FBAR (FinCEN Form 114) is a tool used by the Financial Crimes Enforcement Network to track money laundering across foreign bank accounts exceeding $10,000, whereas Form 8938 is an IRS tax form designed to identify undeclared foreign financial assets for income tax assessment.
For US expats, High Net Worth Individuals (HNWIs), and international investors, the US tax code presents a unique "Double Jeopardy." You are not just responsible to the IRS; you are also monitored by the Treasury Department’s financial crimes division. Failing to distinguish between these two forms is the single most expensive administrative error a US taxpayer can make.
In this guide, we dismantle the complexities of FBAR and Form 8938 filing requirements, ensuring you remain compliant and safeguard your assets from aggressive forfeiture and penalty regimes.
Key Takeaways: FBAR vs. Form 8938
- Dual Obligations: Filing an FBAR does not exempt you from filing Form 8938 (and vice versa).
- Different Thresholds: FBAR has a low, flat threshold ($10,000 aggregate). Form 8938 has higher, tiered thresholds based on residency and marital status.
- Scope of Assets: Form 8938 requires reporting of assets that FBAR ignores, such as foreign stock held directly and interests in foreign partnerships.
- Submission Method: FBAR is filed separately via the FinCEN BSA E-Filing system. Form 8938 is attached to your Form 1040 tax return.
- Statute of Limitations: FBAR is 6 years. Form 8938 has an indefinite statute of limitations if the form is never filed.
What is the Difference Between FBAR and Form 8938?
To understand the difference, one must look at the legislative history. The FBAR was born from the Bank Secrecy Act of 1970. Its purpose was never originally about tax revenue; it was about tracking the movement of illicit funds, terrorism financing, and money laundering. This is why it is filed with FinCEN (Financial Crimes Enforcement Network), a bureau of the US Department of the Treasury.
In contrast, Form 8938 was created under the Foreign Account Tax Compliance Act (FATCA) in 2010. After the 2008 financial crisis, Congress needed to close the "tax gap." The Form 8938 is purely a tax compliance instrument designed to cross-reference the income you report on your tax return with the assets you actually hold.
Understanding the FBAR (FinCEN Form 114)
The Report of Foreign Bank and Financial Accounts (FBAR) is strictly informational. No tax is due with this form. However, the penalties for failing to file are famously draconian because the government views non-compliance as a potential attempt to hide criminal activity.
- Authority: Title 31 of the U.S. Code (Money and Finance).
- Trigger: Aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year.
Understanding FATCA (Form 8938)
Form 8938 (Statement of Specified Foreign Financial Assets) is part of your annual tax return (Form 1040). It focuses on "Specified Foreign Financial Assets." The IRS uses this form to ensure you are paying tax on the interest, dividends, and capital gains generated by your offshore holdings.
- Authority: Title 26 of the U.S. Code (Internal Revenue Code).
- Trigger: Holding specified assets above the applicable reporting threshold (ranging from $50,000 to $600,000).
Do I Need to File Both FBAR and 8938?
Yes. This is the most common pitfall. The IRS explicitly states that filing Form 8938 does not relieve you of the FBAR requirement. Conversely, filing the FBAR does not satisfy your FATCA obligation. They are duplicative in nature but distinct in law. If you meet the thresholds for both, you must file both.
Detailed Filing Thresholds: The Mathematics of Compliance
The "at risk" determination relies entirely on whether you have crossed specific monetary thresholds. These numbers are absolute; there is no leniency for being "just a few dollars over."
FBAR Thresholds ($10,000 Aggregate Rule)
The FBAR threshold is deceptively simple but often misunderstood. You must file if the aggregate maximum value of all your foreign financial accounts combined exceeds $10,000 at any point during the calendar year.
Example: You have 3 accounts in Singapore.Total: $11,000. Even though no single account is over $10,000, the aggregate is. You must report all three accounts on the FBAR.
- Account A: $4,000
- Account B: $4,000
- Account C: $3,000
Form 8938 Thresholds (The Tier System)
Unlike the FBAR, Form 8938 thresholds vary significantly based on whether you live in the US or abroad, and your marital status.
1. Taxpayers Living in the United States
- Unmarried (or Married Filing Separately): You must file if total foreign assets exceed $50,000 on the last day of the tax year, OR $75,000 at any time during the year.
- Married Filing Jointly: You must file if total foreign assets exceed $100,000 on the last day of the tax year, OR $150,000 at any time during the year.
2. Taxpayers Living Abroad (Expats)
The IRS grants a higher threshold for expats, acknowledging that local accounts are necessary for daily life, not just investment.
- Unmarried (or Married Filing Separately): You must file if total foreign assets exceed $200,000 on the last day of the tax year, OR $300,000 at any time during the year.
- Married Filing Jointly: You must file if total foreign assets exceed $400,000 on the last day of the tax year, OR $600,000 at any time during the year.
Comparison of Form 8938 and FBAR Requirements
Determining what counts as a reportable asset is where many taxpayers face "compliance drift." The definitions of "financial interest" differ between Title 26 (IRS) and Title 31 (FinCEN).
What Counts as a "Foreign Financial Asset"?
Assets Reported on BOTH Forms:
- Savings, checking, and demand deposit accounts at foreign banks.
- Brokerage and securities accounts held at foreign financial institutions.
- Foreign mutual funds (if held in an account).
- Foreign-issued life insurance or annuity contracts with a cash surrender value.
Assets Reported ONLY on Form 8938 (FATCA):
This is a critical distinction. FinCEN only cares about "accounts." The IRS cares about "investment assets," even if they aren't in a bank.
- Stock or Securities held directly: If you hold physical stock certificates of a foreign company (not in a brokerage account), this goes on Form 8938 but NOT the FBAR.
- Interests in Foreign Partnerships: Ownership in a foreign partnership (managed fund or business) is reportable on 8938.
- Foreign Hedge Funds & Private Equity: Often structured as foreign corporations or partnerships, these are reportable on 8938.
Assets Reported ONLY on FBAR:
- Signature Authority: If you have signature authority over a corporate account (e.g., you are the CFO of a company with a UK bank account) but have no financial interest in it, you must file an FBAR. You generally do not report this on your personal Form 8938.
- Indirect Interests: Beneficiaries of certain foreign trusts may have FBAR requirements that differ from 8938 reporting.
The Valuation Date Nuance
When calculating your total value, the methodology differs:
- FBAR: Requires the periodic statement balance. If the bank statement says you had $12,000 on June 4th, that is your number. You use the Treasury Bureau of the Fiscal Service exchange rate for December 31st of that year.
- Form 8938: Requires the Fair Market Value (FMV). For accounts, this is usually the statement balance. For other assets (like private equity), you may need an appraisal or a credible estimate. You typically use the IRS year-end exchange rate.
The Comparison Engine: FBAR vs Form 8938
| Feature | FBAR (FinCEN Form 114) | Form 8938 (FATCA) |
|---|---|---|
| Who Must File? | "US Persons" (Citizens, Residents, Trusts, LLCs, Corps). | "Specified Individuals" (Citizens, Resident Aliens) & "Specified Domestic Entities". |
| Filing Threshold | >$10,000 aggregate at any time. | Starts at >$50,000 (US) or >$200,000 (Abroad). |
| What is Reported? | Financial Accounts only. | Financial Accounts + Non-Account Investment Assets. |
| Where to File? | FinCEN (BSA E-Filing System). | IRS (Attached to Form 1040). |
| Due Date | April 15 (Auto-extension to Oct 15). | April 15 (Extensions apply via Form 4868). |
| Penalty (Non-Willful) | Up to $16,536 per violation (Inflation Adjusted). | $10,000 per failure to file. |
| Statute of Limitations | 6 Years. | 3 Years (Indefinite if form is not filed). |
Penalties and Pitfalls: The High Cost of Non-Compliance
The US government enforces these regulations through a penalty regime that many legal experts consider "confiscatory." It is vital to understand the "High CPC" terminology here: we are dealing with Civil Monetary Penalties (CMPs) and potential Criminal Tax Exposure.
FBAR Penalties: Inflation Adjusted for 2025
Under the Federal Civil Penalties Inflation Adjustment Act, FBAR penalties increase annually.
- Non-Willful Violation: If you simply forgot or didn't know, the penalty is capped at approximately $16,536 per violation (per form, based on the Bittner Supreme Court ruling).
- Willful Violation: If the government proves you intentionally hid assets, the penalty is the greater of $165,353 or 50% of the account balance at the time of the violation.
Form 8938 Penalties
- Failure to File: $10,000 initial penalty.
- Continuation Penalty: If you do not file within 90 days of IRS notification, an additional $10,000 is added for every 30 days, capped at $50,000. Maximum total: $60,000.
- Accuracy-Related Penalty: If you underpay tax because of an undisclosed foreign asset, you face a 40% penalty on the underpayment (substantial understatement).
Hypothetical Scenarios: Applied Knowledge
Scenario A: The "Accidental American"
Situation: Sarah was born in the US but has lived in France since she was 2 years old. She earns €45,000/year and has a French savings account with €15,000 ($16,500 USD). She is unmarried.
Analysis:
FBAR: Yes. Her account exceeds $10,000 USD. She must file FinCEN Form 114.
Form 8938: No. As an expat living abroad, her threshold is $200,000 at year-end. Her $16,500 is well below the reporting requirement.
Scenario B: The High Net Worth Investor
Situation: Robert lives in New York. He has a Swiss bank account with $80,000 and holds $50,000 worth of stock in a private Cayman Islands company (certificate held in a safe). Total foreign assets: $130,000.
Analysis:
FBAR: Yes. His Swiss bank account ($80k) exceeds the $10,000 threshold. Note: The private stock is not a "financial account" so it is not reported on FBAR.
Form 8938: Yes. He lives in the US. His total specified foreign assets ($80k + $50k = $130k) exceed the $100,000 year-end threshold for married filers (or $50k for single). He must report both the bank account and the stock on Form 8938.
Remediation: What If I Forgot to File?
If you are reading this and realizing you are non-compliant, do not panic—but do not wait. "Quiet Disclosure" (just filing late without explanation) is risky and discouraged.
Streamlined Filing Compliance Procedures (SFCP)
The IRS offers an amnesty program for taxpayers whose failure to file was non-willful.
- Streamlined Foreign Offshore Procedures (SFOP): For expats. You file 3 years of tax returns and 6 years of FBARs. Penalty: 0%.
- Streamlined Domestic Offshore Procedures (SDOP): For US residents. You file amended returns and FBARs. Penalty: 5% of the highest aggregate foreign asset balance.
Delinquent FBAR Submission Procedures
If you reported all the income on your tax return (and paid the tax) but simply forgot to file the FBAR, you can file electronically with a reason for late filing. Typically, the IRS will not impose a penalty in this specific scenario.
PRO TIP: The "Zero Income" Trap
Many people believe "I made no interest on that account, so I don't need to report it." This is false. FBAR and Form 8938 are asset reporting forms, not just income reporting forms. Even a zero-interest checking account with $200,000 in it must be reported. Failure to do so triggers the full penalty regime.
FAQ: Common Questions on International Reporting
- Is the $10,000 FBAR limit per account?
- No. It is an aggregate limit. If you have 10 accounts with $1,001 each, you have $10,010 total and must report all 10 accounts.
- Does Form 8938 replace the FBAR?
- Absolutely not. They are separate requirements under separate statutes. Filing one does not satisfy the other.
- What is the difference between FBAR and Form 8938 penalties?
- FBAR penalties are generally higher for willful violations (50% of asset value), while Form 8938 penalties are more focused on fixed dollar amounts ($10k-$60k) plus accuracy-related penalties on unpaid tax.
- Do I list my foreign pension on Form 8938?
- Generally, yes. Foreign pensions are considered specified foreign financial assets. However, if the US has a specific treaty with the country (like Canada's RRSP), reporting rules may vary, but disclosure is usually required.
Conclusion
Navigating the intersection of FBAR and Form 8938 is complex, but the rules are clear: transparency is your best defense. The IRS and FinCEN have heavily invested in data-sharing agreements with foreign banks under FATCA. The era of banking secrecy is effectively over. By understanding the distinct requirements of these two forms, you protect your wealth and ensure your financial legacy remains intact.