FBAR and FATCA: What Every US Expat Should Know
FBAR and FATCA are two key reporting rules that every US expat must understand. Learn what they mean, how they differ, and why working with a financial advisor can help you stay compliant and protect your wealth while living abroad.
For US expats living overseas, life can be full of exciting changes and new beginnings. However, there is one aspect of American life they can't escape and will follow them everywhere: US taxes.
Unlike most countries, the United States taxes its citizens and ‘US connected persons’ on worldwide income, no matter where they live. That means even if your salary, savings, or investments are all outside the US, you must still report them to the IRS. Two key reporting requirements, FBAR and FATCA, have been designed to improve transparency around foreign financial assets and accounts.
While extra US tax filing requirements may not sound very appealing, understanding FBAR and FATCA is essential for any US expat who wishes to stay compliant and avoid costly mistakes.
In this article, you will learn:
- What the FBAR and FATCA reporting requirements are and why they are so important for US expats
- When you are required to file under these rules
- What steps to take if you have not filed on time
- How these reporting requirements affect your retirement accounts
FBAR Filing Requirements
FBAR is the Foreign Bank Account Report, also known as FinCEN Form 114. This reporting requirement was introduced under the Bank Secrecy Act and is submitted electronically to the US Treasury, not the IRS.
An FBAR must be filed by any US connected person whose foreign financial accounts exceed a total value of $10,000 at any point during the calendar year. This includes all non-US bank accounts, savings accounts, investment accounts, and even certain types of life insurance or pension funds which have a cash value.
The important thing to understand is that the $10,000 threshold applies to the combined maximum balance of all your accounts. It doesn’t matter if the balance only reached that amount for one day, or if the same money moved between accounts, all accounts are counted at their highest value during the course of the calendar year.
Many expats may have multiple accounts spread across various jurisdictions, and all these balances must be added together. Once the combined total passes $10,000 in a tax year, every single account must be reported under FBAR, even if some have very little money in them.
Although FBAR does not impose taxes, it ensures transparency. And while many expats assume it is not enforced, penalties for non-filing can be severe, potentially reaching thousands of dollars per violation. Compliance is always the safer and less stressful option.
Understanding FATCA Reporting
The Foreign Account Tax Compliance Act (FATCA) was introduced in 2010 to combat offshore tax evasion. Under FATCA, US taxpayers are required to report certain foreign assets using Form 8938, which is filed alongside your annual tax return.
If FBAR reports your foreign bank accounts, FATCA goes a step further by covering additional “specified foreign financial assets.” This can include foreign mutual funds, stocks or securities held outside the US, interests in foreign partnerships or trusts, and even foreign-issued life insurance policies.
The reporting thresholds under FATCA are much higher than for FBAR. For expats, single filers must report if their total foreign assets exceed $200,000 at year-end (or $300,000 at any time during the financial year).
Unfortunately for US expats, FATCA has significantly impacted the way foreign financial institutions work with US clients. It is legally required for all foreign banks and institutions to identify and report US clients’ holdings to the IRS, or they risk losing access to US financial markets. As a result, US expats may struggle to open foreign bank accounts, as many institutions simply don’t want the reporting burden that comes with having American clients.
If you meet the threshold, Form 8938 must be included with your US tax return. Filing an FBAR alone does not fulfill your FATCA obligation as both filings are separate, and both must be completed to ensure full compliance.
How Do FBAR and FATCA Work?
While these requirements were both introduced to improve foreign financial transparency and reduce tax evasion, they operate independently. FBAR focuses on the foreign financial accounts of US citizens, and is submitted to the US Treasury, while FATCA targets foreign assets and is filed with IRS tax returns.
If your total account balances are modest, you may only need to file FBAR. But as your wealth grows, whether through savings, investments, or even a foreign pension, you may inevitably cross the FATCA threshold as well.
Failing to meet these obligations doesn’t just risk penalties; it can also raise red flags with the IRS if your foreign accounts are reported by your overseas bank under FATCA but not listed in your own filings. Staying proactive ensures both peace of mind and financial protection.
What If You Have Not Filed FBAR or FATCA?
If you have just learned about FBAR or FATCA and realise you may have fallen behind on filings, do not panic. Fortunately, the IRS has amnesty programs designed to help expats catch up without severe penalties.
The Streamlined Filing Compliance Procedures are ideal for taxpayers who unintentionally failed to file and now intend to rectify this. Additionally, the Delinquent FBAR Submission Program focuses specifically on late FBAR filings. The important thing is to act before the IRS contacts you, as once they do, you lose the protection these programs offer.
Expat Retirement Accounts
For US expats, navigating how retirement accounts fit into reporting requirements can be a challenge. US-based accounts like 401(k)s and IRAs follow American tax rules, even when you move abroad, but contributing to them or managing rollovers can get complex.
For example, to contribute to an IRA, you need earned income that is taxable in the US. However, many expats may opt to use the Foreign Earned Income Exclusion (FEIE) to avoid double taxation, which can unintentionally disqualify them from making IRA contributions. Once you exclude your income under FEIE, it’s no longer “earned” for contribution purposes.
Some expats may explore Roth conversions or consider rolling their old 401(k)s into IRAs, especially if they’ve moved to countries like the UK where treaties govern how retirement accounts are taxed. However, cross-border retirement planning must be handled carefully as currency risk, local tax rules, and timing all play a part in determining whether these moves make financial sense.
Even local pensions and foreign retirement accounts can create unexpected tax headaches. For instance, foreign mutual funds are often treated by the IRS as Passive Foreign Investment Companies (PFICs), which come with complex and punitive tax rules. This is where professional advice becomes invaluable
Do I Need to Report My IRA under FBAR or FATCA?
If your retirement savings are in a US-based IRA, the good news is that you are not required to report it under either FBAR or FATCA. These accounts are held with US financial institutions, so they aren’t considered foreign financial accounts and therefore do not fall within the reporting requirements.
However, if you hold a foreign pension or retirement plan, such as a UK SIPP, these accounts may be treated as foreign financial accounts and often must be included on both your FBAR and FATCA filings if the value exceeds the relevant thresholds.
It is also worth remembering that while US IRAs don’t need to be reported, they still form part of your overall financial picture as an expat. If you hold a combination of US and foreign retirement assets, it’s wise to seek professional advice to ensure your savings are structured tax-efficiently under both systems.
Top Tip
If your foreign accounts or assets exceed the FBAR or FATCA limits, the key is to stay compliant by filing both forms on time- FBAR through FinCEN and Form 8938 with your US tax return. And don't worry if you have fallen behind, there are IRS programs that allow you to catch up before incurring criminal penalties.
The Importance of Financial Advice for US Expats
Managing your finances as a US expat often involves navigating vastly different tax systems and rules. A qualified financial advisor who specialises in both US tax law and international financial structures can save you time, money, and stress.
An advisor helps ensure that your banking, investments, and retirement strategies align with your filing obligations under FBAR and FATCA. They can identify which accounts are reportable, which investments are tax-efficient, and which might lead to unnecessary complications.
A cross-border advisor can stay up to date with changes in tax treaties, FATCA enforcement, and global reporting rules on your behalf. For expats balancing life across multiple countries, this expert guidance often becomes essential.
Our Verdict:
Getting familiar with FBAR and FATCA is fundamental to your financial life as a US expat. They ensure transparency and allow you to maintain a clean record with both the IRS and the US Treasury.
Compliance should be part of your overall financial strategy. With a qualified advisor by your side, you can make informed, tax-efficient decisions while building wealth abroad.
At The Wealth Genesis, we specialise in helping US expats remain compliant whilst protecting their wealth abroad. To learn more, book a free discovery call today.
