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Foreign financial account

The Form 8938 instructions and federal FBAR rules describe foreign financial accounts through account types and reporting conditions. For a U.S. citizen, the term appears in both Form 8938 instructions and FBAR reporting rules.

Meaning and account types

The Form 8938 instructions treat a financial account outside the United States as a specified foreign financial asset, while federal FBAR rules define reportable accounts by their type and location.[1][3]

The FBAR rules identify bank accounts as deposits maintained with a banking business and securities accounts as accounts with a business that buys, sells, holds, or trades securities. Other listed accounts include cash-value insurance or annuity policies, certain futures or options broker accounts, and qualifying mutual funds or similar pooled funds.[3]

The regulation defines a foreign country as geographic areas outside the United States. Its listed exclusions include certain government accounts, international financial institution accounts, military banking facilities abroad, and bank settlement accounts used only between banks.[3]

Where reporting rules use the term

For FBAR purposes, a U.S. citizen with a financial interest in or signature authority over foreign financial accounts falls within a filing rule when their combined value exceeds $10,000 at any point in the calendar year. The regulation says U.S. persons report such relationships for each year in which they exist.[2][3]

Form 8938 uses related but distinct categories. Its instructions call for reporting foreign deposit and custodial accounts in specified parts of the form, and distinguish those accounts from other specified foreign financial assets. Assets held inside a financial account generally do not need separate reporting on that form.[1]

The Form 8938 instructions also exclude certain accounts maintained by a U.S. payer, including domestic financial institutions. The examples include U.S. mutual fund accounts, IRAs, qualified U.S. retirement plans, and brokerage accounts maintained by U.S. financial institutions.[1]

Ownership and neighboring terms

For FBAR purposes, ownership and authority are separate bases for the reporting relationship. The regulation treats each named owner of a jointly named account as having a financial interest, and also assigns an interest in specified circumstances involving entities or trusts that hold an account.[3]

A foreign financial account is distinct from a specified foreign financial asset that is not held in an account. The Form 8938 instructions give foreign corporate stock, partnership interests, certain debt, and interests in foreign trusts or estates as examples of other assets when held for investment outside an account.[1]

FATCA uses the neighboring term financial account for information reporting by foreign financial institutions. FATCA reporting covers accounts held by U.S. taxpayers and by certain foreign entities with substantial U.S. ownership interests.[4]

Questions and answers

What account types fall within the FBAR rules?

The regulation lists bank accounts, securities accounts, cash-value insurance or annuity policies, certain commodity futures or options broker accounts, and qualifying mutual funds or similar pooled funds. The rules also state exceptions for specified account categories.[3]

When is an FBAR required?

A U.S. person with a financial interest in or signature authority over foreign financial accounts must file if their aggregate value exceeds $10,000 at any time during the calendar year. The regulation describes reporting for each year the relationship exists.[2]

Are account assets reported separately on Form 8938?

The Form 8938 instructions say that when an account holds specified foreign financial assets, the account assets do not need separate reporting on that form. The instructions separately provide for reporting foreign deposit and custodial accounts.[1]

Does Form 8938 treat every foreign account the same way?

No. The instructions distinguish deposit and custodial accounts from other financial accounts and assets, and exclude certain accounts maintained by a U.S. payer. They list domestic institution accounts and some U.S. retirement accounts as examples.[1]

How does FATCA use the term financial account?

Under FATCA, foreign financial institutions report information about financial accounts held by U.S. taxpayers. That reporting also covers accounts held by certain foreign entities in which U.S. taxpayers have a substantial ownership interest.[4]

  • FBAR: FinCEN describes the FBAR filing rule for U.S. persons with foreign accounts. It covers the $10,000 aggregate threshold, account interests and exceptions.
  • Financial interest in an account: FBAR rules define financial interest through account ownership or relationships to the legal title holder. A U.S. person named on an account has an interest.
  • Specified foreign financial asset: The Form 8938 instructions use specified foreign financial asset for certain foreign accounts and investment holdings. The term identifies assets for reporting.

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Sources and data notes
  1. Internal Revenue Service, Instructions for Form 8938. https://www.irs.gov/instructions/i8938. Retrieved .
  2. FinCEN, Report foreign bank and financial accounts. https://www.fincen.gov/report-foreign-bank-and-financial-accounts. Retrieved .
  3. U.S. Government, 31 CFR 1010.350. https://ecfr.io/Title-31/Section-1010.350. Retrieved .
  4. Internal Revenue Service, FATCA summary. https://www.irs.gov/businesses/corporations/summary-of-key-fatca-provisions. Retrieved .
  5. U.S. Department of the Treasury, FATCA: agreements by jurisdiction. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Retrieved .
  6. Internal Revenue Service, 26 CFR 1.1471-4. https://www.irs.gov/instructions/iw9. Retrieved .

Dates in this block record when each source was read for this page.