Understanding Your Offshore Reporting Obligations
In recent years, the IRS and DOJ have intensified efforts to target U.S. taxpayers with undeclared offshore assets and accounts, as part of a global push against tax evasion and to boost financial transparency. If you hold an offshore account, understanding the risks is crucial—failure to comply can lead to hefty civil penalties, criminal charges, and imprisonment, but proactive steps like voluntary disclosures can mitigate these consequences
Enacted in 2010 under the HIRE Act, the Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report U.S. account holders' details to the IRS via intergovernmental agreements or direct registration, while U.S. taxpayers must disclose specified foreign assets exceeding thresholds on Form 8938 with their annual returns. Complementing this, U.S. persons must file an annual FBAR (FinCEN Form 114) if foreign financial accounts—such as banks, securities, or other interests—total over $10,000 at any point in the year, with non-compliance risking severe penalties but offering resolution through IRS voluntary programs.
FBAR Reporting Requirements for 2025
The FBAR is a critical tool for the U.S. government to monitor offshore assets and combat money laundering. For calendar year 2024 (filed in 2025), you must file if you are a U.S. person (citizen, resident, or entity) with a financial interest in or signature authority over one or more foreign accounts, and the total value exceeds $10,000 at any point in the year. "Foreign financial accounts" broadly include bank accounts, brokerage accounts, mutual funds, and even certain insurance policies with cash value.
Key 2025 filing details:
Deadline
April 15, 2025, with an automatic extension to October 15, 2025—no separate request needed.
How to File
Electronically via the BSA E-Filing System on the FinCEN website; paper filings are not accepted.
Joint Filings
Spouses can file jointly if both qualify, but separate filings are allowed.
Thresholds
No minimum balance for the year—it's based on the maximum aggregate value at any time.
If you've missed prior years, the IRS offers delinquent FBAR submission procedures for non-willful cases, allowing filings without automatic penalties if you haven't been contacted by the IRS. Always consult a professional before submitting to assess risks.
FATCA and Form 8938 Reporting
FATCA complements FBAR by requiring U.S. taxpayers to self-report foreign financial assets on their income tax returns. For tax year 2024 (filed in 2025), file Form 8938 if you are a specified person (U.S. citizen, resident, or certain entities) and the total value of your foreign financial assets exceeds the reporting threshold.
Thresholds for 2025:
- Living in the U.S.: $50,000 on the last day of the year or $75,000 at any time (single filers); double for married filing jointly.
- Living Abroad: $200,000 on the last day or $300,000 at any time (single); double for married filing jointly.
Form 8938 attaches to your Form 1040 and reports assets like foreign stocks, interests in foreign entities, and contracts with non-U.S. persons. Note that FBAR and Form 8938 overlap but are distinct—FBAR focuses on accounts, while Form 8938 covers broader assets. FFIs must certify compliance by July 1, 2025, for the period ending December 31, 2024.
Voluntary Disclosure Options for Offshore Accounts
The IRS Offshore Voluntary Disclosure Program (OVDP) closed in September 2018, but viable alternatives remain for coming into compliance, especially for non-willful conduct. These programs help avoid criminal prosecution and reduce penalties.
Streamlined Filing Compliance Procedures (SFCP)
The primary option for U.S. taxpayers with unreported offshore accounts:
- Streamlined Foreign Offshore Procedures (SFOP) : For U.S. residents living abroad who certify non-willful conduct. Requires 3 years of amended tax returns, 6 years of FBARs, and a 5% miscellaneous offshore penalty on the highest year's assets. No income tax penalties if eligible.
- Streamlined Domestic Offshore Procedures: For U.S. residents, similar but with a 5% penalty and required 20% accuracy-related penalty on underreported income.
Eligibility requires certifying non-willful oversight and no prior IRS contact. As of 2025, the IRS has reaffirmed SFCP availability despite program changes.
Other Pathways
- Voluntary Disclosure Practice (VDP):For willful cases, merged with pre-existing VDP in 2018; involves full disclosure and potential penalties but shields from prosecution.
- Quiet Disclosures: Filing late returns without formal program—risky, as it may trigger audits.
We guide clients through eligibility assessments and submissions to minimize exposure.
The Penalties for Failing to Comply with Offshore Reporting Requirements
Non-compliance carries steep consequences, adjusted for inflation in 2025:
- FBAR Penalties: Non-willful: Up to $16,536 per account per year. Willful: Greater of $100,000 (or $100,117 adjusted) or 50% of the account's highest balance per year, with no statute of limitations for willful cases.
- FATCA/Form 8938: $10,000 per failure, up to $50,000 for continued disregard; reduces foreign tax credits.
- Criminal: Fines up to $250,000 and/or 5 years imprisonment for willful evasion.
Penalties can stack across years and accounts, leading to millions in liabilities. Early voluntary disclosure often waives or caps these.
Work With Experienced Offshore Tax Lawyers
At The Wilson Firm, our tax lawyers have extensive experience helping clients navigate the complex world of offshore account reporting and compliance. We can assist you in determining the best course of action for disclosing your offshore assets based on your particular facts and circumstances—whether through SFCP, VDP, or delinquent filings. We'll work with you to minimize the risk of penalties and criminal charges and ensure that you comply with all applicable U.S. tax laws, including FATCA and FBAR.
Frequently Asked Questions
U.S. persons (citizens, residents, or entities) with a financial interest in or signature authority over foreign financial accounts exceeding $10,000 in aggregate value at any time during 2024 must file. This includes joint accounts where you have authority.
The deadline is April 15, 2025, with an automatic six-month extension to October 15, 2025. No application is required for the extension.
For non-willful violations, penalties are up to $16,536 per account per year. Willful violations can reach the greater of $100,117 or 50% of the account balance, with potential criminal fines and imprisonment.
The OVDP closed in 2018. Alternatives include the Streamlined Filing Compliance Procedures (SFOP for expats, Domestic for U.S. residents) for non-willful cases, and the Voluntary Disclosure Practice for willful conduct.
FBAR reports foreign accounts to FinCEN if over $10,000; FATCA requires Form 8938 with your tax return for broader foreign assets over $50,000 (U.S. residents). Some overlap exists, but both must be filed separately.
