Anyone who has recently become a US tax resident may owe four separate reports on foreign assets beyond the standard income tax return — FBAR, Form 8938 (FATCA), Form 5471, and Form 3520 — and the penalties for missing them run into thousands, even tens of thousands, of dollars.
In short
- Tax resident status can be triggered on an ordinary work visa — H-1B, O-1, E-2, L-1 — by accumulating 183 days under the three-year substantial presence formula.
- FBAR (FinCEN 114) is required if the combined balance of all foreign accounts exceeded $10,000 at any point in the year.
- Form 8938 is broader than FBAR: it includes stock and stakes in foreign companies, is filed together with Form 1040, and starts at a $50,000 threshold.
- Owning 50% or more of a foreign company, or buying 10% or more of its stock, requires filing Form 5471 or facing a penalty starting at $10,000.
- A gift from abroad over $100,000 from an individual, or $20,000 from a company, must be reported on Form 3520, or the penalty can reach 25% of the amount.
Who becomes a US tax resident, and why it matters
A person doesn’t need a green card or citizenship to become a US tax resident — an ordinary work visa holder on an H-1B, O-1, E-2, L-1, or similar status can trigger the same status. The determining tool is the substantial presence test: days in the current year count in full, days in the prior year count as one-third, and days in the year before that count as one-sixth. Once the total reaches 183, the person becomes a tax resident. Spread evenly across three years, that works out to roughly 121–122 days a year, but the formula applies just as well when time is distributed unevenly across the years.
F-1 students are a separate exception: for as long as they’ve been in the US for five years or fewer, they’re generally treated as nonresidents for tax purposes, even if they live and study there full-time.
Tax resident status is what starts the reporting obligations. For anyone newly carrying that status — someone who just moved to the US or just picked up their first work visa — the obligations don’t stop at the income tax return. A separate layer of requirements covers foreign assets and accounts, and that’s where most of the mistakes happen.
Tax residency can be triggered on a work visa too — H-1B, O-1, E-2, L-1 — once the substantial presence test adds up to 183 days. F-1 students are generally the exception for their first 5 years.
FBAR (FinCEN 114): reporting foreign financial accounts
FBAR is FinCEN Form 114, required if the combined balance across all foreign financial accounts exceeded $10,000 at any point during the year. The threshold applies to the combined balance of every account at once, not to any single account — and that’s exactly what trips most people up: two accounts with $6,000 each already clear the threshold, even though neither one does on its own.
two accounts with $6,000 each already clear the threshold, even though neither one does on its own
The calculation isn’t limited to a personal bank account. It also covers:
- brokerage accounts;
- cryptocurrency accounts, including any fiat currency held on them;
- business accounts, if the person owns 50% or more of the company;
- business accounts where the person has signature authority — meaning they can direct funds in the account, even without owning any part of the business.
Because the scope is this wide, the $10,000 threshold ends up catching almost anyone who still has an ordinary life outside the US — accounts, assets, a stake in a business back home. The rule gets missed less because the amounts are small and more because it’s written in a confusing way.
The penalty for an unintentional failure to file FBAR can reach $16,000 a year — effectively for every report not filed. If the violation is deemed willful, the penalty is calculated differently and can reach 50% of the account balance per year, with criminal liability possible in some cases. In certain situations the penalty can be waived if there’s reasonable cause, but on its own the amount is out of proportion to what’s actually required: simply reporting accounts held outside the country.
Thresholds and penalties for foreign asset reporting
The minimum amounts at which filing becomes mandatory
- FBAR — filing threshold$10,000combined balance of all foreign accounts
- FBAR — penalty for unintentional failure to fileup to $16,000per unfiled report, per year
- Form 8938 — threshold for a single US resident$50,000year-end account balance or asset value
- Form 8938 — penalty for failure to filefrom $10,000per year, can increase
- Form 5471 — penalty for failure to filefrom $10,000per year
- Form 3520 — threshold for gifts from an individualover $100,000amounts from related individuals are combined
FBAR is required once the combined balance of ALL foreign accounts exceeded $10,000 even once — even if each account individually holds less.
Form 8938 (FATCA): reporting foreign assets
Form 8938 is built on FATCA — the Foreign Account Tax Compliance Act — and runs on the same basic logic as FBAR: it’s required once foreign accounts and assets cross a certain threshold. That’s where the similarity ends.
FBAR covers only financial accounts. Form 8938 is broader: it also captures stock holdings and ownership interests in foreign companies. If their value exceeds the threshold, they have to be reported too — even when there’s no “account” behind them in the usual sense.
The filing process is different as well. FBAR is a standalone report that goes to FinCEN separately from the tax return. Form 8938, by contrast, is attached to the return — to Form 1040 — and filed with the IRS together with it, not on its own.
The thresholds depend on whether the person lives in the US or abroad, and on filing status. The lowest threshold applies to a single person living in the US: if the account balance at year-end exceeds $50,000, the form is required. The same rule applies if the year-end value of assets — for example, a stake in a foreign company — exceeds $50,000.
Penalties for failing to file start at $10,000 a year and can increase depending on aggravating circumstances.
Unlike FBAR, Form 8938 also requires reporting stock and ownership stakes in foreign companies, not just accounts. The threshold for a single US resident is $50,000 at year-end.
FBAR vs. Form 8938: what’s the difference
| Criterion | FBAR (FinCEN 114) | Form 8938 (FATCA) |
|---|---|---|
| What it covers | financial accounts only | accounts, stock, stakes in foreign companies |
| Where it’s filed | separately with FinCEN | attached to Form 1040, filed with the IRS |
| Threshold for a single US resident | $10,000 (combined across all accounts) | $50,000 at year-end |
| Penalty for failure to file | up to $16,000 per year (unintentional) | from $10,000 per year |
Thresholds for Form 8938 depend on whether you live in the US or abroad, and on filing status.
Form 5471: owning a foreign company
Form 5471 has nothing to do with accounts — it covers ownership of foreign companies. It’s required for any US tax resident who owns 50% or more of a foreign company; the form is included with the tax return. A second trigger that makes filing mandatory is acquiring 10% or more of the stock in a foreign corporation: that threshold applies independently of the first one and is tied to the act of acquiring the stake itself.
The rules around Form 5471 are considered some of the most complicated in tax reporting — no single article can cover every nuance. In most cases, acquiring or selling a stake in a foreign company, especially above the 10% threshold, triggers some kind of filing obligation almost without exception.
Depending on the type of company in which the stake is acquired, there are ways to fall outside this requirement, which involve filing additional forms. But that shouldn’t be assumed in advance — whether an exception applies to a specific ownership structure has to be checked separately.
Missing the form carries a penalty starting at $10,000 per year. This is especially critical for anyone holding a controlling stake in a foreign company — these are the structures tax authorities watch most closely.
Form 3520: reporting gifts from abroad
Form 3520 is required to report gifts from foreign sources. It’s filed separately from the tax return, but by the same deadline as the return itself. The gift itself isn’t taxed — the form simply tells the government who sent the money and how much, explaining where the funds came from.
The threshold depends on who’s giving the gift:
- from an individual, or from several related individuals combined — over $100,000;
- from a foreign partnership or corporation — over $20,000.
Gifts from related individuals are added together when checking the threshold: if a mother and father each send less than $100,000, but the combined total is more, the gift still has to be reported. This requirement is most often missed by people who recently moved to the US, especially younger applicants whose parent abroad sends money toward a down payment on a home — that kind of transfer formally falls under the same rules.
This requirement is most often missed by people who recently moved to the US, especially younger applicants whose parent abroad sends money toward a down payment on a home
The penalty for not filing the form can reach 25% of the gift amount. When the transfer was substantial — toward a home purchase or a business — the penalty scales up accordingly and becomes a significant sum.
If a mother and father each send less than $100,000, but the total is more, Form 3520 is still required — otherwise the penalty can reach 25% of the amount.
Why these requirements get overlooked so often
Meeting these requirements isn’t technically difficult in itself — at its core, it’s a matter of reporting specific transactions and accounts, not complex calculations. The real problem is different: many new residents simply don’t know these forms exist in the first place.
many new residents simply don’t know these forms exist in the first place
Someone who has recently become a US tax resident, or just picked up their first work visa, is usually prepared to file an income tax return for the year. But that’s often where their picture of tax obligations ends — even though the actual list of required filings is wider than a single annual income report.
Forms a new US tax resident should check
Frequently asked questions
Do I need to file FBAR if I was a resident last year but left the US and lost that status this year?
The obligation to file FBAR is tied to tax resident status in a specific year: a report is required for the year in which the person was a resident and exceeded the $10,000 threshold on the combined balance of foreign accounts. For the year in which resident status is lost, no new FBAR obligation arises for that period, but reports for prior resident years remain mandatory and aren’t cancelled by leaving the country.
What happens if I only just found out about FBAR and Form 8938, and haven’t filed them for several years?
The penalty for unintentional failure to file FBAR is calculated for each missed year and can reach $16,000 per year, while Form 8938 penalties start at $10,000 per year — meaning the amounts add up across multiple years of non-filing. In certain cases, the FBAR penalty can be waived if there was reasonable cause for the unintentional violation.
Do I need to file FBAR and Form 8938 at the same time if both thresholds are exceeded?
Yes — these are two separate requirements with different thresholds and recipients: FBAR is filed with FinCEN separately from the tax return once the combined account balance exceeds $10,000, while Form 8938 is attached to Form 1040 and filed with the IRS once the asset threshold is exceeded (starting at $50,000 for a single US resident). Clearing one threshold doesn’t exempt you from checking the other — the thresholds and forms are independent of each other.
Do I need to report a gift separately if the money went directly toward tuition or medical expenses rather than to a personal account?
The Form 3520 rule applies to gifts from foreign sources that exceed the threshold — over $100,000 from an individual or related individuals, and over $20,000 from a foreign partnership or corporation. If a transfer meets the definition of a gift and exceeds the relevant threshold, the obligation to report arises regardless of exactly where the funds ended up.
Do FBAR and FATCA requirements apply to green card holders, or only to visa workers?
All of these requirements are tied not to visa type but to US tax resident status, which a green card holder acquires automatically. That means FBAR, Form 8938, Form 5471, and Form 3520 apply to a green card holder exactly the same way they apply to someone on a work visa who has passed the substantial presence test.
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