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You've lived in London for five years. Built a life abroad. Opened bank accounts, invested in foreign stocks, maybe bought property. Your foreign assets total $250,000. Then you discover Form 8938 and FATCA—the Foreign Account Tax Compliance Act you've never heard of.
You missed filing Form 8938 for the past three years. You didn't know it existed. You thought FBAR was enough. The IRS can impose FATCA penalties starting at $10,000 per year for not filing, plus an additional $10,000 for every 30 days of continued non-compliance after IRS notice, up to $50,000 maximum.
FATCA penalties are separate from FBAR penalties. You can owe both and FATCA fines apply even if you owe no additional tax. The penalties are for failing to file the required information return, not for tax evasion. Miss three years of Form 8938? That's potentially $30,000 in penalties right there, before any continued non-compliance penalties kick in.
Expats don't discover FATCA requirements until it's too late. They hear about FBAR's $10,000 threshold and think that's the only foreign reporting requirement. They don't realize Form 8938 has different, higher thresholds and must be filed with their tax return. And when they finally learn about FATCA, they've already accumulated multiple years of non-compliance with penalties stacking up. Many turn to professional expat tax services to address these complex requirements.
According to the IRS, FATCA enforcement has increased significantly since 2010, with over 300,000 foreign financial institutions now reporting US account holder information directly to the IRS. A study by the Treasury Inspector General found that FATCA non compliance penalty assessments have exceeded $14 million. Here's everything you must know:
What is FATCA and who must comply?
The Foreign Account Tax Compliance Act (FATCA) is a 2010 US law designed to combat offshore tax evasion by requiring US persons to report foreign financial assets exceeding certain thresholds and requiring foreign financial institutions to report information about US account holders directly to the IRS.
US citizens, resident aliens (green card holders), and certain non-resident aliens living abroad must file Form 8938 (Statement of Specified Foreign Financial Assets) with their annual tax return if their specified foreign financial assets exceed reporting thresholds.
FATCA reporting thresholds for 2025
The thresholds depend on your filing status and whether you live abroad:
|
Filing Status |
Living Abroad - Last Day of Year |
Living Abroad - Anytime During Year |
|
Single/MFS |
$200,000 |
$300,000 |
|
Married Filing Jointly |
$400,000 |
$600,000 |
"Living abroad" means you're a US citizen whose tax home is in a foreign country AND you're present in foreign country(ies) for at least 330 days during the 12-month period ending on the last day of the tax year (same as FEIE Physical Presence Test).
Living in US thresholds are much lower: $50,000 (single) on the last day or $75,000 anytime during the year; $100,000 (married) on the last day or $150,000 anytime during the year.
What assets must be reported on Form 8938
Must report: Foreign bank and financial accounts (checking, savings, brokerage), foreign stock or securities not held in financial accounts, foreign partnership interests, beneficial interests in foreign trusts, foreign-issued life insurance or annuities with cash value, interests in foreign pensions or deferred compensation plans, and any other financial instruments or contracts issued by foreign persons.
Don't report: Foreign real estate held directly (not through entity), tangible assets like art, jewelry, cars, precious metals held directly, or assets held in US financial institutions (even if foreign stocks/bonds).
FATCA vs. FBAR: What's the difference?
Many expats confuse FATCA (Form 8938) with FBAR (FinCEN Form 114). Both require foreign account reporting but are completely separate requirements with different penalties for non compliance:
|
Feature |
FBAR |
FATCA (Form 8938) |
|
Threshold |
$10,000 aggregate |
$200,000-$600,000 (expats) |
|
What's Reported |
Financial accounts only |
Broader range of assets |
|
Where Filed |
FinCEN (separate) |
With Form 1040 |
|
Deadline |
April 15 (auto Oct 15) |
With tax return |
|
Penalties |
$10,000-$100,000+ |
$10,000-$50,000 + 40% tax penalty |
Critical: You may need to file both. FBAR at $10,000 threshold, Form 8938 at $200,000+ threshold. Filing one doesn't satisfy the other.
What are the penalties for not filing Form 8938?
FATCA penalties are severe and can accumulate quickly for multiple years of non-compliance. Understanding these penalties for non compliance helps you avoid costly mistakes.
Initial failure-to-file penalty
The form 8938 penalty starts at $10,000 per year for each year you fail to file Form 8938 when required. This penalty applies automatically if you meet the filing threshold and don't file.
Example: You met Form 8938 filing requirements for 2022, 2023, and 2024 but didn't file. Initial penalties: $30,000 ($10,000 × 3 years).
This is a per-tax-year penalty, so multiple years multiply quickly. Unlike some IRS penalties that are calculated as a percentage of tax owed, the FATCA non compliance penalty is a fixed amount regardless of whether you owe additional tax.
Continued non-compliance penalty
If the IRS notifies you of your failure to file and you still don't comply, additional penalties for non compliance apply:
$10,000 for every 30 days of continued non-compliance after IRS notice, up to $50,000 maximum per year.
Example: IRS sends notice that you failed to file Form 8938. You have 90 days to file. If you don't file within 90 days, penalties start at $10,000 per month. After 5 months (150 days total), you hit the $50,000 maximum for that year.
Accuracy-related penalty for tax understatement
40% penalty on any tax understatement attributable to non-disclosed foreign financial assets.
This penalty applies if you failed to report income from the undisclosed foreign assets, creating an underpayment of tax.
Example: You didn't file Form 8938 reporting your foreign brokerage account. That account generated $15,000 in dividend income you also didn't report. US tax on $15,000 at 22% bracket = $3,300 understatement. Accuracy penalty: 40% × $3,300 = $1,320 additional penalty.
This penalty is in addition to the failure-to-file penalties. You pay the $10,000+ for not filing Form 8938 PLUS the 40% on any resulting tax understatement.
When do FATCA penalties apply?
Understanding when FATCA fines penalties are triggered helps you avoid them. Many expat tax services specialize in helping Americans abroad understand these timing requirements.
Penalty triggers
FATCA penalties apply when you meet Form 8938 filing requirements (foreign assets exceed thresholds) AND you fail to file Form 8938 with your tax return by the deadline (including extensions).
Filing deadline: Form 8938 files with your Form 1040. For expats using the automatic two-month extension, the deadline is June 16, 2026 (for 2025 tax year). With Form 4868 extension: October 15, 2026.
Unlike FBAR which has automatic extension to October 15, Form 8938 extension requires filing Form 4868. If you don't file an extension request and miss the June 16 deadline, penalties begin accruing.
Penalties for late filing
If you file Form 8938 late but before the IRS sends notice, you still face the $10,000 initial form 8938 penalty. However, you avoid the continued non-compliance penalties ($10,000/month up to $50,000). This makes filing late better than not filing at all.
Reasonable cause exception
The IRS may waive penalties for non compliance if you can show "reasonable cause" for the failure to file. Reasonable cause requires showing you exercised ordinary business care and prudence but still failed to comply due to circumstances beyond your control.
Accepted reasonable causes (examples):
- Death or serious illness of taxpayer or immediate family
- Natural disaster or casualty that destroyed records
- Reliance on incorrect written advice from tax professional
- Inability to obtain records despite reasonable efforts
NOT accepted as reasonable cause:
- Ignorance of the law ("I didn't know about Form 8938")
- Complexity of Form 8938
- Relying on FBAR filing thinking it satisfied FATCA
- Lack of funds to pay tax (doesn't excuse information return failure)
Burden of proof: You must document and prove reasonable cause. The IRS presumes penalties apply unless you overcome this presumption with evidence.
How do FATCA penalties compare to FBAR penalties?
Since expats often must file both FBAR and Form 8938, understanding how FATCA fines penalties compare and stack is critical.
FBAR penalties for comparison
Non-willful FBAR violations: Up to $16,536 per violation for 2025 (inflation-adjusted annually).
Willful FBAR violations: Greater of $165,353 or 50% of account balance per violation for 2025.
Criminal FBAR penalties: Up to $250,000 fine and/or 5 years imprisonment for willful violations.
Can you face both FBAR and FATCA penalties?
Yes—penalties can stack. FBAR and FATCA are separate reporting requirements with separate penalties for non compliance.
Example: Foreign bank account with $250,000 balance.
- Meets FBAR threshold ($10,000): Must file FBAR
- Meets Form 8938 threshold ($200,000 single expat): Must file Form 8938
- Fail to file either: Face both FBAR penalties ($16,536 non-willful or much higher if willful) AND Form 8938 penalties ($10,000 initial + potential $50,000 continued non-compliance)
- Total potential penalties: $76,536+ for one account for one year
Which is worse: FBAR or FATCA penalties?
FBAR penalties are generally higher because willful violations can reach 50% of account balance with no cap beyond the inflation adjustment. A $500,000 account with willful FBAR violation could face $250,000 penalty.
FATCA penalties are more common because Form 8938 is filed with tax return and IRS can easily identify non-filing during return processing. FBAR violations often require separate investigation.
Both are severe and should be avoided through compliance.
What should I do if I haven't filed Form 8938 for the past years?
If you've been dealing with FATCA non compliance, several options exist to get back into compliance and minimize or eliminate penalties for non compliance. The IRS offers Streamlined Procedures for taxpayers whose failure to file was non-willful (unintentional). Professional expat tax services can guide you through these options.
Streamlined Filing Compliance Procedures
Requirements:
- File past 3 years of tax returns (including Form 8938)
- File past 6 years of FBARs
- Pay any tax owed with interest
- Certify that failure to file was non-willful
Benefits for expats:
- No failure-to-file penalties for Form 8938
- No FBAR penalties
- Only 5% penalty on highest aggregate foreign account balance (foreign residents) or 0% penalty (if qualify as foreign resident)
Who qualifies: US citizens and green card holders living outside the US who failed to report foreign financial assets due to non-willful conduct. "Non-willful" means conduct that is due to negligence, inadvertence, or mistake, or conduct that is the result of good faith misunderstanding of requirements.
There is no specific deadline for this process—file as soon as you become aware of non-compliance. The program remains available until the IRS announces discontinuation.
Delinquent Information Return Submission Procedures
For taxpayers who filed all required tax returns but failed to file Form 8938, the IRS offers Delinquent Information Return procedures.
Requirements:
- All tax returns (Form 1040) were filed on time
- All tax has been paid
- Not currently under IRS examination
- File delinquent Form 8938 for all required years
- Include statement explaining why Form 8938 wasn't filed
Benefits:
- No failure-to-file penalties if reasonable cause exists
- Simpler than Streamlined Procedures
- No penalty if you didn't owe additional tax
Who qualifies: Taxpayers whose only compliance issue is missing Form 8938 (all tax returns filed and all tax paid on time).
Voluntary Disclosure Practice
For taxpayers who don't qualify for Streamlined Procedures or Delinquent Filing procedures (typically willful violations or large tax liabilities), Voluntary Disclosure may be the only option.
Requirements:
- Make voluntary disclosure before IRS contacts you
- Cooperate fully with IRS
- File all required returns
- Pay all tax, interest, and penalties
Penalties: Substantial penalties for non compliance still apply but avoids criminal prosecution. Typically includes 50% offshore penalty on highest aggregate account balance plus all tax and accuracy penalties.
Who needs this: Taxpayers with willful violations or those facing potential criminal exposure.
File immediately going forward
Regardless of which option you use for past years, file Form 8938 correctly going forward. Don't let FATCA non compliance continue while deciding how to address past years.
How can I avoid FATCA penalties going forward?
Prevention is far better than dealing with FATCA penalties after the fact. Working with qualified expat tax services ensures ongoing compliance.
Track your foreign asset values throughout the year
If you're close to thresholds ($200,000 single expat on the last day or $300,000 anytime during the year), monitor carefully. Remember: "anytime during the year" means the threshold needs to be checked daily—one day over threshold requires filing.
Maintain detailed records
Keep records showing maximum values of foreign assets during the year, dates acquired and disposed of, income generated by each asset, cost basis for investments, and currency exchange rates for conversion to USD.
File Form 8938 with your tax return
Form 8938 cannot be filed separately—it must be attached to Form 1040. If you file an extension (Form 4868), Form 8938 deadline extends to October 15 along with your return.
Use tax software or professionals
FATCA compliance is complex. Tax software designed for expats (TurboTax Expat, H&R Block Expat, etc.) guides you through Form 8938. Professional expat tax services ensure compliance and optimize your filing.
Don't confuse FBAR and FATCA
File both if you meet both thresholds. FBAR ($10,000+) files separately through FinCEN by October 15. Form 8938 ($200,000+ for expats) files with Form 1040. Filing one doesn't satisfy the other.
Set calendar reminders
Create reminders for June 16 (expat tax deadline), October 15 (extended deadline and FBAR deadline), and periodic reminders throughout the year to track asset values.
How NSKT Global Can Help with FATCA Compliance
NSKT Global specializes in FATCA compliance and helping Americans living abroad avoid severe FATCA penalties. Our comprehensive expat tax services address all aspects of foreign asset reporting.
We provide comprehensive FATCA analysis and Form 8938 preparation by reviewing all foreign financial assets to determine filing requirements, calculating maximum asset values in USD with proper currency conversion, completing Form 8938 accurately with all required asset details, ensuring coordination with FBAR filing to avoid duplication issues, and filing Form 8938 timely with your Form 1040.
We offer Streamlined Filing Compliance Procedures assistance for taxpayers with past FATCA non compliance by preparing 3 years of delinquent tax returns with Form 8938, preparing 6 years of delinquent FBARs, drafting non-willful certification statements, calculating required penalties (if any) under streamlined procedures, and representing you throughout the streamlined filing process.
We provide penalty defense and reasonable cause documentation by preparing reasonable cause statements when form 8938 penalty assessments are asserted, gathering supporting documentation for reasonable cause defenses, negotiating with IRS for penalty abatement, representing you in penalty appeals, and developing strategies to minimize penalty exposure.
We handle complex FATCA situations including passive foreign investment companies (PFICs) requiring Form 8621, controlled foreign corporations (CFCs) requiring Form 5471, foreign trusts requiring Form 3520/3520-A, foreign partnerships requiring Form 8865, and multiple foreign accounts across different countries.
We offer ongoing compliance support through annual asset tracking and valuation assistance, threshold monitoring and filing requirement determination, coordination between federal, state, FBAR, and FATCA filings, and proactive planning to minimize reporting burdens.
Whether you're just discovering FATCA requirements or dealing with past non-compliance, our comprehensive expat tax services ensure you get into compliance while minimizing penalties for non compliance and protecting your financial security.
Frequently Asked Questions
Q: What's the minimum FATCA penalty if I forget to file?
$10,000 for each year you don't file when required. Can go up to $60,000 per year if you ignore IRS notices, plus a 40% penalty on any unreported income from those assets.
Q: Can the IRS put me in jail for FATCA violations?
Only for willful evasion (intentionally hiding assets). Honest mistakes result in civil FATCA penalties only. But willful violations can bring criminal charges, fines up to $250,000, and up to 5 years in prison.
Q: Do I file Form 8938 if I already filed FBAR?
Yes, if you meet both thresholds. They're separate requirements. FBAR threshold is $10,000. Form 8938 threshold is $200,000+ (for expats). Many expats file both forms reporting the same accounts. Professional expat tax services help ensure both are filed correctly.
Q: What if my foreign bank balance was only high for one month?
Still must file if it exceeds the threshold. The IRS requires checking maximum balance at any time during the year, not just December 31. Even one day over threshold triggers a filing requirement.
Q: Does FATCA apply to green card holders who have never lived in the US?
Yes. Green card holders are US persons for tax purposes. You must file Form 8938 if you meet thresholds, regardless of where you've lived. The requirement ends only when you formally surrender your green card.
Q: What if I inherited foreign accounts from non-US parents?
You must still report. Doesn't matter how you acquired accounts. If you're a US person and total foreign assets exceed the threshold, you must file Form 8938. Inheritance doesn't exempt you.
