A taxpayer with a single foreign brokerage account can trigger two different federal filing obligations that overlap in coverage but differ in threshold, filing agency, and penalty structure, and satisfying one does nothing to satisfy the other. FBAR and FATCA were built for related purposes, tracking offshore assets and closing the same general gap in visibility, but they are governed by separate statutes, filed with separate agencies, and carry separate penalties for noncompliance.
Lincoln PLLC advises individuals and businesses with international tax exposure across bank accounts, foreign entities, and cross-border investments, and a recurring pattern is a taxpayer who is current on one of these two filings and unknowingly exposed on the other. Erik Lincoln, founding member of Lincoln PLLC, is a former senior tax manager at Ernst & Young, and the firm’s approach to FBAR and FATCA compliance starts by mapping which of a client’s accounts and entities are reportable under each regime rather than assuming one filing covers the other.
How the FBAR and FATCA Thresholds Actually Differ
The FBAR, filed with the Financial Crimes Enforcement Network as FinCEN Form 114, applies whenever a U.S. person has a financial interest in, or signature authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any point during the calendar year, a threshold set under the Bank Secrecy Act rather than the tax code. FATCA’s individual reporting requirement operates under a different statute, Section 6038D of the Internal Revenue Code, and is satisfied by filing IRS Form 8938 with the taxpayer’s federal income tax return, with thresholds that vary by filing status and by whether the taxpayer resides inside or outside the United States, ranging from more than $50,000 at year-end (or $75,000 at any time during the year) for an unmarried taxpayer living in the United States to more than $400,000 at year-end (or $600,000 at any time) for married taxpayers filing jointly who live abroad.
Because the FBAR threshold is much lower, many taxpayers must file an FBAR without having any Form 8938 obligation. The reverse can also occur, depending on how the taxpayer’s foreign holdings are structured. Form 8938 reaches a broader category of assets than the FBAR, including foreign stock and securities, foreign partnership interests, and interests in foreign trusts held outside of a financial account, which means a taxpayer with no foreign bank account at all can still have a Form 8938 obligation. Conversely, the FBAR reaches accounts over which a person has only signature authority, which Form 8938 does not.
Why the Penalty Exposure Is Not the Same on Both Sides
The FBAR penalty analysis changed significantly after the Supreme Court’s decision in Bittner v. United States (2023), which held that the penalty for a non-willful violation applies per report rather than per unreported account, a distinction that can substantially reduce the potential exposure in a multi-account case. The IRS’s own FBAR guidance confirms that civil penalty maximums are adjusted annually for inflation, and willful violations remain subject to a substantially higher maximum penalty equal to the greater of an inflation-adjusted fixed dollar amount or 50 percent of the balance in the account at the time of the violation.
FATCA’s Form 8938 penalty regime arises under the tax code rather than the Bank Secrecy Act: a $10,000 penalty for failure to file, an additional penalty of up to $50,000 for continued failure after IRS notice, and a 40 percent accuracy-related penalty on underpayments attributable to undisclosed foreign financial assets. A missing or incomplete Form 8938 can also keep the assessment statute of limitations open for the related tax return. The two penalty structures do not offset one another. A taxpayer who has resolved FBAR exposure through a compliance procedure has not necessarily resolved any corresponding Form 8938 exposure, and the reverse is equally true, which is why Lincoln PLLC reviews both filings together rather than treating a fix on one side as complete.
Where Overlap Creates the Most Confusion
Certain accounts and entities sit at the edge of both regimes’ definitions, and these are where confusion most often arises. Taxpayers frequently assume that any asset with a foreign connection is reportable under both regimes, or that neither applies, and neither assumption is reliable. Foreign securities held in an account at a U.S. financial institution, for example, are generally outside both regimes, while the following categories deserve a closer look before either filing is finalized.
- Foreign life insurance: A policy with cash value can trigger reporting under one regime, both, or neither, depending on the policy’s specific facts.
- Foreign pensions: Many foreign pension accounts qualify as reportable accounts even when the funds cannot yet be withdrawn.
- Foreign mutual funds: These frequently trigger both FBAR and FATCA reporting and can carry separate passive foreign investment company (PFIC) consequences, including annual Form 8621 reporting.
- Foreign corporation accounts: A foreign account held in a corporation’s name can still create a personal FBAR obligation for a U.S. shareholder who owns, directly or indirectly, more than 50 percent of the corporation’s stock or who has signature authority over the account.
Taxpayers with an interest in a foreign partnership face a related layer of complexity, since that interest can carry its own reporting obligation, such as Form 8865, on top of any FBAR or FATCA exposure tied to the partnership’s underlying accounts, an issue that intersects directly with the firm’s work on partnership reporting obligations.
Structuring Around Both Regimes From the Start
For clients with cross-border investment structures, including those involved in a transaction with cross-border M&A structuring components, FBAR and FATCA exposure should be mapped before the structure is finalized rather than discovered afterward. A blocker entity, a foreign holding company, or a fund-level structure each carries its own reporting consequences under both regimes, and an incorrect assumption made early in a deal can compound into a multi-year filing gap by the time it surfaces.
Lincoln PLLC maps a client’s holdings against both sets of requirements, identifies which filings apply, and corrects any gap before it becomes a multi-year exposure problem. Tracking every threshold interaction between the two regimes requires a systematic review of the full holdings picture rather than an account-by-account assumption.
Working With Lincoln PLLC on FBAR and FATCA Compliance
Erik Lincoln, an attorney and CPA, brings both legal and accounting training to this reporting work, which matters because FBAR and FATCA compliance sits at the intersection of tax law and federal reporting requirements enforced through separate statutory schemes. His background as a former senior tax manager at Ernst & Young and former equity partner at Moore & Van Allen shapes how the firm reviews a client’s full foreign holdings picture rather than evaluating a single filing in isolation.
For individuals and businesses with foreign accounts, foreign entity interests, or cross-border investments, Lincoln PLLC is available to review the full reporting picture and confirm that both FBAR and Form 8938 obligations have been properly identified and satisfied. Please contact Lincoln PLLC to discuss the specific facts of your holdings.
Talk to Lincoln PLLC About Your Client’s Foreign Reporting Exposure
If an FBAR or FATCA situation has moved past routine filing to potential penalties or a willfulness question, Lincoln PLLC can manage the legal exposure directly. Erik Lincoln built this firm around sophisticated tax matters, including international work involving foreign trusts and private equity structures, and that background allows us to assist at the point where the analysis becomes a legal one.
We understand foreign reporting matters can be sensitive, and we treat every matter with appropriate discretion. When you are ready to discuss a foreign reporting question, contact Lincoln PLLC.