Quick overview

U.S. citizens and resident aliens must report worldwide income on their Form 1040, regardless of where the income was earned. In addition to ordinary income reporting, many taxpayers must disclose foreign financial accounts and foreign assets using separate filings — most commonly FinCEN Form 114 (FBAR) and IRS Form 8938 — when account balances or asset values exceed specified thresholds. These rules are part of a layered reporting framework created to prevent tax evasion, enforce FATCA, and improve international transparency (IRS; FinCEN).

Who must report international income and foreign assets?

  • U.S. citizens and resident aliens (green card holders) report worldwide income on Form 1040.
  • Some nonresident aliens must file a U.S. return if they have U.S.-source income or meet other filing tests.
  • “Specified individuals” under FATCA may need to file Form 8938 when they meet asset thresholds.
  • Any person with a financial interest in or signature authority over foreign financial accounts that exceed the FBAR threshold must file FinCEN Form 114.

In my practice advising cross-border clients, confusion usually arises when taxpayers assume paying foreign tax eliminates U.S. reporting. It does not — foreign taxes can create credits or deductions, but reporting is a separate obligation (see Foreign Tax Credit, Form 1116).

Which forms matter and why

  • Form 1040 — Report all income, including wages, interest, dividends, business income, capital gains and other items from foreign sources (IRS Instructions for Form 1040).
  • FinCEN Form 114 (FBAR) — Required when the aggregate value of foreign financial accounts exceeded $10,000 at any time during the calendar year. FBAR is filed electronically through the BSA E-Filing System administered by FinCEN (FinCEN BSA E-Filing).
  • IRS Form 8938 (Statement of Specified Foreign Financial Assets) — FATCA-based disclosure required with your income tax return if you are a specified individual and your foreign asset values exceed filing thresholds (IRS Form 8938).
  • Form 2555 (Foreign Earned Income Exclusion) — Used by qualifying expats to exclude earned income up to the annual exclusion (requirements include bona fide residence or physical presence tests) (IRS Form 2555).
  • Form 1116 (Foreign Tax Credit) — Claim a credit for foreign income taxes paid to reduce double taxation on the same income.

For practical filing differences, see our internal guide on FBAR versus Form 8938 for when you must file each: FBAR vs. Form 8938: What to File for Foreign Financial Accounts.

Key thresholds and deadlines (practical guide)

  • FBAR (FinCEN Form 114): file if aggregate foreign account value > $10,000 at any time during the calendar year. FBAR is due April 15 with an automatic extension to October 15 (filed electronically via BSA E-Filing) (FinCEN).
  • Form 8938: thresholds vary by filing status and residency. For many U.S-based unmarried filers the threshold is $50,000 on the last day of the tax year or $75,000 at any time during the year; married filing jointly thresholds are higher (IRS Form 8938 instructions). Taxpayers living abroad face larger thresholds. Form 8938 is filed with your Form 1040 and follows the tax-return due date and extensions.

Note: Threshold values have been stable but can change; always check current IRS and FinCEN guidance before filing.

Examples to illustrate

  • Example A: A U.S. citizen works remotely from Spain and earns €40,000 in wages. She reports those wages on Form 1040. If her foreign accounts never exceeded the FBAR threshold and her foreign assets fall under Form 8938 thresholds, she would not file FBAR or Form 8938 — but she still reports income and checks eligibility for the foreign earned income exclusion or foreign tax credit.

  • Example B: A U.S. resident holds €120,000 in a European brokerage account during the year. Because her aggregate foreign account value exceeded $10,000, she must file an FBAR. If her specified foreign assets exceed the Form 8938 thresholds, she must also include Form 8938 with her tax return. See our practical article on Reporting Foreign Bank Accounts and FBAR Basics for step-by-step instructions: Reporting Foreign Bank Accounts and FBAR Basics.

Penalties and enforcement (what to watch for)

Penalties for failing to report foreign accounts or assets can be severe. Civil and criminal penalties may apply depending on facts and whether failures are willful. For FBAR, penalties can include substantial civil fines and, in willful cases, criminal prosecution. Form 8938 failures also carry monetary penalties and potential further enforcement actions. The IRS and Treasury have expanded cross-border compliance efforts since FATCA took effect.

If you discover an omission, corrective options exist: amend returns, file delinquent FBARs, or consider voluntary disclosure programs in appropriate cases. In my experience, proactively using a voluntary disclosure or penalty mitigation pathway often reduces long-term risk compared with waiting for an IRS inquiry (see Voluntary Disclosure Programs).

Recordkeeping and documentation

Keep clear documentation for at least three to seven years depending on the item:

  • Account statements showing balances and dates.
  • Records of income earned, foreign taxes paid, and foreign tax returns.
  • Documentation of ownership or signature authority for foreign accounts.
  • Exchange-rate conversions used to compute USD amounts.

Good recordkeeping makes accurate reporting and any later audit or correction far easier.

Common mistakes and how to avoid them

  • Assuming foreign-tax payment eliminates U.S. reporting — it does not.
  • Missing FBAR because accounts are jointly held or have signature authority — FBAR rules cover financial interest and signature authority.
  • Using the wrong valuation date or exchange rate — be consistent and document conversions.
  • Treating Form 8938 and FBAR as identical — they have different thresholds and definitions; you may need to file one, both, or neither.

Practical strategies and professional tips

  1. Inventory foreign relationships annually: list accounts, assets, and balances to test thresholds early.
  2. Use software or a secure spreadsheet to track monthly or quarterly balances in USD.
  3. When living abroad, assess FEIE (Form 2555) vs. Foreign Tax Credit (Form 1116) — the right choice depends on income types and long-term tax planning.
  4. If you missed prior-year filings, consult a tax professional familiar with international disclosure procedures before responding to any IRS notices.

Frequently asked questions (short answers)

  • Must I report a one-time foreign payment? Yes — any taxable foreign income should be reported on Form 1040.
  • Is FBAR the same as Form 8938? No — FBAR is a FinCEN filing focused on foreign financial accounts; Form 8938 is an IRS tax form for specified foreign financial assets. Both can apply (see internal guide above).
  • What if I paid tax in the foreign country? You still must report the income on Form 1040; you may be eligible for the foreign tax credit (Form 1116) or the foreign earned income exclusion (Form 2555) if you meet the rules (IRS Forms 1116, 2555).

Next steps if you have foreign income or accounts

  • Start by creating a complete list of foreign accounts and assets and converting end-of-year balances to USD.
  • Review FBAR and Form 8938 thresholds and determine which forms apply.
  • If you’re unsure, consult a CPA or tax attorney experienced in international tax matters. If you find prior noncompliance, act sooner rather than later: voluntary disclosure programs and penalty-mitigation routes may still be available.

Resources and further reading

Professional disclaimer: This article is educational and does not constitute tax or legal advice. For guidance tailored to your situation, consult a qualified tax professional.

Authoritative sources: Internal Revenue Service (irs.gov); Financial Crimes Enforcement Network (fincen.gov); U.S. Department of the Treasury (treasury.gov).