Foreign asset reporting for dual citizens, finally explained
FBAR and FATCA aren't the same form, the same threshold, or the same penalty. Here's the version of the rules a dual citizen can actually use before April.
The IRS opened more international compliance audits in 2025 than in any year since FATCA took effect, and the people getting the letters are not who you’d expect. They are not yacht owners hiding money in the Caymans. They are dual citizens, naturalized Americans, and green-card holders with a savings account back home, a pension in São Paulo, or a brokerage statement that still arrives at their mother’s address in Bogotá.
If you are a US person — citizen, dual citizen, green-card holder, or tax resident — the rules require you to tell the US government about your foreign accounts every year, regardless of where you live or whether any of it produced income. The good news is the rules are not subjective: two forms, four thresholds, and one Supreme Court case that settled the worst of the penalty math. Here is the version that takes ten minutes to learn.
The two forms most people confuse
Almost every owner we work with has at some point confused these two regimes — and the IRS, for what it’s worth, does not penalize you less because you misunderstood the difference.
FBAR (FinCEN Form 114) is the Foreign Bank Account Report. It is filed with FinCEN, a bureau of the US Treasury — not with the IRS, and not with your tax return. It is e-filed separately through the BSA system, and it predates the IRS’s modern international reach by forty years.
Form 8938 is the Statement of Specified Foreign Financial Assets. It is filed with the IRS, attached to your Form 1040, and was created by FATCA in 2010 to give the IRS its own line of sight into foreign accounts.
You can owe both. You can owe one and not the other. They use different definitions of “foreign asset,” different thresholds, and different penalties. Filing one does not satisfy the other.
The thresholds, by where you live
FBAR uses one threshold for everyone: if the combined value of all foreign accounts you own or have signature authority over crosses $10,000 at any point during the calendar year, you file. Not $10,000 per account — $10,000 in aggregate, on a single day. Hit $10,001 for one hour because of an inheritance wire, and the FBAR is due.
Form 8938 uses four tiers:
- US resident, single or MFS: $50,000 end of year, or $75,000 at any point.
- US resident, MFJ: $100,000 end of year, or $150,000 any time.
- Living abroad, single or MFS: $200,000 end of year, or $300,000 any time.
- Living abroad, MFJ: $400,000 end of year, or $600,000 any time.
These are the numbers for the 2025 tax year, filed in 2026. They have not changed this cycle.
What counts, what doesn’t
The most useful test is whether the asset is held by a financial institution. If yes, it is almost certainly reportable.
- Reportable: foreign bank accounts, foreign brokerage accounts, foreign mutual funds, shares of non-US companies held in foreign accounts, interests in foreign partnerships and trusts, foreign pensions with cash value, certain foreign life insurance policies with cash value.
- Not reportable on FBAR or 8938: foreign real estate held directly in your name, foreign currency held physically, personal property (cars, art, jewelry), and US-based brokerage accounts that happen to hold foreign stocks.
The reporting question is never about where the asset is. It is about who is holding it, and on whose behalf.
The trap is foreign real estate held through a foreign LLC or partnership. The real estate itself is not reportable. The interest in the entity that owns it is — on Form 8938, and depending on structure, on Form 5471 or Form 8865 as well.
The penalty stack, after Bittner
Before 2023, the IRS argued that non-willful FBAR penalties applied per account, per year. A dual citizen with twenty-five small accounts back home who had not filed for five years could be assessed $10,000 × 25 × 5 = $1,250,000 in penalties without any finding of willfulness. The Supreme Court rejected this in Bittner v. United States (2023), holding that the non-willful penalty applies per FBAR report, not per account.
The current stack, after Bittner and the latest inflation adjustments:
- Non-willful FBAR: up to $16,536 per report, per year.
- Willful FBAR: the greater of $165,353 or 50% of the account balance, per violation. Criminal exposure on top — up to $250,000 and five years.
- Form 8938: $10,000 base, plus another $10,000 for each 30-day period of continued non-filing after IRS notice, up to $50,000. Add a 40% accuracy-related penalty on any underpayment of tax tied to unreported foreign assets.
- Form 3520: 5% per month of an unreported foreign gift, up to 25%, with a separate stack for trust transactions.
The accuracy penalty is the one most people underestimate. Owe $20,000 in additional tax because of unreported foreign dividends, and the IRS can add another $8,000 on top of any FBAR or Form 8938 penalty.
The traps that catch dual citizens specifically
Five patterns we see again and again at Hoyos Baker:
- Birthright citizens who never lived in the US. Born to a US parent abroad, never filed a return, doesn’t know they are a US person for tax purposes. The IRS does not care that you have never had a US address.
- Naturalized Americans with assets back home. Sold a property in Medellín or Mexico City before naturalizing, parked the proceeds in a local bank account, never moved it. Still reportable, every year, for as long as it sits there.
- Green-card holders who became tax residents. From the year you receive the card, you owe FBAR and Form 8938 on your worldwide accounts — including the ones in your home country you have had since you were eighteen.
- Treaty-deferred retirement accounts. A Canadian RRSP gets income-tax deferral under the US-Canada treaty, but you still report it on the FBAR every year. The treaty defers the tax, not the disclosure.
- Signature authority over a relative’s account. If your name is on the account so you can pay your mother’s bills, you have a reportable interest, even if not one dollar of it is yours.
What to do if you are already behind
You probably qualify for the Streamlined Filing Compliance Procedures, the IRS’s amnesty program for non-willful failures. The requirements are mechanical:
- Three years of late or amended income tax returns.
- Six years of delinquent FBARs.
- Form 14653 (if you live abroad) or Form 14654 (if you live in the US), certifying that your failure was non-willful.
- Payment of any back tax owed, plus interest.
For taxpayers living abroad, the streamlined procedure waives penalties entirely. For taxpayers living in the US, there is a 5% miscellaneous offshore penalty on the highest aggregate year-end balance of the unreported accounts — far less than the standard stack.
The catch: you must come forward before the IRS contacts you. Once a letter is in the mail, the streamlined door closes, and the Voluntary Disclosure Practice becomes your only option — it offers criminal protection but carries a 50% offshore penalty.
What we tell clients
We onboard a steady stream of dual citizens and naturalized clients who didn’t know any of this until a foreign bank asked them to sign a FATCA self-certification at a routine account refresh. The first month is a quiet inventory: every account, every signature authority, every entity interest, mapped against the year you became a US person. Most cases resolve cleanly through the Streamlined Filing Compliance Procedures within ninety days.
If you have ever wondered whether you should have been filing an FBAR, book a call and bring a list of the accounts you remember — we’ll tell you in thirty minutes whether you have a real problem and what the cheapest path out is. For a full review of your exposure, our tax services team handles FBAR, Form 8938, Form 3520, and the streamlined remediation in one engagement.
