The United States taxes its citizens and permanent residents on worldwide income regardless of where they live or where their assets are held. To enforce this, Congress created two parallel foreign account reporting regimes — FBAR and FATCA — that operate independently, cover overlapping but not identical assets, and carry different penalties for failure to comply. For international investors, LATAM families with U.S. residency, and advisers serving these clients, understanding both regimes is not optional.

FBAR: The Foreign Bank Account Report

FBAR stands for Foreign Bank and Financial Accounts Report, filed on FinCEN Form 114. It is a creation of the Bank Secrecy Act, administered by the Financial Crimes Enforcement Network (FinCEN) — not the IRS — though the IRS has delegated enforcement authority.

Who must file: Any U.S. person — U.S. citizens, permanent residents (green card holders), and domestic entities including corporations, partnerships, LLCs, and trusts — who has a financial interest in, or signature authority over, one or more foreign financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year.

The $10,000 threshold is aggregate across all foreign accounts, not per account. If you have five foreign accounts each holding $3,000 at the same moment, the aggregate $15,000 exceeds the threshold and triggers a filing obligation even though no single account crosses $10,000.

What counts as a foreign financial account: Bank accounts, brokerage accounts, mutual funds, foreign-issued debit or credit cards linked to foreign accounts, certain insurance policies with a cash value component, and foreign retirement accounts in many cases. Real estate held directly — without an intervening financial account — does not trigger FBAR. But a foreign bank account used to hold proceeds from real estate does.

Signature authority: FBAR applies not only to accounts you own but to accounts over which you have signature authority — meaning the authority to control the assets through direct communication to the financial institution. Corporate officers with signing authority over company foreign accounts must file even if they have no beneficial interest in the account.

Filing mechanics: FinCEN Form 114, filed electronically through the BSA E-Filing System. The deadline is April 15, with an automatic extension to October 15 — no form needs to be filed to obtain the extension. FBAR is not filed with your tax return; it is a separate filing with FinCEN.

Penalties: Non-willful FBAR violations carry a penalty of up to $10,000 per violation per year. Willful violations carry a penalty of the greater of $100,000 or 50% of the account balance at the time of the violation — per year. The Supreme Court clarified in Bittner v. United States (2023) that the non-willful penalty applies per form (per year), not per account, which limits but does not eliminate exposure. Criminal prosecution is possible for willful violations.

FATCA: The Foreign Account Tax Compliance Act

FATCA was enacted in 2010 and operates on two levels: it requires U.S. taxpayers to report specified foreign financial assets on Form 8938 (filed with their tax return), and it requires foreign financial institutions to report information about U.S. account holders to the IRS or face a 30% withholding tax on U.S.-source payments.

Who must file Form 8938: U.S. individuals (and certain domestic entities) whose specified foreign financial assets exceed the applicable threshold. The thresholds are higher than FBAR and vary by filing status and residence:

  • Single filers living in the U.S.: $50,000 at year-end or $75,000 at any point during the year
  • Married filing jointly in the U.S.: $100,000 at year-end or $150,000 at any point
  • Taxpayers living abroad: $200,000/$300,000 (single) or $400,000/$600,000 (married filing jointly)

What counts as a specified foreign financial asset: FATCA's scope is broader than FBAR. In addition to financial accounts at foreign institutions, FATCA covers foreign stocks and securities held directly (not through a U.S.-based account), interests in foreign entities, foreign partnership interests, and foreign pension and deferred compensation plans. Real estate held directly is excluded, but an interest in a foreign entity that holds real estate is not.

Key difference from FBAR: FATCA Form 8938 is filed with the tax return (Form 1040 or 1120), covers a broader asset class, and applies to assets held outside of foreign financial institutions. FBAR covers only financial accounts at foreign institutions but applies at a much lower threshold.

FATCA penalties: Failure to file Form 8938 carries a $10,000 penalty, with an additional $10,000 for each 30-day period of continued failure after IRS notification, up to $50,000. An underpayment of tax attributable to an undisclosed specified foreign financial asset is subject to a 40% penalty (rather than the standard 20% accuracy penalty).

The Institutional Side of FATCA

FATCA's institutional requirement — that foreign financial institutions (FFIs) report U.S. account holders to the IRS — explains why banks across Latin America, Europe, and Asia have been asking clients to complete W-9 and W-8 forms and self-certify their U.S. person status. Non-compliant FFIs face 30% withholding on their U.S.-source income, creating strong incentives for compliance. This has made it increasingly difficult for U.S. persons to maintain undisclosed foreign accounts — the institutional reporting infrastructure now funnels information to the IRS even when individual taxpayers don't file voluntarily.

Implications for New U.S. Residents

For individuals immigrating to the United States — a common situation for LATAM families relocating to Miami — FBAR and FATCA obligations attach immediately upon becoming a U.S. resident for tax purposes. The day a green card is issued, or the day the substantial presence test is satisfied, the individual's worldwide assets come within the U.S. tax and reporting framework.

This means that pre-immigration planning must address not only income tax exposure but also the foreign account reporting obligations that will apply to existing accounts and assets. An individual who has spent years building wealth in Brazil, Colombia, or Venezuela and relocates to Miami becomes a U.S. person subject to FBAR and FATCA from that moment forward — often with accounts and structures that were not designed with U.S. compliance in mind.

Voluntary Disclosure and Streamlined Procedures

For individuals who have failed to file FBAR or Form 8938, the IRS offers several compliance pathways. The Streamlined Filing Compliance Procedures are available for taxpayers whose failures were non-willful — meaning due to negligence, inadvertence, or misunderstanding, not deliberate evasion. The offshore streamlined procedure (for taxpayers residing outside the U.S.) carries no penalty. The domestic streamlined procedure carries a 5% miscellaneous offshore penalty. Both require filing amended returns for the three most recent tax years and FBARs for the six most recent years.

Willful failures require a different approach — the IRS Voluntary Disclosure Program — and carry higher penalties, though they provide a pathway to avoid criminal prosecution. Determining whether a failure was willful or non-willful is a legal judgment that depends on specific facts and requires counsel.

Practical Steps

Any U.S. person with foreign accounts should confirm annually whether they meet the FBAR and FATCA filing thresholds. The analysis is not difficult but requires knowing the aggregate balance across all foreign accounts at any point during the year — not just at year-end. For those approaching or crossing the thresholds, the filings are straightforward when done correctly and dangerous when ignored.