Form 8938 and FATCA Reporting – A Guide for Expats in 2025

Did you know that understanding your responsibilities under the Foreign Account Tax Compliance Act (FATCA) is just as important as filing your US tax return? 

FATCA requires both foreign financial institutions and Americans living abroad to report their foreign registered financial assets to the US government. Individuals do this on IRS Form 8938. It’s a complex form, but understanding it is essential to staying compliant with US tax laws and avoiding a run in with the IRS.

In this article, we cover everything you need to know about how FATCA affects expats and filing Form 8938 in 2025.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA), passed by Congress in 2010, aims to prevent tax evasion by Americans channeling income or investments overseas. FATCA imposes reporting obligations on both individual US taxpayers and foreign financial institutions (FFIs) to track offshore assets.

Although FATCA became law in 2010, many of its reporting requirements were gradually phased in, with widespread compliance by foreign financial institutions beginning in 2014. Since then, the IRS has known about almost every American held account abroad, including the account holder’s contact details and the account balance at the end of each year. US individuals with specified foreign financial assets must also report these assets annually. 

To enforce compliance, FATCA gives the US government authority to withhold payments to any FFI that fails to meet its FATCA reporting obligations. This has resulted in most foreign banks and other financial firms to implement rigorous reporting processes if they serve US clients, while some have opted to limit or close accounts for Americans to avoid the administrative burden and cost of FATCA compliance.

What Is Form 8938?

Form 8938 has to be filed by US taxpayers to notify the IRS about certain foreign financial assets.

What needs to be reported on Form 8938?

US persons with foreign financial assets exceeding certain thresholds must report these Specified Foreign Financial Assets on Form 8938:

• Foreign bank and brokerage accounts
• Foreign life insurance policies and annuity contracts with cash value
• Investments in foreign hedge funds, private equity funds, and mutual funds
• Foreign-held pensions, trusts, stocks, bonds, and partnership interests (if not held in a US-based account)

When filing Form 8938, you will need to provide details about each account, including:

• The account’s name, and the name and address of the bank or other financial institution where the account is held.
• The account holder’s name, address, country of residence (if different), and ITIN.
• The maximum account balance during the year.

Who needs to file Form 8938?

US citizens, green card holders, and certain resident aliens who own foreign financial assets may be required to file Form 8938. The filing thresholds vary based on residency and filing status (such as single or married filing jointly).

Filing thresholds for US residents

For individuals living in the US, the filing requirements are as follows:

• Single or married filing separately: You must file Form 8938 if your foreign financial assets exceed $50,000 at the end of the tax year or $75,000 at any time during the year.
• Married filing jointly: You must file if the combined value of your foreign assets exceeds $100,000 at the end of the tax year or $150,000 at any time during the year.

Filing thresholds for expats living abroad in 2025

For those who qualify as expats:

• Single or Married Filing Separately: You must file Form 8938 if your foreign financial assets exceed $200,000 at year-end or $300,000 at any time during the year.
• Married Filing Jointly: The thresholds double, so you must file if your combined foreign assets exceed $400,000 at year-end or $600,000 at any time during the year.

These higher thresholds apply to US taxpayers living abroad due to the increased likelihood of holding foreign accounts and assets.

While the information required on Form 8938 often overlaps with that required on the Foreign Bank Account Report (FBAR), there are differences in filing thresholds and what exactly is reported. FBARs are for reporting accounts, Form 8938, assets. Expats may need to file both Form 8938 and an FBAR, depending on their holdings.

How FATCA impacts your relationship with foreign banks

FATCA has introduced challenges for US expats seeking banking services abroad due to foreign financial institutions (FFIs) now facing significant reporting obligations when they have US citizen clients.

Some foreign banks hesitate to work with American clients to avoid the complexities and costs associated with FATCA compliance, which involves administrative tasks, system updates, and legal responsibilities, with the risk of penalties for non-compliance.

FATCA requirements for foreign financial institutions

Under FATCA, foreign financial institutions must:

• Register with the IRS
• Report accounts held by US taxpayers and entities with substantial US ownership

Consequences for FFIs non-compliance

If foreign banks do not comply, the US government may impose a 30% withholding on certain US-source payments to the non-compliant institution, incentivizing them to fulfill FATCA’s reporting requirements.

These obligations place a substantial compliance burden on foreign banks, often resulting in increased scrutiny and documentation requests from American clients. As a result, some FFIs have chosen to limit or avoid working with US citizens altogether.

Potential consequences for expats

Many foreign financial institutions (FFIs) are reluctant to work with US citizens due to FATCA requirements, making it more challenging for US expats to open and maintain foreign bank accounts.

These institutions now often require extensive documentation to comply with FATCA standards, which can slow the account setup process and add layers of scrutiny, complicating financial management abroad.

Penalties for not filing Form 8938

Failing to file Form 8938 if required can lead to substantial penalties for expats. The initial fine for non-compliance is $10,000 per year. If the IRS notifies taxpayers of their failure to file, they will have a 90-day window to comply. Continuing to neglect this obligation may result in an additional $10,000 penalty for every 30 days of non-compliance, up to a maximum of $50,000.

Additionally, taxpayers may face a significant underpayment penalty of 40% on any tax owed on undeclared income from foreign financial assets.

In rare circumstances, criminal penalties may also be applicable.

How to file Form 8938

Form 8938 should be filed alongside your federal income tax return. The form comprises six sections:

1. Part I: Used to report foreign financial accounts.
2. Part II: Focuses on other types of foreign financial assets, such as stocks, bonds, and various financial instruments.
3. Part III: Summarizes any income generated from your foreign financial assets.
4. Part IV: Lists any financial assets exempt from reporting on Form 8938 due to being reported elsewhere on your tax return.
5. Parts V and VI: Provide additional details regarding your foreign accounts and financial instruments.

For detailed instructions, please consult the IRS website,

Planning tips for FATCA compliance

1. Understand local banking rules
Get familiar with banking and tax regulations in your host country to make FATCA compliance easier. Some countries are more FATCA-friendly than others, meaning their banks and financial institutions are more likely to cooperate with US tax reporting.

2. Review your asset structure
Assess whether holding certain assets in foreign accounts may lead to higher reporting burdens. Consider whether US-based financial institutions might be able to fulfill your needs while reducing reporting complexity.

3. Seek expert guidance
Because FATCA and Form 8938 requirements can be complex, consulting a tax advisor who specializes in US expat tax matters can provide essential guidance, especially if you have significant or complex foreign holdings.

Common questions about FATCA and Form 8938

Is Form 8938 the same as FBAR? While both Form 8938 and FBAR require reporting of foreign assets, they serve different purposes and have separate thresholds. FBAR, filed with the Financial Crimes Enforcement Network (FinCEN), covers foreign financial accounts with an aggregate balance of $10,000 or more. In contrast, Form 8938 requires reporting of broader asset types and has higher thresholds.

Do retirement accounts and pensions need reporting? Yes, certain foreign pensions and retirement accounts may require disclosure on Form 8938. Examples include Canadian Registered Retirement Savings Plans (RRSPs) and Swiss pensions. These accounts may also need FBAR reporting if they meet FBAR criteria.

How are jointly held accounts reported? When holding a foreign account jointly, expats must report the entire balance, even if they do not solely own the account. US persons filing Form 8938 and FBAR will each need to report the full value of the joint account.

Updates and changes to FATCA in 2025

Filing thresholds and exemptions
Reporting thresholds remain unchanged for 2024 tax year (filing in 2025).

IRS enforcement focus
The IRS continues to emphasize FATCA compliance, especially for high-value foreign assets and accounts and individuals.

Extended relief for foreign financial institutions
The IRS has extended certain FATCA compliance relief provisions for foreign financial institutions (FFIs) through 2027. This relief reduces immediate penalties for FFIs that demonstrate a good-faith effort to comply with FATCA requirements, allowing more time for banks to implement required systems and reporting processes. By being proactive and seeking assistance from a US expat tax professional, you can ensure compliance with US tax laws while living abroad, helping to avoid potential penalties.

If you’ve missed reporting in past years, the IRS offers the Streamlined Filing Compliance Procedures, which allow eligible expats to catch up on their filing obligations penalty-free. Taking advantage of this program, and staying up to date with reporting requirements, can help you manage your financial responsibilities confidently and avoid unnecessary issues.