FATCA Compliance Guide 2026: Form 8938 Requirements for US Expats
Complete guide to FATCA compliance for Americans abroad. Learn about Form 8938 reporting thresholds, what assets to report, and how to avoid costly penalties.
What is FATCA?
The Foreign Account Tax Compliance Act (FATCA) is a US law enacted in 2010 as part of the HIRE Act. It requires US citizens and residents to report their foreign financial assets to the IRS, and mandates that foreign financial institutions report information about accounts held by US persons. For American expats, FATCA creates significant reporting obligations that must be carefully managed.
The Purpose of FATCA
FATCA was designed to combat tax evasion by US persons holding assets in offshore accounts. The law works on two levels:
- Individual reporting: US taxpayers must report foreign financial assets on Form 8938
- Institutional reporting: Foreign Financial Institutions (FFIs) must report US account holders to the IRS
Global Impact of FATCA
FATCA has had profound effects on Americans living abroad:
| Impact Area | Effect on US Expats |
|---|---|
| Banking access | Many foreign banks refuse US clients due to FATCA compliance costs |
| Investment options | Foreign investment platforms often exclude Americans |
| Privacy | Financial information shared with US government |
| Compliance burden | Additional forms and professional fees required |
| Renunciation | Record numbers of Americans renouncing citizenship |
FATCA Intergovernmental Agreements
The US has signed Intergovernmental Agreements (IGAs) with over 100 countries to implement FATCA. These agreements determine how foreign banks report US account holders:
- Model 1 IGA: Banks report to their local government, which shares data with the IRS
- Model 2 IGA: Banks report directly to the IRS with local government consent
Who Must File Form 8938
Form 8938, Statement of Specified Foreign Financial Assets, must be filed by US taxpayers who meet specific criteria.
Filing Requirements
You must file Form 8938 if you are:
- A US citizen (regardless of where you live)
- A US resident alien
- A non-resident alien who elects to be treated as a resident
AND you meet the applicable reporting threshold based on your filing status and residence.
Specified Individuals
| Category | Description | Filing Requirement |
|---|---|---|
| US Citizens Abroad | Citizens living outside the US | Higher thresholds apply |
| US Citizens in US | Citizens living in the United States | Lower thresholds apply |
| Resident Aliens Abroad | Green card holders living outside US | Higher thresholds apply |
| Resident Aliens in US | Green card holders living in US | Lower thresholds apply |
| Dual Status Aliens | Part-year resident aliens | Depends on specific situation |
Exceptions to Filing
You do not need to file Form 8938 if:
- You do not meet the reporting threshold for your category
- You have no specified foreign financial assets
- You are not required to file a US tax return for the year
- You file as a married person filing separately and your assets are included on your spouse's Form 8938
Reporting Thresholds Explained
The reporting thresholds differ significantly based on whether you live in the US or abroad. Understanding these thresholds is critical for compliance.
Thresholds for Taxpayers Living Abroad
To qualify as living abroad, you must either:
- Be a US citizen who has been a bona fide resident of a foreign country for an uninterrupted period including the entire tax year, OR
- Be present in a foreign country for at least 330 full days during any consecutive 12-month period
| Filing Status | End of Year Threshold | Any Time During Year |
|---|---|---|
| Single or Married Filing Separately | $200,000 | $300,000 |
| Married Filing Jointly | $400,000 | $600,000 |
Thresholds for Taxpayers Living in the US
| Filing Status | End of Year Threshold | Any Time During Year |
|---|---|---|
| Single | $50,000 | $75,000 |
| Married Filing Jointly | $100,000 | $150,000 |
| Married Filing Separately | $50,000 | $75,000 |
How the Two-Threshold Test Works
You must file Form 8938 if your foreign assets exceed EITHER threshold:
Example 1: End of Year Test
Sarah, a US citizen living in Germany (single), has:
- December 31 balance: $210,000 in foreign accounts
- Maximum balance during year: $220,000
Result: Must file because end-of-year balance ($210,000) exceeds the $200,000 threshold.
Example 2: Any Time Test
Mike, a US citizen living in Singapore (single), has:
- December 31 balance: $180,000 in foreign accounts
- Maximum balance during year: $350,000 (before transferring funds to US)
Result: Must file because maximum balance ($350,000) exceeds the $300,000 threshold, even though year-end balance is below $200,000.
Example 3: Below Both Thresholds
Lisa, a US citizen living in Japan (single), has:
- December 31 balance: $150,000 in foreign accounts
- Maximum balance during year: $200,000
Result: Does not need to file because neither threshold is exceeded.
What Assets Must Be Reported
Form 8938 requires reporting of "specified foreign financial assets." Understanding what qualifies is essential for compliance.
Assets That Must Be Reported
| Asset Type | Examples | Reportable? |
|---|---|---|
| Foreign financial accounts | Bank accounts, savings, checking, deposits | Yes |
| Foreign brokerage accounts | Investment accounts, securities held abroad | Yes |
| Foreign stocks and securities | Direct ownership not through US broker | Yes |
| Foreign mutual funds | Including PFICs | Yes |
| Foreign partnership interests | Ownership in foreign partnerships | Yes |
| Foreign pension accounts | Most foreign retirement accounts | Yes (with some exceptions) |
| Foreign life insurance | Cash value policies | Yes |
| Foreign hedge funds | Alternative investment vehicles | Yes |
Assets That Are NOT Reported on Form 8938
| Asset Type | Reason Not Reported |
|---|---|
| US financial accounts | Not foreign assets |
| Foreign stocks held in US brokerage | US account, not foreign asset |
| Foreign real estate (direct ownership) | Not a financial asset |
| Foreign currency held directly | Not in a financial account |
| Precious metals held directly | Not in a financial account |
| Social Security-type programs | Typically exempt |
Valuation of Assets
For Form 8938, you must report:
- Maximum value during the year: The highest fair market value at any point
- Year-end value: Fair market value on December 31
- Exchange rate: Use the Treasury Department's year-end exchange rate for December 31 values
Exchange Rate Sources
The IRS accepts exchange rates from:
- Treasury Reporting Rates of Exchange
- Federal Reserve rates
- Other reliable sources used consistently
How to Complete Form 8938
Form 8938 is filed as an attachment to your annual tax return (Form 1040). Here is a step-by-step guide:
Part I: Foreign Deposit and Custodial Accounts
Report each foreign financial account:
- Account type: Deposit, custodial, or other
- Account number: Full or partial account number
- Financial institution name and address
- Maximum value during year: In US dollars
- Whether account was opened or closed during year
Part II: Other Foreign Assets
Report non-account foreign financial assets:
- Description of asset: Be specific (e.g., "shares of XYZ Ltd.")
- Identifying number: If applicable
- Name and address of issuer or counterparty
- Maximum value during year
- Whether asset was acquired or disposed of during year
Part III: Summary of Tax Items
Report amounts related to reported assets:
- Interest income
- Dividend income
- Royalties
- Capital gains
- Other income
- Deductions
- Credits
Filing Tips
| Tip | Details |
|---|---|
| Use correct exchange rates | Use Treasury year-end rate for December 31 values |
| Keep records | Maintain account statements showing maximum values |
| Report in US dollars | All values must be converted to USD |
| Be consistent | Use same methodology year over year |
| When in doubt, report | Better to over-report than under-report |
FATCA vs FBAR: Key Differences
Many taxpayers confuse Form 8938 (FATCA) with FinCEN Form 114 (FBAR). While both report foreign financial assets, they have important differences.
Comparison Table
| Feature | Form 8938 (FATCA) | FinCEN Form 114 (FBAR) |
|---|---|---|
| Authority | IRS (Internal Revenue Code) | FinCEN (Bank Secrecy Act) |
| Filing threshold (abroad) | $200,000 year-end / $300,000 any time | $10,000 any time during year |
| Filing threshold (US) | $50,000 year-end / $75,000 any time | $10,000 any time during year |
| How to file | Attached to Form 1040 | Electronically via BSA E-Filing |
| Due date | Tax return due date (with extensions) | April 15 (auto-extension to October 15) |
| Assets covered | Financial accounts + other financial assets | Financial accounts only |
| US accounts with foreign assets | Not reported | Not reported |
| Foreign stocks (direct) | Yes | No |
| Maximum penalty | $50,000+ (can escalate) | Greater of $100,000 or 50% of account |
You May Need to File Both
Many Americans abroad must file both forms. The FBAR has a much lower threshold ($10,000), so you might file FBAR but not Form 8938, or you might file both.
Example Scenarios
| Scenario | Form 8938 | FBAR |
|---|---|---|
| $15,000 in foreign bank account (living abroad) | No | Yes |
| $250,000 in foreign accounts (living abroad) | Yes | Yes |
| $50,000 in foreign stocks, no accounts | No (below threshold) | No (no accounts) |
| $200,000 in foreign stocks + $15,000 account | Yes | Yes |
Penalties for Non-Compliance
FATCA penalties can be severe. Understanding the consequences helps emphasize the importance of compliance.
Failure to File Penalties
| Violation | Penalty |
|---|---|
| Failure to file Form 8938 | $10,000 per year |
| Continued failure after IRS notice | Additional $10,000 per 30-day period (up to $50,000) |
| Underpayment due to undisclosed assets | 40% penalty on underpayment |
| Criminal penalties (willful) | Up to $250,000 and/or 5 years imprisonment |
Statute of Limitations
The normal 3-year statute of limitations is extended to 6 years if you fail to report more than $5,000 of foreign income. If you fail to file Form 8938, the statute may remain open indefinitely for the portion of your return related to foreign assets.
Reasonable Cause Exception
Penalties may be waived if you can demonstrate reasonable cause for non-compliance. Factors considered include:
- Reliance on professional advice
- Complexity of tax situation
- Whether you made good faith efforts to comply
- No willful neglect of filing obligations
Voluntary Disclosure Programs
If you have not been compliant, options exist to come into compliance with reduced penalties:
| Program | Description | Best For |
|---|---|---|
| Streamlined Foreign Offshore | 3 years of returns, 6 years of FBARs, 5% penalty | Non-willful expats |
| Streamlined Domestic Offshore | 3 years of returns, 6 years of FBARs, 5% penalty | Non-willful US residents |
| Delinquent FBAR Submission | File late FBARs without penalty | Those with only FBAR issues |
| Delinquent International Information Return | File late forms with reasonable cause | Those with reasonable cause |
Compliance Strategies
Staying compliant with FATCA requires organization and planning. Here are strategies for managing your obligations.
Record Keeping Best Practices
| What to Keep | How Long | Purpose |
|---|---|---|
| Monthly account statements | 7 years minimum | Determine maximum values |
| Year-end statements | 7 years minimum | December 31 values |
| Exchange rate documentation | 7 years minimum | Support USD conversions |
| Account opening documents | While account is open + 7 years | Account identification |
| Copies of filed forms | Indefinitely | Compliance record |
Annual Compliance Checklist
- January: Gather all December 31 statements for foreign accounts
- February: Calculate year-end values in USD using Treasury rates
- March: Review all months to determine maximum account values
- April: File FBAR by April 15 (or note auto-extension to October 15)
- April-June: Prepare Form 8938 with tax return
- June 15: Tax return due for expats (Form 1040 + Form 8938)
- Throughout year: Track new accounts opened or closed
Technology Tools for Compliance
- Spreadsheet tracking: Maintain running log of all accounts and maximum values
- Cloud storage: Securely store statements and documentation
- Currency converter apps: Track exchange rates throughout the year
- Tax software: Use software that supports Form 8938 (TurboTax, H&R Block)
- Expat tax services: Consider specialized services like Greenback, Bright!Tax
When to Get Professional Help
Consider working with an expat tax professional if:
- You have complex foreign holdings (foreign pensions, trusts, businesses)
- You are not current with past filings
- You have both FATCA and FBAR obligations
- You live in a country with complex tax treaty provisions
- You have PFIC holdings that need reporting
- You are considering voluntary disclosure
Cost of Professional Services
| Service | Typical Cost Range |
|---|---|
| Simple expat tax return | $500-$1,000 |
| Tax return with Form 8938 | $750-$1,500 |
| Complex return with multiple forms | $1,500-$3,000+ |
| Streamlined filing procedure | $3,000-$10,000 |
| FBAR-only filing service | $100-$300 |
FATCA compliance is non-negotiable for Americans abroad. While the reporting requirements add complexity to your financial life, the penalties for non-compliance are severe and can compound quickly. The key to successful compliance is organization: maintain good records throughout the year, understand your filing thresholds, and do not hesitate to seek professional help when needed. Remember that both Form 8938 and FBAR may be required, and the thresholds are different for each. With proper planning, FATCA compliance becomes a manageable part of your annual tax routine.
This article is for informational purposes only and does not constitute tax or legal advice. FATCA regulations are complex and subject to change. Consult with a qualified tax professional for advice specific to your situation.
Recommended for You
FATCA Compliance Guide: US Citizens Foreign Account Reporting
Complete FATCA compliance guide. Form 8938 requirements, reporting thresholds, and avoiding penalties.
US Expat Tax Guide 2026: FBAR, FATCA & Foreign Income
Complete US expat tax guide. FBAR filing, FATCA compliance, foreign earned income exclusion, and tax treaties.
US Expats in Asia: Currency & Investment Strategy
Financial strategy for Americans living in Asia. Currency management, local investing, and US tax compliance.
Americans Abroad: Opening Brokerage Accounts Overseas
Guide for US citizens opening investment accounts abroad. PFIC rules, broker restrictions, and compliant options.
Related Services
Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instruments. All investment decisions must be made at your own responsibility. Forex and cryptocurrency trading carries risk of capital loss.