What is FATCA? Form 8938 explained

FATCA is the Foreign Account Tax Compliance Act, passed in 2010 and effective from 2014. It does two things:

1. It forces foreign financial institutions to report information about their U.S.-citizen and U.S.-resident account holders directly to the IRS.
2. It forces U.S. taxpayers themselves to disclose their foreign financial assets to the IRS each year on Form 8938, filed with their 1040.

The first part is why your bank in Berlin or Seoul has, at some point in the last decade, asked you to fill out a W-9 with your Social Security number — and why some foreign banks now refuse to open accounts for Americans at all. The second part is the form your accountant may or may not have remembered to file with your return.

This article focuses on the second part: Form 8938, who has to file it, and how it overlaps with — and differs from — FBAR.

Form 8938 in one sentence

If you're a U.S. taxpayer with foreign financial assets above certain thresholds, you must file Form 8938 with your annual income tax return, disclosing each asset and the maximum value during the year.

The 8938 lives with your 1040 — same envelope, same deadline (including extensions). It is not filed separately like the FBAR.

The filing thresholds

The thresholds depend on filing status and whether you live abroad. For expats (your tax home is in a foreign country and you meet either PPT or BFR), the thresholds are roughly 5× higher than for U.S.-resident filers:

Filing status (living abroad)	Year-end value	At any point in year
Single / MFS	$200,000	$300,000
Married filing jointly	$400,000	$600,000

For U.S.-resident filers, the thresholds drop to $50,000 / $75,000 (single) and $100,000 / $150,000 (MFJ).

You must file if either threshold is exceeded. So even if your year-end balance is under $200,000, if your accounts briefly hit $310,000 during the year (perhaps when an end-of-year bonus or a property sale settled), you owe an 8938.

What's a "specified foreign financial asset"

This is broader than the FBAR definition. It includes:

• Foreign financial accounts (the same accounts that trigger FBAR): checking, savings, brokerage, foreign retirement accounts, foreign mutual funds held inside accounts.
• Foreign stocks and securities held directly — not through an account. If you own physical share certificates of a Brazilian company in your safe, FBAR doesn't apply but 8938 does.
• Interest in a foreign partnership or trust (where the value can be reasonably estimated).
• Foreign pension and deferred compensation plans — even certain employer-sponsored plans that aren't traditional accounts.
• Foreign-issued life insurance and annuity contracts with cash value.

What 8938 does not include:

• Foreign real estate held directly (a Tokyo apartment is not a "specified foreign financial asset" by itself — but a foreign account that holds the rent is)
• Foreign currency cash
• Tangible foreign-held assets like art, gold, jewelry
• Accounts where you have signature authority only (no financial interest) — different from FBAR
• U.S. assets held at a U.S. broker, even if the broker has a foreign branch

FATCA vs. FBAR side by side

A lot of expats assume these are the same form. They aren't.

	FBAR (FinCEN 114)	FATCA (Form 8938)
Filed with	U.S. Treasury (FinCEN)	IRS, with 1040
Threshold (expat, single)	$10,000 aggregate, any moment	$200,000 year-end / $300,000 any moment
Threshold (resident, single)	$10,000	$50,000 year-end / $75,000 any moment
Signature-only accounts	Yes	No
Foreign real estate (direct)	No	No
Foreign stocks held directly	No	Yes
Foreign mutual funds	Yes	Yes
Foreign pensions	Most	Most
Penalty (non-willful)	Up to $10K per FBAR	$10K initial + up to $50K continuing

Many expats end up filing both: FBAR catches you at $10K, 8938 catches you at $200K (or $300K mid-year). If your accounts are between those numbers, FBAR only.

How banks see FATCA

The bank-side of FATCA is why, somewhere in the last few years, your foreign bank asked you to fill out a W-9 or a similar self-certification.

Under FATCA, foreign financial institutions (FFIs) that want to do business in U.S. dollar markets must either:

• Sign an FFI agreement with the IRS to report their U.S. account holders directly, or
• Operate in a country with an Intergovernmental Agreement (IGA) that requires the local bank to report to its local tax authority, which then forwards the data to the IRS.

Almost every major country has signed an IGA. Practically every foreign bank with significant operations is reporting. If a bank discovers you're a U.S. person and you refuse to fill out the FATCA paperwork, they will close your account. Some refuse to open accounts for U.S. persons at all because the compliance cost isn't worth their margin on a small expat customer base.

This means: the IRS almost certainly knows about your foreign account. Whether they've cross-referenced it with your 1040 yet is a different question, but the data is there. The chance of "I'll just not file and they'll never notice" working has dropped enormously since 2014.

Penalties for missing Form 8938

• $10,000 initial penalty for failure to file.
• Up to $50,000 in continuation penalties if you fail to file after IRS notification.
• 40% accuracy-related penalty on any tax underpayment attributable to undisclosed foreign assets.
• The statute of limitations on your entire return never closes if you omitted a required 8938. The IRS can audit you for that year forever.

That last one is the silent killer. Normally the IRS has 3 years to audit a return (or 6 for substantial omissions). If you owe an 8938 and didn't file it, that clock never starts. A return from 2014 with a missing 8938 is fully audit-eligible today.

How to complete it

Form 8938 has three main parts:

1. Part I: foreign deposit and custodial accounts. Each account: bank name, account number, year-end balance and maximum value (in USD), country.
2. Part II: other foreign assets. Direct holdings — foreign stocks, partnership interests, pension cash values.
3. Part III: summary of income generated by these assets (dividends, interest, cap gains) and where on your 1040 you reported it.

Part III is where the IRS does its cross-reference. If you list a foreign brokerage with a $500,000 balance and a $0 income figure, expect a letter asking for the missing 1099-equivalent. Foreign banks don't issue U.S.-style 1099s, so you have to reconstruct interest, dividends, and capital gains from foreign year-end statements.

What if you've never filed Form 8938

The fix is the same as for FBAR: the Streamlined Filing Procedures. Streamlined-Foreign waives the 8938 penalty along with the FBAR penalty, provided your non-compliance was non-willful and you meet the residency test.

If you owe 8938 but not Streamlined (because you do meet the willfulness threshold or because you live in the U.S.), other options include:

• Delinquent International Information Return Submission Procedures — for filers who don't have unreported tax. File the missing 8938s with a reasonable-cause statement.
• IRS Voluntary Disclosure Practice — for filers with potential willfulness exposure. Different, more expensive program with criminal-protection benefits.

Like with FBAR, the worst path is "quiet disclosure": file 8938 starting this year and hope the IRS doesn't ask about prior years. They probably will.

Practical compliance for expats

Once your foreign assets are anywhere near the $200,000 line, build the muscle of:

1. Pulling each foreign asset's year-end value and maximum value once a year.
2. Tracking interest, dividends, and capital gains as you go — not on April 14.
3. Filing Form 8938 every year you're over the threshold, even if you're well under it some years (so the IRS sees a continuous pattern rather than a sudden new disclosure).

Talk to a credentialed pro if you hold foreign mutual funds (PFICs), foreign businesses (Forms 5471/8865), or foreign trusts. The information returns multiply fast.

Next steps

• What is FBAR?
• Streamlined Filing Procedures
• The PFIC trap
• Who must file as a U.S. expat