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Special U.S. Filing Obligations — Foreign Income & Assets (FBAR vs. Form 8938)

2026. március 30. által
Patrik Hancz, JD

The U.S. tax system taxes worldwide income, and therefore imposes strict reporting obligations on U.S. citizens and residents who live abroad or hold foreign assets. The FBAR and Form 8938 are often required concurrently, yet they follow different rules. In this article, I would like to present the similarities, differences, and consequences of non-compliance between these two reporting requirements.

Determining the Filing Obligation

In the United States, when determining tax liability, the gross income includes all items that may otherwise be excluded as foreign earned income or foreign housing exclusion. For U.S. citizens and resident aliens, the rules for filing income tax returns, estate and gift tax returns, and paying estimated taxes are generally the same, regardless of whether the taxpayer lives inside or outside the United States. Whether a filing obligation actually exists depends on the taxpayer’s income, filing status, and age.

As a general rule:

  • For U.S. citizens and residents, worldwide income is taxable.
  • For nonresident aliens, only U.S.-source income is taxable.
  • An exception applies if a nonresident elects to be treated as a resident for tax purposes (for example, to file a joint return with a U.S. citizen spouse, which generally results in more favorable taxation).

Reporting of Foreign Bank Accounts and Financial Assets

FBAR – FinCEN Report 114

Every U.S. citizen, resident, or person engaged in business in the United States who has ownership, signature, or other authority over a foreign financial account must file an FBAR if the aggregate value of all foreign accounts exceeded $10,000 at any time during the calendar year.

  • Due date: April 15, with an automatic extension to October 15.
  • Failure to file: May result in civil and criminal penalties.
Example: On January 1, a U.S. taxpayer (citizen or resident) deposits $5,000 in a bank account in Country X. On July 1, the taxpayer deposits an additional $5,001 in an account in Country Y. On July 2, the taxpayer withdraws the $5,000 from the account in Country X to make a purchase. Because the taxpayer had more than $10,000 in total across foreign accounts at any time during the year (specifically $10,001 on July 1, in two different countries and accounts), they are required to file an FBAR for that year.

Form 8938 – Specified Foreign Financial Assets

Form 8938 serves as one of the key reporting tools used by the IRS to enforce compliance under the Foreign Account Tax Compliance Act (FATCA).

Taxpayers must also file Form 8938 to report specified foreign financial assets if their total value exceeds:

  • For U.S. residents: $50,000 at year-end or $75,000 at any time during the year.
  • For those living abroad: $200,000 at year-end or $300,000 at any time during the year. (The thresholds double for joint filers.)
  • Form 8938 must be filed together with the annual income tax return (e.g., Form 1040).
  • Taxpayers who are not required to file a tax return are also not required to file Form 8938.
Important: There is significant overlap between the FBAR and Form 8938, but one does not replace the other. In many cases, both must be filed. Let’s now look at the key similarities and differences.

For those who wish to explore the topic in more detail, a comparative table is available among the sources listed at the end of this article, directly on the IRS website.

Similarities and Differences Between FBAR and Form 8938

Similarities:

  1. Both forms aim to promote transparency of foreign financial accounts and assets, to combat tax evasion and money laundering.
  2. Both apply to individuals who are U.S. citizens or residents, regardless of whether they live in the United States or abroad.
  3. There is substantial data overlap: in many cases, the same accounts and assets must be reported on both forms.
  4. Failure to file can result in penalties (monetary fines and, in severe cases, criminal consequences).

Differences:

Filing authority and method:

  • The FBAR is filed electronically with FinCEN (Financial Crimes Enforcement Network), separate from the tax return.
  • Form 8938 is filed with the IRS as part of the annual income tax return (e.g., Form 1040).

Thresholds:

  • For FBAR, the threshold is low ($10,000 aggregate at any time during the year).
  • For Form 8938, the threshold is much higher ($50,000–$300,000, depending on residence and filing status).

Scope of reportable assets:

  • FBAR covers only financial accounts (bank accounts, securities accounts, mutual funds, etc.).
  • Form 8938 covers a broader range of assets, including foreign stocks, bonds, partnership interests, insurance policies with cash value, and certain derivatives.

Penalties:

  • FBAR: Failure to file can result in severe penalties — up to $10,000 per account for non-willful violations, and for willful violations, the greater of $100,000 or 50% of the account balance.
  • Form 8938: Failure to file generally results in a $10,000 fine, which may increase with continued non-compliance.

Summary

The fundamental principle of the U.S. tax system is that citizens and residents are taxed on their worldwide income. Therefore, U.S. citizens living abroad must comply not only with local but also with U.S. tax reporting obligations. Non-compliance can result in severe penalties, making proper international tax planning essential.

The information provided in this article is for informational purposes only and does not constitute tax or legal advice.

Sources

Dependents in the United States: Qualifying Child and Qualifying Relative, with Examples – Part 3