Tax Tip Tuesday: FBAR and FATCA: What’s the Difference and Do You Need to File Both?

If you hold a foreign bank account, own international investments, or have financial ties outside the United States, you’ve probably heard the terms FBAR and FATCA — sometimes used as if they mean the same thing. They don’t. Understanding the difference matters, because each has its own form, its own deadline, its own threshold, and its own set of penalties for non-compliance.

We know — you've heard about FBAR and FATCA before. But there's a reason we keep coming back to this topic: missed foreign reporting obligations are one of the most frequent and expensive mistakes we see in practice. Many taxpayers simply don't know they have to file, and for foreign nationals living in the U.S., these requirements are often the first thing the IRS zeros in on.

What Is FBAR?

FBAR stands for Foreign Bank Account Report. It is filed using FinCEN Form 114 and is required under the Bank Secrecy Act — not the Internal Revenue Code. The filing goes directly to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, through the BSA E-Filing System. It is completely separate from your federal income tax return.

Who must file: U.S. persons — including citizens, permanent residents, some nonresidents treated as tax residents, and certain domestic entities — who have a financial interest in, or signature authority over, one or more foreign financial accounts with an aggregate value exceeding $10,000 USD at any point during the calendar year. There is no adjustment for filing status or residency.

Where it’s filed: Electronically with FinCEN through the BSA E-Filing System — not attached to or submitted with your tax return.

Deadline: April 15, with an automatic extension to October 15. No separate extension request is required.

Assets covered: Foreign bank accounts, savings accounts, checking accounts, brokerage accounts, mutual funds, and similar accounts held at foreign financial institutions. Also includes accounts over which you have signature authority, even if you have no financial interest.

Governing law: The Bank Secrecy Act (Title 31 of the U.S. Code) — administered by FinCEN and the Department of the Treasury, not the IRS.

What Is FATCA / Form 8938?

FATCA stands for the Foreign Account Tax Compliance Act, enacted in 2010. Under FATCA, U.S. taxpayers with significant foreign financial assets must disclose them to the IRS using Form 8938 (Statement of Specified Foreign Financial Assets), which is attached to your annual federal income tax return.

FATCA also requires foreign financial institutions to report information about U.S. account holders directly to the IRS — creating a dual-reporting system. If there is a mismatch between what the institution reports and what you filed, it can trigger an audit or penalty notice.

Who must file: Specified individuals (U.S. citizens, resident aliens, and certain nonresident aliens) and, for tax years after 2015, certain specified domestic entities, whose foreign financial assets exceed the applicable threshold.

Where it’s filed: Attached to your federal income tax return (Form 1040). It is not filed separately.

Deadline: The same as your federal income tax return, including any extensions you have been granted.

Assets covered: A broader category than FBAR. Includes foreign financial accounts, foreign stocks and securities held directly outside of an account, foreign partnership interests, foreign corporation interests, certain foreign-issued life insurance and annuity contracts with a cash value, and interests in foreign hedge funds and private equity funds.

Governing law: The Internal Revenue Code (IRC §6038D, Title 26) — administered by the IRS.

Form 8938 Filing Thresholds: It Depends on Your Situation

This is where many taxpayers get the details wrong. Unlike FBAR — which has a single $10,000 aggregate threshold that applies to everyone regardless of filing status or where they live — Form 8938 thresholds vary significantly based on two factors: your filing status and whether you live in the United States or abroad.

FORM 8938 FILING THRESHOLDS AT A GLANCE

Living in the United States:

•     Unmarried / Married Filing Separately: More than $50,000 on the last day of the year, or more than $75,000 at any point during the year

•     Married Filing Jointly: More than $100,000 on the last day of the year, or more than $150,000 at any point during the year

Living Abroad (meets IRS presence abroad test):

•     Unmarried / Married Filing Separately / Head of Household: More than $200,000 on the last day of the year, or more than $300,000 at any point during the year

•     Married Filing Jointly: More than $400,000 on the last day of the year, or more than $600,000 at any point during the year (even if only one spouse lives abroad)

Note: Married Filing Separately taxpayers (whether in the U.S. or abroad) follow the single/separate thresholds, not the joint thresholds.

To qualify as “living abroad” for Form 8938 purposes, you must meet one of the IRS presence abroad tests: either you are a U.S. citizen who was a bona fide resident of a foreign country for an uninterrupted period covering the entire tax year, or you were physically present in a foreign country or countries for at least 330 full days during any 12-consecutive-month period ending in that tax year.

One important nuance: if you are married filing jointly and even one spouse qualifies as living abroad, the higher abroad thresholds apply to your joint return.

Key Differences Between FBAR and Form 8938

1. Where You File

FBAR (FinCEN Form 114) is filed electronically with FinCEN through the BSA E-Filing System and is completely separate from your tax return. Form 8938 is attached directly to your federal income tax return and submitted to the IRS. Submitting your tax return does not satisfy your FBAR obligation, and vice versa.

2. The Threshold

FBAR has a single, flat threshold: $10,000 aggregate across all foreign accounts at any point during the year. It applies the same way to everyone — single filers, married filers, U.S. residents, and taxpayers living abroad.

Form 8938 thresholds are tiered. A married couple filing jointly and living in the U.S. has a year-end threshold of $100,000 — ten times higher than the FBAR threshold. A single taxpayer living abroad has a year-end threshold of $200,000 — twenty times the FBAR threshold. This means many taxpayers will owe FBAR filings without having any Form 8938 obligation at all.

3. What Assets Are Covered

FBAR covers foreign financial accounts only — accounts held at foreign financial institutions, including those over which you have signature authority. It does not reach foreign assets held outside of an account structure.

Form 8938 covers a broader universe. It picks up foreign financial accounts like FBAR, but also foreign stocks and securities held directly (not through an account), foreign partnership and corporation interests, foreign trusts and estates, and certain foreign insurance products with cash value. If you hold foreign stock certificates personally, FBAR may not require reporting them — but Form 8938 may.

4. Signature Authority

FBAR must be filed if you have signature authority over a foreign account — for example, if you are an authorized signatory on a company’s foreign bank account, even if you personally own no interest in the funds. Form 8938 does not require reporting of accounts where you have only signature authority and no financial interest.

5. The Governing Law

FBAR is a financial crime reporting requirement under the Bank Secrecy Act (Title 31). It is administered by the Treasury/FinCEN. Form 8938 is a tax disclosure requirement under the Internal Revenue Code (Title 26), administered by the IRS. This distinction matters for enforcement: FBAR penalties are assessed under a separate legal framework than tax penalties, and willful FBAR violations can carry criminal exposure under Title 31.

6. The Statute of Limitations

For Form 8938, the IRS has six years to assess tax on income attributable to an undisclosed foreign financial asset (if that income exceeds $5,000). If Form 8938 is never filed, the statute of limitations does not begin to run. For FBAR, the government generally has six years from the due date of the report to bring a civil penalty action.

Can You Be Required to File Both?

Yes — frequently. A foreign bank account often triggers both the FBAR and Form 8938 requirements simultaneously, as long as the applicable thresholds are met. You must evaluate each requirement independently based on your facts.

That said, not every FBAR filer needs to file Form 8938. If your foreign accounts exceed $10,000 but fall below your applicable Form 8938 threshold, you owe the FBAR but not Form 8938. And not every Form 8938 filer will have covered every required asset on their FBAR, since FATCA reaches asset types that FBAR does not.

Filing one does not satisfy the other. They are independent obligations.

Penalties for Non-Compliance

Both requirements carry substantial penalties, and IRS enforcement of foreign reporting has increased significantly in recent years.

FBAR Penalties

•        Non-willful violations: up to $10,000 per violation per year

•        Willful violations: up to the greater of $100,000 or 50% of the account balance per violation, per year

•        Criminal penalties may also apply in willful cases under Title 31

Form 8938 / FATCA Penalties

•        Failure to file: $10,000 per year

•        Continued failure after IRS notification: an additional $10,000 per 30-day period, up to a maximum of $50,000 (not including the initial $10,000)

•        Underpayment of tax attributable to undisclosed foreign financial assets: 40% accuracy-related penalty

These are not minor administrative oversights. The penalties can quickly exceed the value of the account or asset itself, and the IRS’s access to third-party data from foreign financial institutions under FATCA makes non-detection increasingly unlikely.

Common Misconceptions

“I don’t owe any foreign taxes, so I don’t need to file.”

Both FBAR and Form 8938 are disclosure requirements, not tax payment obligations. Even if you owe no additional tax on foreign income, you may still be required to report the account or asset. The two questions — whether you owe tax and whether you have a reporting obligation — are separate.

“My tax preparer already handled it.”

FBAR is filed separately from your tax return, directly with FinCEN. Many general tax preparers do not automatically file FBAR on their clients’ behalf unless specifically engaged to do so. If you have foreign accounts, confirm with your preparer explicitly that both filings were completed — don’t assume.

“The balance is too small to matter.”

The FBAR threshold is based on the aggregate balance across all foreign accounts, not any single account. Multiple smaller accounts can add up to cross the $10,000 mark and trigger a filing obligation.

“I’m married, so my threshold is just doubled.”

Only if you file jointly. If you are married filing separately, your Form 8938 threshold is the same as a single filer — not doubled. Your filing status and residency together determine which threshold applies to you.

Relief Options If You’ve Missed Prior Years

If you have unfiled FBAR or Form 8938 returns from prior years, there are IRS-approved pathways to come into compliance — often with significantly reduced or eliminated penalties — when done correctly:

•        Streamlined Filing Compliance Procedures — for non-willful violations; available in domestic and foreign versions depending on where you live

•        Delinquent FBAR Submission Procedures — for taxpayers who have not been contacted by the IRS and have properly reported all related income on prior returns

•        Delinquent International Information Return Submission Procedures (DIIRSP) — may apply in certain situations involving Form 8938 and other international information returns

The right pathway depends on your specific facts: how many years are involved, whether the failures were willful, whether you have been contacted by the IRS, and whether the underlying income was reported. Choosing the wrong program can foreclose better options, so qualified advice before filing is essential.

Bottom Line

FBAR and FATCA both bring transparency to offshore accounts and assets, but they are distinct requirements operating under different laws, filed with different agencies, with different asset coverage, and with thresholds that depend on your filing status and where you live. If you have any foreign financial accounts or assets, a careful review of both obligations is worth the time.

Don’t wait for a penalty notice to find out you had a filing requirement. The sooner you address it, the more options you have.

 Have Foreign Accounts or Assets? Let’s Talk.

At MKHS Tax Group, we help individuals and business owners navigate foreign reporting requirements — including FBAR, FATCA, and IRS relief programs for prior-year non-compliance. Whether you’re filing for the first time or need a second opinion, we’re here to help. Contact us at info@mkhstaxgroup.com to schedule a consultation.