Holding money or investments outside the United States isn’t only an asset-allocation decision. For U.S. citizens and residents, it can trigger two separate federal reporting obligations — one to the Treasury Department, one attached to the tax return itself — with real penalties for missing either. They get confused with each other constantly, partly because they cover overlapping ground with different thresholds, different forms, and different agencies.
FBAR: the Treasury filing, triggered at a low threshold
The Report of Foreign Bank and Financial Accounts (FBAR) is required of any U.S. person — citizen, resident, or certain entities — who has a financial interest in, or signature authority over, foreign financial accounts whose combined value exceeded $10,000 at any single point during the calendar year. That threshold is cumulative: two foreign accounts worth $6,000 each at the same moment trigger the filing requirement just as much as one account worth $12,000 does.
The FBAR is filed as FinCEN Form 114, electronically, directly with the Financial Crimes Enforcement Network — not with the IRS, and not attached to a tax return. It’s due April 15, with an automatic extension to October 15 that doesn’t need to be requested. IRA and other retirement accounts you own are excluded from the count, as are a handful of institutional and government-account categories. Penalties are adjusted annually for inflation; as a rough baseline, non-willful violations have topped out around $10,000 per violation, while willful violations can reach the greater of $100,000 or 50% of the account balance, per violation, with criminal penalties possible in serious cases. Records supporting each reported account need to be kept for five years.
Form 8938: the IRS filing, with thresholds that depend on where you live
Form 8938 (Statement of Specified Foreign Financial Assets) is a separate requirement under the Foreign Account Tax Compliance Act, filed with the IRS as part of the tax return itself. The IRS’s own side-by-side comparison of the two forms lays out how different the thresholds are. For someone living in the U.S., an unmarried filer (or married filing separately) needs to file if specified foreign assets were worth more than $50,000 on the last day of the tax year or more than $75,000 at any point during the year; for a married couple filing jointly, those thresholds double to $100,000 and $150,000. Living outside the U.S. raises the bar considerably: $200,000 / $300,000 for an unmarried filer, $400,000 / $600,000 for a married couple filing jointly.
Form 8938 also covers some assets FBAR doesn’t — foreign stock or securities not held inside a financial account, and foreign partnership interests, for example — while FBAR covers some things Form 8938 doesn’t, like signature authority over an account with no ownership interest, or an account at a foreign branch of a U.S. bank. Penalties are structured differently too: up to $10,000 for failing to disclose, plus an additional $10,000 for every 30 days the failure continues after an IRS notice, capped at a $60,000 maximum, with criminal penalties possible on top of that in serious cases.
Filing one does not excuse the other
This is the detail that catches people: satisfying the Form 8938 requirement does not satisfy the FBAR requirement, and vice versa. Someone with meaningful assets abroad can legitimately owe both filings for the same underlying accounts, to two different agencies, on two different schedules. A U.S. brokerage’s own year-end tax documents won’t flag either requirement, since both depend on foreign accounts the brokerage typically has no visibility into.
A few specific asset types are worth knowing about because the answer is counterintuitive: foreign real estate held directly in your own name isn’t reportable on either form (though real estate held through a foreign entity can make that entity itself reportable), while foreign mutual funds are reportable on both.
What this means in practice
None of this is a reason to avoid holding investments outside the U.S. — it’s a reason to treat the compliance side as a distinct task from the investment decision itself. Anyone opening a foreign bank account, inheriting foreign assets, or building meaningful positions in foreign brokerage or retirement accounts should confirm with a tax professional, specifically, whether FBAR, Form 8938, or both apply to their situation — before the April filing deadline arrives, not after.
This article is educational and summarizes published IRS and FinCEN requirements as understood at the time of writing; thresholds and penalty amounts are adjusted periodically and can change. See our Financial Disclaimer, and consult a qualified tax professional about your specific foreign accounts and assets.
