Moving to the United States often means leaving financial ties behind in your home country, such as savings accounts, fixed deposits, or retirement funds. While maintaining these overseas accounts is perfectly legal, failing to report them to the US government can trigger devastating financial penalties.
The US enforces a strict system of global financial transparency through two primary mechanisms: FBAR (Report of Foreign Bank and Financial Accounts) and FATCA (Foreign Account Tax Compliance Act). Understanding how these reporting requirements work prevents immigrants, visa holders, and permanent residents from accidentally committing tax evasion.
What Are FBAR and FATCA?
Though they sound similar and both deal with foreign money, they are administered by different government bodies and serve slightly different purposes.
- FBAR (FinCEN Form 114): Governed by the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury Department. It focuses specifically on combating money laundering and tracking foreign financial accounts.
- FATCA (Form 8938): Governed directly by the Internal Revenue Service (IRS). It is filed alongside your annual income tax return and is designed to ensure US taxpayers are not hiding taxable income in foreign assets.
You may be required to file just one, both, or neither, depending on the aggregate value of your overseas assets.
FBAR: Report of Foreign Bank and Financial Accounts
Who Must File?
Any "US Person" with a financial interest in, or signature authority over, foreign financial accounts must file an FBAR. A "US Person" includes US citizens, Green Card holders, and Resident Aliens (meaning visa holders who pass the Substantial Presence Test). If you are a Non-Resident Alien for tax purposes, you do not have to file an FBAR.
The $10,000 FBAR Threshold Explained
The number one point of confusion is the FBAR threshold US foreign accounts.
You must file FinCEN Form 114 if the combined maximum value of all your foreign financial accounts exceeds $10,000 USD at any point during the calendar year.
- It is an aggregate threshold: The IRS does not care if an individual account never hits $10,000. If you have $4,000 in an Indian checking account, $3,000 in an overseas fixed deposit, and $4,000 in a foreign brokerage account, your aggregate maximum is $11,000. You must file an FBAR.
- It is based on peak value: You must calculate the highest balance each account reached during the year, even if that peak lasted only one day.
- It includes closed accounts: If an account pushed your total over $10,000 in March but you closed it in April, it must still be reported.
How and When to File
The FBAR is not attached to your tax return. It must be filed electronically through the FinCEN BSA E-Filing system. The deadline is April 15, but an automatic extension to October 15 is granted to all filers without needing to request it.
FATCA: Foreign Account Tax Compliance Act (Form 8938)
Who Must File?
Form 8938 must be filed by "specified individuals," which includes US citizens, Resident Aliens, and certain Non-Resident Aliens who elect to be treated as residents. FATCA reporting for Green Card holders is mandatory and highly scrutinized by the IRS, as permanent residents are taxed on their worldwide income.
The FATCA Reporting Thresholds
The FATCA thresholds are significantly higher than the FBAR threshold and vary depending on your tax filing status and whether you physically live inside or outside the United States.
If you live inside the US:
- Single / Married Filing Separately: Total value of foreign assets exceeds $50,000 on the last day of the tax year, or $75,000 at any point during the year.
- Married Filing Jointly: Total value of foreign assets exceeds $100,000 on the last day of the tax year, or $150,000 at any point during the year.
If you live outside the US (Expats):
- Single / Married Filing Separately: Exceeds $200,000 on the last day of the year, or $300,000 at any point.
- Married Filing Jointly: Exceeds $400,000 on the last day of the year, or $600,000 at any point.
What Assets Must Be Reported?
Knowing exactly what counts as a reportable asset ensures you remain compliant. While FBAR focuses strictly on financial accounts, FATCA casts a wider net over ownership interests.
| Asset Type | Report on FBAR? | Report on FATCA? |
| Foreign Checking / Savings Accounts | Yes | Yes |
| Fixed Deposits (FDs) / Term Deposits | Yes | Yes |
| Foreign Brokerage / Mutual Funds | Yes | Yes |
| Foreign Life Insurance (with cash value) | Yes | Yes |
| Pension Accounts (foreign employer) | Yes | Yes |
| Direct Foreign Real Estate (e.g., a house) | No | No |
| Real Estate held through a Foreign Corporation | No | Yes |
Note on Real Estate: If you own a house or apartment back home directly in your name, the physical property is not reported on FBAR or FATCA. However, any rental income generated by that property must be reported on your US tax return (Schedule E).
The Severe Penalties for Non-Compliance
The US government does not view foreign reporting failures lightly. Even accidental omissions can trigger life-altering fines.
- FBAR Penalties: A "non-willful" failure to file an FBAR (an honest mistake) can result in a fine of up to $16,536 per year. A "willful" violation (intentionally hiding accounts) carries a penalty of up to $165,353 or 50% of the account balance, whichever is greater, alongside potential criminal charges.
- FATCA Penalties: Failing to attach Form 8938 to your tax return triggers an immediate $10,000 penalty, which can escalate up to $60,000 if you continue to ignore IRS notices.
If you recently arrived in the US and realize you failed to report your home-country accounts in previous years, do not simply start filing in the current year. Speak with a cross-border CPA about entering the IRS "Streamlined Filing Compliance Procedures." This amnesty program allows eligible taxpayers to retroactively file missing FBARs and FATCA forms without paying the massive penalties associated with late filing.