How to Report Foreign Assets to the IRS: A Guide

For US taxpayers with foreign financial interests, it’s not enough to file a standard tax return—you may also need to report overseas assets. Failure to do so can lead to serious penalties. Whether you’re an expatriate, investor, or business owner, understanding your responsibilities is essential. This guide walks you through the steps to remain compliant with the IRS.

Step 1: Determine If You Need to Report

The IRS requires certain US persons to report foreign assets depending on the type, value, and location of those assets. You may need to report if you fall into one of the following categories:

• You hold foreign bank accounts, investment accounts, or mutual funds.
• You have ownership in a foreign corporation or partnership.
• You are the beneficiary of a foreign trust.
• You have signature authority over a foreign account.

Two Key Reporting Requirements:

1. FBAR (FinCEN Form 114): Required if the combined value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.
2. FATCA (Form 8938): Required under certain thresholds based on your filing status and whether you live in the US or abroad.

Step 2: Gather Documentation

Before filing, you’ll need to gather:

• Account numbers and names of institutions
• Maximum account values during the year
• Dates the accounts were opened or closed
• Foreign entity details (if applicable)

It’s wise to maintain organised records year-round, including account statements and agreements.

Step 3: Complete the FBAR (FinCEN Form 114)

The FBAR is not filed with your tax return. Instead:

• File electronically via the BSA E-Filing System.
• Must be submitted by April 15 (with an automatic extension to October 15).
• Include all accounts, even if jointly held or those with signature authority only.

Step 4: Complete FATCA (Form 8938)

If you’re required to file Form 8938:

• Attach it to your annual tax return (Form 1040).
• Report details such as interest earned, dividends, and capital gains from foreign accounts.
• Disclosure thresholds vary:
  
  • Single filer living in the US: $50,000 on the last day of the year or $75,000 at any point.
  • Married filing jointly (US residents): $100,000/$150,000 thresholds.
  • Foreign residents: Higher thresholds apply.

Step 5: Understand Penalties

Failure to report foreign assets can result in harsh penalties:

• FBAR: Non-wilful violations can lead to penalties up to $10,000 per violation; wilful violations may result in up to $100,000 or 50% of the account balance, whichever is greater.
• FATCA: Failure to file can result in a $10,000 penalty, with additional penalties for continued noncompliance.

Criminal penalties may apply in cases of wilful neglect or fraud.

Step 6: Use Streamlined Procedures if You’re Behind

If you’ve failed to report foreign assets in the past but were non-wilful, the IRS offers Streamlined Filing Compliance Procedures:

• You must certify that failure to report was not wilful.
• Submit amended tax returns and FBARs for the past 3 years.
• Pay any tax and interest due.

This can help mitigate penalties and bring you into compliance.

Step 7: Consider Professional Support

Navigating international tax reporting can be complex. A qualified financial professional can help you understand your obligations and avoid costly mistakes—especially if you have significant holdings or complicated cross-border arrangements.

How a Financial Advisor Can Help

Navigating the reporting requirements for foreign assets can feel overwhelming, especially when dealing with complex cross-border financial arrangements. A financial advisor with international experience can provide valuable support in several key areas:

Clarifying Your Reporting Obligations

A financial advisor can help you understand whether you’re required to file an FBAR, FATCA Form 8938, or both. They’ll assess the types and values of your foreign assets and explain how the rules apply to your specific circumstances.

Coordinating With Tax Professionals

While advisors don’t prepare tax returns, they often work alongside accountants to provide accurate financial data and context. This collaboration makes your reporting consistent across forms and reflects your global financial picture.

Structuring Accounts Efficiently

An experienced advisor can assist with structuring your accounts and investments in a way that supports your financial goals while helping to simplify compliance. This might include consolidating accounts or choosing investment vehicles that are more tax-efficient under US regulations.

Ongoing Monitoring and Documentation

Staying compliant means more than a once-a-year filing. A financial advisor can support you in keeping detailed records of account balances, ownership, and income throughout the year, making reporting more straightforward at tax time.

Helping with Regular Reviews

International tax laws change frequently. A knowledgeable advisor will keep you informed of any updates that may impact your obligations and help you adjust your strategy accordingly.

Working with a financial advisor familiar with global financial planning doesn’t just help you meet IRS requirements—it also supports long-term financial wellbeing by helping you manage risk, identify opportunities, and make informed decisions about your international assets.

How to Report Foreign Assets to the IRS

Blacktower supports expatriates and cross-border clients with tailored wealth strategies and a clear understanding of US reporting requirements. If you have overseas accounts or assets and want help managing your obligations, get in touch. Our team is here to help you navigate the complexities of reporting foreign assets to the IRS, and all your other financial concerns, with clarity and confidence.