FBAR and FATCA Risks for U.S. Expats
Many U.S. citizens and Green Card holders living abroad believe that once they move overseas and start paying taxes locally, their U.S. reporting obligations largely disappear.
In practice, that is often not the case.
The United States continues to impose extensive reporting requirements – even where no additional U.S. tax is due.
For many expats, the problem is not intentional noncompliance. The issue is that the rules are far more technical than people expect.
FBAR Reporting: Simple Rule, Complicated Reality
One of the most common reporting obligations is the FBAR, FinCEN Form 114, officially called the Report of Foreign Bank and Financial Accounts.
In general, a U.S. individual is required to submit an FBAR when the combined balance of their foreign financial accounts goes over $10,000 at any time during the year.
On paper, that sounds straightforward. In reality: Who Must File the FBAR?
A U.S. person with either a financial interest in, or signature authority over, one or more foreign financial accounts is generally required to file an FBAR if the total value of those accounts exceeds $10,000 at any time during the calendar year.
What Constitutes a “Financial Interest”?
Many individuals incorrectly assume that only accounts held directly in their own name are reportable.
In reality, the definition of “financial interest” is substantially broader. A U.S. person may be treated as having a reportable financial interest where:
- the individual is the owner of record or holds legal title to the account;
- the account is maintained for the benefit of another person;
- the account is held through certain foreign entities; or
- the individual directly or indirectly owns more than 50% of the voting power, equity interest, assets, or profits of an entity holding the account.
As a result, FBAR reporting obligations may extend to foreign companies, family structures, trusts, or jointly managed assets.
In practice, many expats operate through structures that were perfectly ordinary in their home country but create unexpected U.S. reporting issues after immigration or acquisition of U.S. tax residency.
Signature Authority Can Trigger Filing Obligations
Another area that creates confusion is “signature authority.”
A person may have an FBAR filing obligation even if the money does not belong to them personally.
Under the rules, signature authority generally means the ability to control the movement of funds in a foreign account through direct communication with the financial institution.
This issue frequently appears in family businesses and international companies where an individual has authority to move funds operationally, even though they are not the beneficial owner of the account.
A surprisingly large number of expats discover FBAR exposure through accounts they viewed as merely administrative or business-related.
Joint Accounts and Family Accounts
FBAR reporting becomes particularly complicated in the context of jointly owned accounts and family relationships.
For example, some individuals are added to foreign accounts simply to help aging parents or relatives manage finances abroad.
Others maintain joint accounts with spouses or family members in their country of origin for practical reasons.
In some situations, spouses may rely on a single FBAR filing. In other cases, separate filings may still be necessary.
Children can also have independent FBAR obligations. Where a child cannot file, the parent or guardian may need to file on the child’s behalf.
These are not unusual situations and commonly arise in international families maintaining accounts outside the United States for estate planning, retirement, or ordinary family financial management.
Currency Conversion and Valuation Issues
Even determining whether the $10,000 threshold has been exceeded may require careful analysis.
Where accounts are denominated in foreign currency, FBAR rules require conversion into U.S. dollars using the applicable Treasury exchange rate for the last day of the calendar year. In certain situations, alternative verifiable exchange rates may be necessary.
This analysis becomes particularly important where:
- multiple foreign currencies are involved;
- cryptocurrency-related accounts are maintained abroad;
- accounts fluctuate significantly during the year; or
- foreign institutions use multiple exchange-rate systems.
FBAR Compliance Often Appears Simpler Than It Is
Many individuals assume that FBAR reporting is a relatively straightforward disclosure obligation.
In reality, the rules involve technical ownership concepts, attribution principles, and reporting requirements that may create significant exposure even where violations were entirely unintentional.
For many U.S. expats, compliance issues are identified only years later — frequently during expatriation planning, immigration review, foreign trust restructuring, or broader cross-border tax analysis.
The matters discussed above represent only a small sample of the issues that may arise in connection with FBAR reporting. Before making corrective submissions or providing expatriation-related certifications, it is generally prudent to conduct a thorough review of foreign accounts, ownership arrangements, signature authority, and prior filing history.
FATCA Reporting: A Separate Obligation
Many U.S. expats are familiar with the FBAR but are less aware of FATCA reporting requirements.
In practice, individuals are often surprised to learn that filing an FBAR does not necessarily satisfy their FATCA obligations.
FATCA, the Foreign Account Tax Compliance Act, generally requires certain U.S. taxpayers to report specified foreign financial assets on IRS Form 8938, which is filed together with the individual’s U.S. tax return.
Unlike the FBAR, which is filed with the U.S. Department of the Treasury through FinCEN, Form 8938 is submitted directly to the IRS as part of a taxpayer’s federal income tax filing.
The overlap between the two reporting systems creates confusion because some foreign assets may need to be reported on both forms, while others may appear only on one.
In practice, many expats do not realize there is a FATCA issue until years later, often during broader tax planning, expatriation planning, or immigration-related review.
FATCA Reporting Thresholds Are Different
FBAR filing obligations generally arise when the combined value of foreign financial accounts exceeds $10,000 at any time during the calendar year. In contrast, FATCA reporting thresholds are substantially higher and vary based on:
- filing status, including marital status;
- whether the taxpayer resides inside or outside the United States; and
- the value and type of specified foreign financial assets.
For instance, U.S. taxpayers residing outside the United States are often subject to considerably higher FATCA reporting thresholds than those living domestically.
In certain situations, an unmarried individual living abroad may not have a FATCA filing obligation unless the value of specified foreign financial assets exceeds $200,000 at the end of the tax year or $300,000 at any point during the year.
As a result, some individuals may have an FBAR filing obligation but no FATCA filing requirement, while others may be required to file both forms.
FATCA Extends Beyond Traditional Bank Accounts
Many individuals associate FATCA exclusively with foreign bank accounts. In reality, FATCA reporting may apply to a much broader category of foreign financial assets.
Depending on the circumstances, reportable assets may include:
- foreign brokerage accounts;
- ownership interests in foreign entities;
- certain foreign trusts;
- foreign-issued life insurance or annuity products;
- foreign pension arrangements;
- foreign mutual funds;
- and other specified foreign financial assets.
In some situations, assets may be reportable under FATCA but not under FBAR.
For example, foreign partnership interests or foreign stock held outside a financial account may trigger FATCA reporting even where no FBAR filing obligation exists.
At the same time, signature authority over a foreign financial account may create an FBAR filing obligation even where the account itself is not reportable under FATCA.
Determining whether a particular asset must be reported often requires careful review of ownership structure, valuation, and the taxpayer’s relationship to the asset.
FATCA Issues Are Often Discovered Years Later
For many U.S. expats, FATCA issues do not become apparent until years later — often during expatriation planning, immigration review, offshore restructuring, or preparation of amended tax filings.
In some cases, individuals first learn about FATCA after receiving requests from foreign financial institutions asking them to certify U.S. tax status or provide IRS forms such as Form W-9.
Foreign banks and financial institutions increasingly exchange information with U.S. authorities under FATCA-related reporting frameworks.
As a result, foreign account and asset reporting issues that previously remained unnoticed are now more likely to surface during routine compliance reviews.
The issues discussed above represent only a few examples of the complexities that may arise in FATCA compliance.
Before submitting amended filings, corrective disclosures, or expatriation-related certifications, careful review of foreign assets, reporting history, and ownership structures is often advisable.
Contact Us
Dilendorf Law Firm advises U.S. and international clients on FATCA and FBAR compliance, offshore reporting obligations, expatriation planning, and broader cross-border tax matters.
Our practice includes review of foreign account reporting issues involving FinCEN Form 114 (FBAR), IRS Form 8938 (FATCA), foreign trusts, offshore entities, and other international reporting requirements that may arise in connection with foreign financial assets and overseas structures.
We assist clients with compliance review, corrective filings, amended international reporting, and strategic planning involving foreign accounts, ownership structures, and cross-border asset arrangements.
With more than 15 years of experience advising both U.S. and non-U.S. clients, we provide practical, strategic guidance tailored to each client’s specific circumstances, including coordination with tax advisors, accountants, and foreign counsel where appropriate.
Whether you are reviewing prior filings, addressing foreign account reporting concerns, preparing for expatriation, or evaluating offshore structures, we can help you assess potential risks and develop a clear compliance strategy.
To discuss your matter, contact us at info@dilendorf.com
Resources
FATCA and Form 8938 Resources
Internal Revenue Service (IRS) — FATCA Information for Individuals
IRS Instructions for Form 8938 — Statement of Specified Foreign Financial Assets
IRS Form 8938 — Statement of Specified Foreign Financial Assets (PDF)
IRS Comparison of Form 8938 and FBAR Requirements
IRS Basic Questions and Answers on Form 8938
IRS Foreign Account Tax Compliance Act (FATCA) Overview
FBAR Resources
IRS Guidance — Report of Foreign Bank and Financial Accounts (FBAR)
FinCEN BSA E-Filing System — FBAR Filing Portal
FinCEN FBAR Line Item Filing Instructions (PDF)
Financial Crimes Enforcement Network (FinCEN) — Report Foreign Bank and Financial Accounts
This article is provided for your convenience and does not constitute legal advice. The information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Prior results do not guarantee a similar outcome.
