A client mentions, in passing, that her mother in Seoul "put her on" a bank account years ago. That sentence can trigger three separate federal filings and six figures of penalties.
When a U.S. taxpayer holds money or investments outside the country, international information reporting can require two separate sets of forms. They look alike, but they come from different laws. One set lives in Title 31, the Bank Secrecy Act. The other lives in Title 26, the Internal Revenue Code.
The Title 31 report is the Report of Foreign Bank and Financial Accounts (FBAR), which the taxpayer files on FinCEN Form 114. The Title 26 reports are Form 8938, Statement of Specified Foreign Financial Assets, plus the forms for foreign entities and trusts: Form 5471, Form 8865, and Form 3520.
KEY: Filing one never satisfies the other. A taxpayer with a $60,000 foreign account files both an FBAR and a Form 8938, so the same account is reported twice, to two different agencies.
Common mistakes
- Applying the FBAR penalty per account. Since Bittner, the non-willful $10,000 penalty applies per report. Eight unreported accounts on one year's FBAR mean one $10,000 penalty, not $80,000.
- Starting the continuation clock at the notice date. A June 1 notice doesn't mean charging starts on June 1. Add the 90 days of grace first, then count.
- Treating the §6038(c) attribute reduction as capped at $10,000. The cap is the greater of $10,000 or the entity's income, a ceiling that almost never binds.
Bottom line
- FBAR threshold: $10,000 aggregate maximum value at any time; filed with FinCEN, due April 15 with automatic extension to October 15.
- Form 8938 thresholds: $50,000/$75,000 single U.S. resident, $100,000/$150,000 MFJ, $200,000/$300,000 single abroad, $400,000/$600,000 MFJ abroad; attached to Form 1040.
- Signature authority is FBAR-only; directly held foreign stock, partnership and trust interests are Form 8938 only; directly held foreign real estate is on neither.
- Form 5471 and Form 8865 attach to the return; Form 3520 tracks the 1040 due date but mails separately; Form 3520-A is due March 15.
Exam shortcut
Run every stem through three questions in this order. First, is it an account or an asset? Accounts feed the FBAR; assets feed Form 8938. Second, whose interest is it? "Signature authority," "no beneficial interest," or "employer's account" is an FBAR-only signal that must be stripped out before you test the Form 8938 thresholds. Third, what date is quoted?
The full lesson (about 4,198 words, 28 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
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