Understanding Foreign Bank Account Reporting: What U.S. Citizens Need to Know About FBAR and Form 8938

If you’re a U.S. citizen with money in a non-U.S. bank account, you may be surprised to learn that you’re required to report it, even if your account doesn’t earn a penny of interest.

That’s because holding foreign financial accounts can trigger special reporting requirements with the U.S. government. While these reports are informational only (no additional tax is due just because you file), the penalties for not reporting can be steep.

In this blog post, we’ll walk you through two key types of reporting: FBAR (Form 114) and Form 8938, explain who needs to file them, and help you understand how to stay compliant.

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What Is FBAR (Form 114)?

The Foreign Bank Account Report (FBAR), officially FinCEN Form 114, is required by the Financial Crimes Enforcement Network (FinCEN), a Treasury agency that works closely with the IRS.

Who must file an FBAR?

• ‍U.S. citizens, green card holders, and certain U.S. residents‍
• U.S. corporations, partnerships, and LLCs that hold foreign accounts‍
• Threshold: If your total across all foreign financial accounts ever exceeded $10,000 USD at any point during the year (even for one day), you must file.‍
• Accounts include: bank accounts, brokerage accounts, mutual funds, trusts, and other foreign financial accounts.

Where to file: FBAR is filed separately from your tax return through the BSA E-Filing System.

At Lodder CPA, many clients choose to have us prepare their FBARs alongside their Form 1040 filing for efficiency and peace of mind.

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What Is Form 8938 (FATCA Reporting)?

Form 8938 is part of your federal tax return and was created under the Foreign Account Tax Compliance Act (FATCA).

Who must file Form 8938?

• U.S. citizens, resident aliens, and some non-residents
• You must file if your foreign financial assets exceeds $50,000 on the last day of the year or $75,000 at any point (single filer living in the U.S.). Higher thresholds apply to married filers and expats (e.g., $200,000 / $300,000 for expats)

What counts as foreign financial assets?

• Foreign stocks and securities not held in an account
• Foreign partnership interests
• Foreign pensions or retirement accounts

Unlike the FBAR, Form 8938 asks for more detailed information, including foreign income and exchange rates. Because it’s filed with your Form 1040, it cannot be filed separately.

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FBAR vs. Form 8938: Quick Comparison

While both FBAR (Form 114) and Form 8938 (FATCA) deal with reporting foreign accounts, they are not the same—and filing one does not satisfy the requirement for the other. Here’s how they differ:

• ‍Where they’re filed: FBAR is submitted to FinCEN separately from your tax return, while Form 8938 is filed directly with the IRS as part of your Form 1040.‍
• Filing thresholds: FBAR is required once your total foreign accounts exceed $10,000 at any point during the year. Form 8938 has higher thresholds, starting at $50,000 (with higher limits for married filers and expats).‍
• What they cover: FBAR focuses on foreign bank and financial accounts. Form 8938 covers a broader range of foreign assets and investments, including things like foreign stocks, partnership interests, and retirement accounts.‍
• Deadlines: FBAR is due by April 15 (with an automatic extension to October 15), while Form 8938 follows the same deadline as your federal tax return.‍
• Penalties: Both carry serious consequences. FBAR penalties can reach up to 50% of your account balance per year for willful violations. Form 8938 penalties start at $10,000 and can grow quickly if you remain non-compliant.

In short: FBAR looks at your accounts; Form 8938 looks at your assets. Many taxpayers end up needing to file both.

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What Happens If You Don’t File?

The IRS and FinCEN take foreign account reporting seriously, and the consequences for missing these filings can be far more severe than most taxpayers expect. Even if your oversight was accidental, penalties can add up quickly—and if the government believes you willfully avoided reporting, the financial impact can be devastating. Here’s a breakdown of what’s at stake:

FBAR penalties

• ‍Non-willful (accidental): up to $10,000 per violation‍
• Willful (intentional): the greater of $100,000 or 50% of the account balance, per year

Form 8938 penalties

• Start at $10,000, with $10,000 added for every 30 days late (up to $50,000)
• Accuracy-related penalties or even criminal charges for fraud

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Made a Mistake? There’s a Way to Fix It

If you didn’t know about these rules and are required to file, but haven’t filed in previous years, don’t panic. The IRS offers options to come into compliance—typically without slamming you with fines.

Voluntary Disclosure Programs (VDP) may apply in more serious situations. These programs allow taxpayers to report previously unfiled foreign accounts, usually with reduced or no penalties charged. Streamlined Filing Compliance Procedures is a common option.

Streamlined Filing Compliance Procedures

Designed for taxpayers who were non-willful (i.e., made an honest mistake)

Requirements:

• 6 years of FBAR filings
• 3 years of amended tax returns if Form 8938 was missed

Don’t rush into filing old forms without a plan. If your account balances were high or your case could look “willful,” it’s best to get professional help. Talk to us at Lodder CPA to help you get a feel for what your requirements are and let us help you complete the streamlined filing on your behalf, so that it gets done correctly and efficiently.

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Other Important Considerations

Foreign account reporting doesn’t always stop with the basics. Depending on your situation, additional rules may apply:

• ‍Joint accounts: Even if you share the account with a spouse or family member, each U.S. person may still be required to file their own FBAR.‍
• Foreign retirement plans: Accounts like RRSPs, SIPPs, or Superannuation funds can count as reportable assets. The treatment isn’t always straightforward, so it’s best to confirm your obligations.‍
• Foreign crypto exchanges: The IRS is paying closer attention to digital assets held abroad. Reporting requirements are evolving, and staying proactive helps you avoid surprises.

These scenarios are common among clients with international ties, and the rules can change quickly. If any of these apply to you, it’s worth having a tax advisor review your situation to ensure you’re fully compliant.

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How Lodder CPA Can Help

The rules around foreign account reporting can seem intimidating, but they’re manageable once you understand the basics. If you have money abroad—whether it's a checking account in Canada or an investment fund in Switzerland—make sure you're following the rules.

When in doubt, talk to us at Lodder CPA. We specialize in international compliance and the cost of getting expert help is a lot less than the cost of ignoring these rules.

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Have foreign accounts?

Book a consultation with Lodder CPA and we’ll help you figure out exactly what you need to file.

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