TL;DR (Too Long; Didn't Read)
The Threshold: If the aggregate balance of all your foreign accounts exceeded $10,000 at any point during the year, you must file an FBAR.
The Penalty: "Non-willful" failure to file can result in penalties of $10,000+ per year, even if you didn't owe any tax on that money.
The Solution: The IRS "Streamlined Filing Compliance Procedures" allow eligible immigrants and expats to get caught up without massive penalties.
The Symptoms: "I haven't touched that account in years."
You moved to the U.S. for a tech role, perhaps on an H-1B or an L-1 visa, or you recently received your Green Card. Back home—whether that’s in Bangalore, London, or Toronto—you left behind a savings account.
Maybe it’s an old salary account from a previous employer, a fixed deposit your parents opened for you, or a dormant investment account. It holds about $11,000. You don’t transfer money from it, and it earns negligible interest. Since you aren't "bringing the money into the U.S.," you assume the IRS doesn't care about it.
Then, you hear a rumor at a dinner party or see a notice from your bank about "FATCA" or "Common Reporting Standards." You realize that for the last three years, you’ve checked "No" on Schedule B of your tax return when asked if you have a financial interest in a foreign account.
You aren't alone, but you are in the crosshairs.
The Technical Deep Dive: FBAR vs. FATCA
The U.S. is one of the only countries that taxes its residents on their worldwide income and requires disclosure of worldwide assets. There are two primary forms you need to know:
1. The FBAR (FinCEN Form 114)
The Foreign Bank and Financial Accounts Report (FBAR) is not actually a tax form—it’s a FinCEN (Financial Crimes Enforcement Network) form.
The Rule: You must file if the total value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.
The Catch: This is an aggregate total. If you have five accounts with $2,001 each, you have triggered the filing requirement.
2. FATCA (Form 8938)
The Foreign Account Tax Compliance Act (FATCA) requires you to report specified foreign financial assets to the IRS.
The Rule: For single filers living in the U.S., the threshold is generally $50,000 on the last day of the year or $75,000 at any point during the year.
The Difference: While FBAR goes to the Treasury’s criminal enforcement wing, FATCA is attached directly to your annual tax return (Form 1040).
Why the IRS knows more than you think
Under FATCA, foreign banks (FFIs) are legally required to report the account details of "U.S. Persons" directly to the IRS. If your bank in your home country has your U.S. address or Social Security Number on file, they have likely already "flagged" you. The IRS's automated systems now cross-reference these bank reports against your tax filings. If the bank reports an account and you didn't file an FBAR, an automated penalty notice is often the result.
The Expensive Mistake: Doing Nothing
Many immigrants assume that because they paid taxes on this money in their home country, or because the account is "dormant," the IRS won't penalize them.
This is a $10,000-per-year misunderstanding.
Non-Willful Penalties: Even if you honestly didn't know about the requirement, the IRS can (and often does) assess a penalty of $10,000 per violation. A "violation" is often interpreted as per form, per year. If you missed three years of filings, you could be looking at a $30,000 bill for an account that only has $11,000 in it.
Willful Penalties: If the IRS decides you purposely hid the account, the penalty jumps to the greater of $100,000 or 50% of the account balance per year.
The Quiet Disclosure Trap: Some people try to "back-file" old FBARs quietly without following official programs. This often triggers an audit. If the IRS finds you before you find them, you lose your eligibility for leniency programs.
The Rally Solution: Streamlined Compliance
The good news is that the IRS provides a "get out of jail free" card for people who made honest mistakes. It’s called the Streamlined Filing Compliance Procedures.
If you can certify that your failure to report was "non-willful" (meaning you didn't know any better), you can typically file the last 3 years of amended tax returns and the last 6 years of FBARs to get back into the IRS's good graces.
However, the math—calculating the maximum aggregate balance for every account across multiple currencies using historical Treasury exchange rates—is a logistical nightmare. This is where Rally simplifies the path to compliance.
How it Works:
Get Your Free AI-Generated Tax Plan: Simply upload your documents to the Rally platform. Our system will analyze your global assets and generate a comprehensive tax plan for free, identifying where you stand with FBAR and FATCA requirements.
Consult with a CPA: Once you have your plan, you can schedule a call with a CPA for a consultation to review the findings and ensure your filings are handled with professional precision.
We don't just tell you that you have a potential problem; we provide the roadmap and the expert access to fix it.
Check Your Compliance Status Now
Don't let a forgotten $11,000 account turn into a $30,000 IRS debt. Whether you are dealing with RSUs, foreign pensions, or simple savings accounts, compliance is significantly cheaper than the alternative.
Rally Tax is an Authorized IRS e-file Provider and SOC2 Compliant.
Frequently Asked Questions:
1. I just moved to the U.S. on a visa. Am I a "Resident" for tax purposes?
Not necessarily. Tax residency is different from immigration residency. You are considered a Resident Alien for tax purposes if you pass the Substantial Presence Test (SPT). This is a formula that counts your days in the U.S. over a three-year period:
All days in the current year.
1/3 of the days in the prior year.
1/6 of the days in the year before that.
If the total equals 183 days or more, the IRS treats you as a U.S. tax resident, meaning you must report your worldwide income.
2. If I pay taxes in my home country, do I still owe taxes in the U.S.?
The U.S. taxes its residents on their global income regardless of where it was earned. However, the IRS provides mechanisms to prevent double taxation:
Foreign Tax Credit (FTC): Allows you to subtract the taxes you paid to a foreign government from your U.S. tax bill.
Foreign Earned Income Exclusion (FEIE): Allows you to exclude a certain amount of your foreign salary (up to $126,500 in 2024) from U.S. taxation if you meet specific residency requirements.
3. Do I need to report my foreign retirement accounts (like Indian EPF or UK Pensions)?
Yes. Most foreign pension and retirement accounts are reportable on the FBAR (if the total value of all foreign accounts exceeds $10,000) and potentially on Form 8938 (FATCA). Some specific foreign investments, like foreign mutual funds, may also trigger PFIC (Passive Foreign Investment Company) reporting, which carries very complex tax rules.
4. What happens if I forgot to file an FBAR for previous years?
If the IRS hasn't contacted you yet, you may be eligible for the Streamlined Filing Compliance Procedures. This program allows taxpayers who were "non-willful" (unaware of the rules) to catch up on their filings with significantly reduced or even zero penalties. Important: Once the IRS initiates an audit, you are no longer eligible for this program.
