The Ultimate Guide to International Taxation

The FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts) must be filed by any U.S. person with a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year. The form is filed electronically through the BSA E-Filing System, separately from the income-tax return. The deadline is April 15 with an automatic extension to October 15. The reporting threshold is per-aggregate, not per-account.

FATCA (Foreign Account Tax Compliance Act, 26 U.S.C. §§1471-1474) requires U.S. persons to report foreign financial assets on Form 8938 (Statement of Specified Foreign Financial Assets) filed with the income-tax return. Thresholds vary by filing status and residency: single domestic filers at $50,000 end-of-year or $75,000 anytime; married filing jointly at $100,000/$150,000; thresholds quadruple for residents living abroad. Form 8938 covers more assets than FBAR but at higher thresholds.

FBAR is a Bank Secrecy Act filing with FinCEN; Form 8938 is an IRS tax-filing under FATCA. FBAR has a $10,000 aggregate threshold and lower asset coverage; Form 8938 has higher thresholds but covers more asset types (foreign securities, foreign partnership interests, foreign-issued financial contracts). Most filers with foreign accounts need to file BOTH if they cross both thresholds. The penalties for non-filing also differ — FBAR penalties under 31 U.S.C. §5321 can reach 50% of account balance for willful violations.

Non-willful penalties: up to $10,000 per violation (adjusted for inflation), per account, per year. Willful penalties: the greater of $100,000 or 50% of the account balance at the time of violation. Criminal penalties for willful violations under 31 U.S.C. §5322: up to five years imprisonment and $250,000 fine. The IRS has aggressively assessed willful penalties in recent years — the willfulness standard does not require knowledge of the FBAR requirement, only knowledge of the account.

The Streamlined Filing Compliance Procedure is the IRS program for taxpayers who failed to report foreign income and accounts due to non-willful conduct. Two tracks: Streamlined Foreign Offshore Procedures (for non-residents, no penalty) and Streamlined Domestic Offshore Procedures (for U.S. residents, 5% miscellaneous offshore penalty). Eligibility requires a non-willful certification — willful conduct disqualifies. The procedure caps look-back at three years of returns and six years of FBARs.

Yes. U.S. citizens and residents are taxed on worldwide income regardless of where earned. Foreign income — wages, business profits, investment income, rental income, capital gains — is reported on the U.S. return. The Foreign Earned Income Exclusion under IRC §911 may exclude up to ~$120,000 (indexed annually) of foreign-earned income for qualifying expatriates. The Foreign Tax Credit under §901 prevents double taxation when foreign tax was paid on the same income.

The Foreign Earned Income Exclusion (FEIE) under IRC §911 allows qualifying expatriates to exclude approximately $120,000 (2026 amount, indexed annually) of foreign-earned income from U.S. taxation. Two qualification tests: Bona Fide Residence Test (full tax year residence in a foreign country) or Physical Presence Test (330 days in any 12-month period in foreign countries). The exclusion applies only to earned income — wages and self-employment — not investment income.

U.S. tax treaties with about 70 countries modify how income is taxed when both the U.S. and the treaty partner would otherwise have tax claims. Common provisions: reduced withholding rates on dividends and interest, exclusive taxing rights for short-term residents, savings clause that preserves U.S. taxation of its citizens regardless of treaty terms. Treaty positions are taken on Form 8833 (Treaty-Based Return Position Disclosure). The savings clause is why U.S. citizens abroad often don't get the full treaty benefit they expect.