IGA Tax and FATCA: Bank Reporting, FBAR, and Form 8938

An intergovernmental agreement under FATCA — an IGA — is a bilateral treaty between the United States and a foreign country that lets banks in that country report US account holders to the IRS without breaking their own local privacy laws. More than 100 jurisdictions have signed one. If you are a US citizen or resident with money abroad, IGA-based FATCA reporting is the reason the IRS already knows about your foreign accounts, and it is why your own FBAR and Form 8938 filings need to line up with what your bank is sending.

What an IGA Actually Does

FATCA, enacted in 2010, requires foreign financial institutions to identify accounts held by US persons and report them, or face a 30% withholding tax on US-source payments like interest and dividends.¹ That threat works on the institution. The problem is that many countries have bank secrecy and data privacy statutes that would make direct reporting to a foreign tax agency illegal.

The IGA fixes that conflict. It gives the foreign bank a domestic legal basis to collect and share the data, because the reporting is now happening under a treaty its own government signed.² From your side as an account holder, the IGA is invisible plumbing: it doesn’t change what you owe or what you have to file. It just guarantees that the IRS is receiving a parallel report on your account from the other end.

Model 1 and Model 2, Briefly

Two templates exist, and the difference is procedural. Under a Model 1 IGA, the foreign bank reports to its own country’s tax authority, which then forwards the information to the IRS on an annual basis. Under a Model 2 IGA, the foreign bank reports directly to the IRS, and its government’s role is just to remove the local legal obstacles.³ Model 1 is far more common. Either way, the data reaches the IRS.

What the Foreign Bank Reports About You

For each reportable account, the institution transmits your name, address, and US taxpayer identification number, plus the account number, the year-end balance or value, and the total interest, dividends, or other income credited during the year.⁴ Banks identify reportable accounts through due diligence searches of their records, looking for indicators like a US address, US phone number, a US place of birth, or standing wire transfer instructions to a US account.

Reportable accounts also include accounts held by foreign entities that have US persons behind them as controlling owners. If you sit behind a foreign holding company or investment vehicle, expect the bank to look through the entity and report you.

Your Filings: FBAR and Form 8938

The IRS receiving data from your foreign bank does not relieve you of anything. Two separate filings apply, they go to different agencies, and meeting one does not excuse the other.⁵

FBAR (FinCEN Form 114)

You must file an FBAR if you have a financial interest in, or signature authority over, foreign financial accounts whose combined value exceeds $10,000 at any point during the calendar year.⁶ The threshold is cumulative. Two accounts holding $6,000 each will trigger it even though neither one is over $10,000 alone.

The FBAR is filed electronically through FinCEN’s BSA E-Filing System, not with your tax return. It is due April 15, with an automatic extension to October 15.⁶ The $10,000 figure has not moved in decades, so it now catches many taxpayers who wouldn’t consider themselves wealthy.

Form 8938 (Statement of Specified Foreign Financial Assets)

Form 8938 is filed with your annual tax return and covers a wider set of assets than the FBAR, including foreign stock, partnership interests, and financial instruments held outside a financial institution.⁴ Thresholds depend on filing status and whether you live in the US or abroad:

Single, living in the US: more than $50,000 on the last day of the year, or more than $75,000 at any point during the year.
Married filing jointly, living in the US: $100,000 year-end or $150,000 at any point.
Single, living abroad: $200,000 year-end or $300,000 at any point.
Married filing jointly, living abroad: $400,000 year-end or $600,000 at any point.

The statute sets a $50,000 base threshold and lets Treasury prescribe higher amounts, which is how the tiered figures above came into effect.⁴ If you cross both the FBAR and Form 8938 thresholds, you file both.

Penalties If You Don’t File

The penalties for foreign account non-reporting are heavy by design, because the IRS treats undetected offshore assets as high-value enforcement territory.

FBAR Penalties

A non-willful failure to file draws a maximum civil penalty of $10,000 per violation, adjusted for inflation. Courts have divided on whether “per violation” means per account or per form, which matters a lot if you have several foreign accounts. A reasonable cause exception applies if the failure wasn’t willful and you properly reported the account balances.⁷

Willful violations are a different order of magnitude. The penalty is the greater of 50% of the account balance at the time of the violation or a statutory floor of $100,000, adjusted for inflation.⁷ For violations assessed on or after January 2025, that floor stood at $165,353.⁸ A $500,000 account, one year of willful non-filing, and you are looking at a $250,000 penalty. The IRS can assess separately for each year.

Form 8938 Penalties

Missing Form 8938 triggers a $10,000 penalty. If you still don’t file after the IRS sends a notice, another $10,000 accrues for every 30-day period the failure continues beyond 90 days, capped at $50,000 in additional penalties.⁴ Total filing-penalty exposure for a single year: $60,000, before any tax consequences.

If you underpaid tax because of assets tied to the unreported holdings, the standard 20% accuracy-related penalty doubles to 40%.⁹

The Statute of Limitations Problem

This is where taxpayers get caught. Normally the IRS has three years from filing to assess additional tax. But if you failed to file a required international information return, including Form 8938, the clock doesn’t start until three years after you actually provide the missing information.¹⁰ A return filed ten years ago can still be open on the foreign-related items today.

Reasonable cause narrows this. If the failure wasn’t willful, the extended assessment period applies only to items specifically related to the missing information, not the whole return.¹⁰ The IRS makes that call, and the burden of proving reasonable cause is on you.

Fixing Past Non-Compliance

If you already have unfiled FBARs or missed Form 8938 filings, coming forward on your own is dramatically cheaper than waiting to be found. Two programs matter for most people.

Delinquent FBAR Submission Procedures

If you reported all foreign account income on your tax returns and just missed the FBAR itself, the delinquent FBAR submission procedures may apply. You have to be clear of any current IRS examination or criminal investigation, and the IRS must not have already contacted you about the missing FBARs.¹¹

If you qualify, the IRS won’t impose a penalty for the late FBARs. You file the missing reports electronically through FinCEN’s system with a written statement explaining the reason for the delay.¹¹ The returns can still be selected for audit through normal processes, but late filing alone won’t automatically trigger one.

Streamlined Filing Compliance Procedures

If you also owe additional tax because you didn’t report foreign income, you may qualify for the streamlined procedures. Separate tracks exist for taxpayers living in the US and living abroad. Under the domestic track, you file amended returns for the most recent three tax years and delinquent FBARs for the most recent six years, and pay a miscellaneous offshore penalty of 5% of the highest aggregate value of your foreign financial assets across the covered periods.¹²

Taxpayers living abroad who qualify for the foreign streamlined procedures pay no miscellaneous offshore penalty at all. Under either track, the IRS waives accuracy-related penalties, information return penalties, and FBAR penalties in favor of the streamlined structure, unless it later determines the original return was fraudulent or the FBAR violation was willful.¹²

A Note on CRS

You may see references to the Common Reporting Standard, developed by the OECD and adopted by more than 100 countries for multilateral automatic exchange of account information. The US has not adopted CRS. It relies on its bilateral FATCA IGA network instead. For a US taxpayer, that means your foreign accounts are reportable under the FATCA/IGA framework regardless of whether the country you hold assets in also participates in CRS. CRS is a separate regime that does not replace, override, or excuse any of your US filing obligations.

1
Office of the Law Revision Counsel. 26 USC 1471 – Withholdable Payments to Foreign Financial Institutions
2
U.S. Department of the Treasury. Foreign Account Tax Compliance Act
3
Internal Revenue Service. FATCA Information for Governments
4
Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets
5
Internal Revenue Service. Comparison of Form 8938 and FBAR Requirements
6
Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)
7
Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties
8
eCFR. 31 CFR 1010.821 – Penalty Adjustment and Table
9
eCFR. 26 CFR 1.6038D-8 – Penalties for Failure to Disclose
10
Office of the Law Revision Counsel. 26 USC 6501 – Limitations on Assessment and Collection
11
Internal Revenue Service. Delinquent FBAR Submission Procedures
12
Internal Revenue Service. U.S. Taxpayers Residing in the United States – Streamlined Domestic Offshore Procedures