one file at a time, and I will tell you when your facts sit in the uncertain part rather than promise a result.

Kevin D. Klagge, Esq., admitted in Florida since 2012. Each case described above is a decision of a court rather than a matter handled by this firm. Past results do not guarantee a similar outcome.

Updated on September 3, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about US law, not legal or tax advice, and does not create an attorney-client relationship. FATCA and Form 8938 are specialized; streamlined submissions, return preparation, and complex valuation and entity computations are referred to an international tax preparer, while voluntary disclosure for willful exposure is handled here. Federal figures are adjusted periodically and may change. Your result depends on your specific facts.