U.S. Tax Attorney
Global Financial Compliance: Your FBAR, FATCA, and International Tax Strategy
The stakes for international financial compliance have never been higher. The U.S. government enforces two primary reporting regimes – the Report of Foreign Bank and Financial Accounts (FBAR) and the Foreign Account Tax Compliance Act (FATCA) – to ensure transparency and tax compliance on worldwide assets. These rules impose mandatory annual filings for U.S. persons and strict identification and reporting obligations for Foreign Financial Institutions (FFIs). Non-compliance can trigger severe monetary penalties, ongoing exposure, and even criminal liability.
For individuals, FBAR and FATCA require disclosure of foreign bank accounts, brokerage holdings, trusts, pensions, and certain insurance products. While FBAR focuses on accounts and signature authority, FATCA extends to a broader range of foreign financial assets. Compliance thresholds, reporting forms, and filing procedures differ, meaning satisfying one requirement does not automatically satisfy the other.
Foreign financial institutions face an equally exacting framework. They must identify U.S. account holders, classify clients accurately, perform diligent reporting, and adhere to Intergovernmental Agreements (IGAs) with the IRS or local tax authorities. Failure to comply risks a 30% withholding on U.S.-sourced payments and serious regulatory scrutiny.
Our practice delivers tailored solutions for both individuals and institutions. We help clients understand and meet their reporting obligations, implement robust compliance systems, and resolve past reporting failures through IRS remediation programs, including the Voluntary Disclosure Program and Streamlined Filing Procedures. With strategic, audit-ready guidance, we protect your assets, minimize exposure, and ensure your financial affairs remain compliant with U.S. law.
MY PRACTICES
FBAR
FATCA
FOREIGN FINANCIAL INSTITUTIONS
PENALTIES
FBAR: Reporting Foreign Financial Accounts (FinCEN Form 114)
1. Legal Authority and Purpose. The obligation to report foreign financial accounts arises from the Bank Secrecy Act of 1970 (31 U.S.C. §§5311–5332) and its implementing regulations at 31 C.F.R. Part 1010. Administered by the Financial Crimes Enforcement Network (FinCEN), FBAR is designed to combat offshore tax evasion, money laundering, and other illicit financial activities. Unlike standard tax returns, FBAR focuses on disclosure of control and interest in foreign accounts, reflecting the U.S. government’s intent to capture both ownership and signature authority.
2. Who Must File. FBAR applies to any U.S. person, which includes:
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Individuals who are U.S. citizens or resident aliens;
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Domestic entities such as corporations, partnerships, trusts, and estates.
Importantly, the reporting obligation extends to accounts over which a U.S. person has signature authority, even without direct ownership. Courts and IRS guidance emphasize that the duty to file is broad, and even modest accounts must be reported if they contribute to the aggregate threshold.
3. Reporting Threshold. The FBAR filing requirement is triggered when the aggregate maximum value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. This low threshold is intentionally designed to capture a wide range of cross-border financial activity. The aggregate maximum value includes the combined peak balances of all foreign accounts, not averages or year-end balances, and missing accounts – even inadvertently – can constitute a violation.
4. What Constitutes a Foreign Financial Account. A foreign financial account includes:
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Foreign bank accounts (checking, savings);
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Brokerage and investment accounts;
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Mutual funds;
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Certain foreign-issued life insurance or annuity policies with a cash value.
The regulations also account for indirect interests, meaning that ownership or beneficial interest in foreign entities holding accounts may create an FBAR obligation. The goal is to ensure complete transparency of a U.S. person’s foreign financial exposure.
5. Filing Logistics. FBAR must be filed electronically through the FinCEN BSA E-Filing System using Form 114. The filing deadline is April 15, with an automatic extension to October 15. While the FBAR is not filed with the IRS, it is enforceable by the IRS, which may initiate audits or penalties based on non-compliance.
Penalties are significant: non-willful violations carry up to $10,000 per violation per year, while willful violations can exceed the greater of $100,000 or 50% of the account balance (31 U.S.C. §5321). These penalties underscore the importance of precise compliance and thorough documentation.
Navigating FBAR obligations can be complex, and even small oversights may trigger significant penalties. Our practice provides tailored guidance to ensure full compliance for U.S. persons with foreign financial accounts. We help clients identify all reportable accounts, accurately calculate the aggregate value, and prepare electronically compliant Form 114 filings.
For those who have missed prior filings, we offer strategic remediation services, including support under the Streamlined Filing Compliance Procedures for non-willful oversights or the Voluntary Disclosure Program for willful non-compliance. Our approach is audit-ready, designed to minimize penalties, protect assets, and provide peace of mind.
With our assistance, clients gain clarity, compliance, and confidence, knowing that their FBAR obligations are being handled with precision and expertise.
My Assistance with FBAR
FATCA: Individual and Corporate Reporting of Foreign Assets (Form 8938)
1. Legal Authority and Purpose. The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act and is codified at 26 U.S.C. §6038D. Unlike FBAR, which is administered by FinCEN, FATCA reporting is integrated into the taxpayer’s annual federal income tax return (Form 1040) and overseen by the IRS. The law requires U.S. persons to disclose Specified Foreign Financial Assets (SFFAs) to ensure the IRS can identify income, ownership, and transfers of assets held abroad.
FATCA serves a complementary purpose to FBAR but captures a broader universe of assets, including those held directly, not just in accounts. Importantly, compliance with FBAR does not exempt a taxpayer from FATCA, and vice versa, meaning U.S. persons must meet both obligations independently.
2. Who Must File and Reporting Thresholds. FATCA applies to U.S. persons – individuals, corporations, partnerships, trusts, and estates – who meet the reporting thresholds for SFFAs. Thresholds vary based on residency and filing status. For example, U.S. residents filing individually must report SFFAs if their total value exceeds $50,000 on the last day of the tax year or $75,000 at any time during the year. Joint filers have higher thresholds, and taxpayers living abroad face substantially higher limits.
These thresholds are significantly higher than the $10,000 FBAR threshold, reflecting FATCA’s broader focus on high-value foreign financial interests. Accurate calculation of SFFA values is critical, as underreporting – even unintentionally – can result in penalties of $10,000 per unreported asset, with additional fines and interest for continued non-compliance under 26 U.S.C. §6038D.
3. Specified Foreign Financial Assets (SFFAs). SFFAs include all accounts reported on FBAR plus a wider set of holdings. Examples include:
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Foreign-issued stocks, securities, and bonds not held in an account;
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Interests in foreign entities, such as corporations and partnerships;
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Foreign pension plans, retirement accounts, and certain insurance policies with cash value.
The scope of FATCA is intentionally broad, capturing both direct ownership and certain indirect interests in foreign financial assets. Failure to properly identify SFFAs can trigger significant penalties, and the IRS expects detailed disclosure for each asset, including identifying information, maximum value, and ownership type.
4. Interplay with Other Reporting Forms. FATCA is an informational reporting requirement, meaning that it does not substitute for income tax reporting. Income generated by foreign assets, as well as ownership in foreign entities, often triggers additional filings such as:
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Form 5471 for U.S. persons with interests in certain foreign corporations;
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Form 8621 for U.S. persons invested in Passive Foreign Investment Companies (PFICs);
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Form 3520/3520-A for trusts and foreign gifts.
Our practice ensures that FATCA reporting is fully integrated with all other IRS filing obligations, preventing gaps that could lead to audits or penalties.
5. Compliance Strategy. Compliance with FATCA requires both identification of all SFFAs and accurate reporting on Form 8938. We assist clients in evaluating thresholds, determining which assets must be reported, and preparing the filing in alignment with IRS guidance. For prior non-compliance, we provide guidance under the Streamlined Filing Compliance Procedures for non-willful conduct or the Voluntary Disclosure Program for willful conduct, minimizing penalties and reducing exposure to audit or enforcement actions.
FATCA compliance can be complex, given the broad definition of Specified Foreign Financial Assets (SFFAs) and the higher reporting thresholds. Our firm helps U.S. individuals and entities identify all reportable foreign assets, determine applicable thresholds, and prepare accurate Form 8938 filings alongside your federal income tax return.
For clients with prior non-compliance, we provide strategic guidance through the Streamlined Filing Compliance Procedures for non-willful oversights or the Voluntary Disclosure Program for willful violations, ensuring submissions are audit-ready and penalties are minimized.
By integrating FATCA reporting with related IRS filings, such as Forms 5471, 8621, or 3520, we ensure a comprehensive, compliant approach that protects your assets and reduces exposure to enforcement actions. With our assistance, clients gain clarity, confidence, and peace of mind regarding their FATCA obligations.
FATCA Services
Foreign Financial Institution (FFI) Compliance
1. Legal Authority and Scope. Foreign Financial Institutions (FFIs), including banks, investment funds, custodial institutions, and certain insurance companies, are subject to compliance obligations under FATCA (26 U.S.C. §1471 et seq.) and its implementing regulations (Treas. Reg. §1.1471-1 through §1.1474-4). FFIs with U.S. account holders must identify, document, and report U.S.-related financial accounts to avoid substantial penalties. Compliance is critical not only to maintain access to U.S. markets but also to avoid the 30% withholding tax on U.S.-sourced payments established under FATCA.
The FATCA compliance framework distinguishes between FFIs and Non-Financial Foreign Entities (NFFEs). While FFIs are obligated to register, report, and withhold where necessary, NFFEs generally provide certification of U.S. ownership information, which FFIs must collect and report. Misclassification or incomplete due diligence can result in severe regulatory exposure.
2. Registration and Global Intermediary Identification Number (GIIN). To participate in FATCA and avoid withholding, FFIs must register with the IRS and obtain a Global Intermediary Identification Number (GIIN). This unique identifier confirms the institution’s participation in FATCA and is required for all reporting and withholding activities. Failure to register can trigger the 30% withholding tax on certain U.S.-sourced payments and limit the institution’s ability to engage with U.S. counterparties.
Registration also ensures that the FFI is recognized in the IRS database, allowing for proper reporting of U.S. account holders. Our firm assists FFIs in navigating the registration process, verifying documentation, and maintaining accurate compliance records.
3. Intergovernmental Agreements (IGAs). Many FFIs operate under an Intergovernmental Agreement (IGA) between the United States and their home country. IGAs can follow a Model 1 or Model 2 structure:
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Model 1 IGAs: The FFI reports U.S. account information to the local tax authority, which then forwards it to the IRS.
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Model 2 IGAs: The FFI reports U.S. account information directly to the IRS.
Understanding the specific IGA framework is essential, as it dictates reporting channels, due diligence procedures, and compliance obligations. Our firm provides guidance on interpreting and implementing IGA requirements, ensuring that FFIs meet both domestic and U.S. reporting standards.
4. Due Diligence and Account Classification. FFIs must perform comprehensive due diligence to identify U.S. account holders. This includes:
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Screening for U.S. indicia such as citizenship, residency, or U.S. address;
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Classifying accounts correctly as U.S.-reportable or non-U.S.;
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Collecting and maintaining documentation for audits.
Additionally, FFIs must distinguish between FFIs and NFFEs and apply the appropriate reporting obligations for each client type. Inadequate due diligence can result in exposure to withholding penalties, reputational damage, and regulatory action.
Foreign Financial Institutions face a demanding regulatory landscape under FATCA and Intergovernmental Agreements (IGAs). Our firm helps FFIs navigate registration requirements, obtain a Global Intermediary Identification Number (GIIN), and implement effective reporting procedures for U.S. account holders.
We provide guidance on due diligence, account classification, and documentation, ensuring your institution identifies U.S. clients accurately and fulfills all reporting obligations. For FFIs with prior compliance gaps, we assist with remediation filings and voluntary disclosures, minimizing penalties and safeguarding access to U.S. markets.
By combining legal expertise with practical compliance solutions, we enable financial institutions to meet FATCA obligations confidently, reduce exposure to withholding, and maintain regulatory integrity.
FFI Services
Penalties and Remediation:
Managing Risk and Resolving Non-Compliance
The consequences of failing to meet U.S. international reporting obligations are among the most severe in the tax code. Both FBAR and FATCA carry substantial civil penalties, and in cases of willful non-compliance, potential criminal liability. Understanding the scope of these penalties and the available remediation pathways is critical for individuals, entities, and foreign financial institutions alike.
1. Severity of Penalties. For FBAR, non-willful violations can result in penalties of up to $10,000 per violation per year, while willful violations may exceed the greater of $100,000 or 50% of the account balance, under 31 U.S.C. §5321. FATCA penalties, codified in 26 U.S.C. §6038D, impose $10,000 per unreported asset, with additional fines and interest for continued non-compliance. For FFIs, failure to register, report, or perform adequate due diligence can trigger a 30% withholding tax on U.S.-sourced payments, along with reputational and regulatory consequences.
Non-filing or misreporting also keeps the statute of limitations open, leaving taxpayers and institutions exposed to IRS or FinCEN examinations for prior years. These risks underscore the importance of proactive compliance and timely remediation.
2. Remediation Pathways for Individuals and Entities. The IRS provides formal programs to resolve past non-compliance and mitigate penalties. For U.S. persons with unreported foreign assets, the Streamlined Filing Compliance Procedures offer relief for non-willful oversights, typically reducing or eliminating penalties when eligibility criteria are met. For willful non-compliance, the Voluntary Disclosure Program (VDP) provides a secure path to disclose previously unreported accounts, avoid criminal prosecution, and negotiate resolution terms with the IRS.
Our firm guides clients through every step of these programs, from eligibility assessment to preparing filings and coordinating with the IRS to ensure maximum benefit and minimal exposure.
3. Remediation for Foreign Financial Institutions. FFIs with prior reporting deficiencies face heightened scrutiny due to their central role in FATCA compliance. Our firm assists institutions in remediation filings, corrective actions, and voluntary disclosures, while also implementing robust compliance programs to prevent future violations. This includes support with account classification, due diligence documentation, and IGA interpretation, ensuring that institutions remain compliant and avoid punitive withholding.
4. Representation and Audit Defense. In addition to proactive remediation, our practice provides audit defense and representation in examinations by the IRS or FinCEN. We advocate for clients, negotiate penalty relief when appropriate, and ensure that all reporting positions are well-documented and defensible. With our guidance, clients gain confidence that their international reporting obligations are met strategically, accurately, and with full legal protection.
If you hold foreign accounts, operate a Foreign Financial Institution, or have discovered past reporting gaps under FBAR or FATCA, taking action now is critical. The penalties for non-compliance are severe, and delays can compound your exposure.
Our firm provides confidential, strategic guidance tailored to your situation. We help clients achieve compliance, remediate past non-filing, and minimize penalties, while ensuring all filings are audit-ready and defensible.
Contact our office today to schedule a private consultation and develop a comprehensive plan to protect your financial interests and maintain full compliance with U.S. international reporting obligations.
Your Action is Important
Viacheslav Kutuzov | International & U.S. Taxation Expert
We minimize your taxes domestically and internationally...
Viacheslav Kutuzov
VIACHESLAV KUTUZOV, Esq.
International and U.S. Taxation Expert
New York Tax Attorney & Counselor-at-Law (6192033)
55 Broadway, Floor 3, New York, New York 10006
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