The following is an anonymized and generalized scenario for educational purposes only. Filing requirements, penalties, and compliance options depend on each taxpayer’s specific facts.

Background

A U.S. citizen taxpayer with limited taxable income had not filed U.S. individual income tax returns for several prior years. The taxpayer believed that low income meant no filing was required and was not aware that foreign accounts and assets may create separate U.S. reporting obligations.

In 2025, the taxpayer contacted our firm after learning that foreign financial assets may need to be reported. We reviewed the taxpayer’s foreign bank accounts, brokerage accounts, stocks, cash-value life insurance, retirement or deferred compensation accounts, and other offshore financial assets.

Tax Issues Identified

We identified potential filing obligations for FBAR and Form 8938.

FBAR — FinCEN Form 114

U.S. persons may be required to file FBAR if the total value of foreign financial accounts exceeds $10,000 at any time during the year.

Form 8938 — Statement of Specified Foreign Financial Assets

Certain taxpayers may also be required to report specified foreign financial assets on Form 8938, which is filed with the federal income tax return. FBAR and Form 8938 are separate reporting requirements, and both may apply.

Our Approach

Our firm assisted with reviewing the taxpayer’s foreign assets, determining filing requirements, preparing prior-year Forms 1040, completing Schedule B and Form 8938 disclosures, filing delinquent FBARs, and evaluating whether the IRS Streamlined Filing Compliance Procedures may apply.

Why Timely Compliance Matters

Low income does not automatically eliminate foreign asset reporting obligations. Failure to properly report foreign accounts or assets may result in significant penalties, interest, additional tax, and increased IRS or FinCEN scrutiny.

Voluntary and proper corrective filing may help reduce compliance risk and bring prior-year filings back into good standing.

Client Reminder

U.S. citizens, green card holders, and U.S. tax residents should review their foreign income, foreign accounts, and foreign financial assets every year. If you hold assets outside the United States, professional review is important before the IRS or FinCEN contacts you.

IRS Resources

Relevant IRS topics include FBAR, Form 8938, comparison of FBAR and Form 8938 requirements, FATCA reporting for individuals, and Streamlined Filing Compliance Procedures.