Two Forms, Two Rulebooks, One Very Expensive Mistake

If you hold money outside the United States, you are probably subject to at least one reporting regime, and possibly two. They have different thresholds, different agencies, different forms, and different deadlines. They also overlap — which is exactly why people assume one takes care of the other.

It does not. You can be fully compliant on one and delinquent on the other, on the same accounts, in the same year.

Neither of these forms taxes your money. They report it. The penalties are for silence, not for the balance.

Form 1 — The FBAR

The FBAR is FinCEN Form 114, filed with the Financial Crimes Enforcement Network — not with your tax return, and not with the IRS.

• Threshold: you must file if the aggregate value of your foreign financial accounts exceeded $10,000 at any time during the calendar year.
• How: electronically, through the BSA E-Filing System.
• When: April 15 following the year reported, with an automatic extension to October 15 if you miss it.

Form 2 — Form 8938 (FATCA)

Form 8938 goes to the IRS, attached to your income tax return. The thresholds are higher, and they move depending on your filing status and whether you live in the U.S. or abroad:

Note the structure: either test triggers the filing. Being under the year-end number does not save you if you were over the “any time” number.

Why people get this wrong

Because the forms look redundant. They report overlapping assets to the same government. But they were written by different agencies for different purposes, and the IRS maintains a comparison chart precisely because the differences matter.

The practical consequences of assuming they are interchangeable:

• You file 8938 and skip the FBAR. Very common for people with large balances who think the “real” form is the one attached to the return. The FBAR threshold is $10,000 — you almost certainly crossed it.
• You file the FBAR and skip 8938. Common for people whose accountant handled the FBAR as a standalone task.
• You reported the accounts but not the income. Reporting the account is not reporting the interest, dividends, or gains it produced. Those go on the return like any other income.

What actually counts as “foreign”

Where the institution is, not where you are and not what currency it holds. An account at a bank in Bogota, Sao Paulo, Madrid, or Zurich is foreign, even if it is denominated in dollars, even if you opened it before you ever set foot in the U.S., and even if the money was already taxed somewhere else.

Signature authority counts too, on the FBAR. If you can direct the disposition of assets in an account — a parent’s account, a family company’s account — you may have a filing obligation even though none of the money is yours.

If you are already behind

This is the part where people panic, and the panic causes worse decisions than the original omission. Two things are worth knowing.

First, the IRS maintains the Streamlined Filing Compliance Procedures for taxpayers whose failure to report was not willful. There are two tracks — one for U.S. persons living abroad, one for those living in the U.S. Both require you to certify, under penalty of perjury, that the failure was non-willful. Taxpayers who qualify and comply with the domestic procedures are subject only to the Title 26 miscellaneous offshore penalty, and not to accuracy-related penalties, information return penalties, or FBAR penalties.

Second, and this is the timing point that matters: you are not eligible if the IRS has already opened a civil examination of your returns for any year — regardless of whether that exam has anything to do with foreign assets — or if you are under criminal investigation.

The door is open until it isn’t. Eligibility is lost the day the IRS contacts you, not the day you decide to deal with it.

That is the whole argument for moving now instead of hoping. Coming forward voluntarily is a fundamentally different conversation than being found.

The takeaway

Foreign account reporting is not about how much tax you owe. Very often the answer is little or nothing. It is about whether you told the government the accounts exist. Two forms, two rulebooks, and the honest answer for most global families is that they need both — filed correctly, on time, every year.

This article is general information, not tax advice. Foreign reporting outcomes are fact-specific and the stakes are high. Please talk to us before acting.