Specialized Returns for Individuals · International information reporting

Covered accounts (e.g., FBAR, Form 8938)

Verification 2026 Verified
tax year · reviewed 2026-08-21 · Draft for I. Ohu review

The two international reporting regimes were built at different times for different purposes, and they draw their boundaries in different places. The FBAR reaches accounts, located outside the United States. Form 8938 reaches assets, held with or issued by foreign persons. Those two ideas overlap heavily and diverge in ways that decide real cases — an account at the Frankfurt branch of a New York bank is on one form and not the other, and a portfolio of foreign shares held in a drawer rather than an account is on the other and not the one. Neither reaches the asset most clients assume is the problem.

The rule

What Form 8938 covers. any financial account within IRC § 1471(d)(2) maintained by a foreign financial institution, plus three categories held outside such an account — stock or a security issued by a non-United States person, a financial instrument or contract held for investment with a non-United States issuer or counterparty, and any interest in a foreign entity (IRC § 6038D(b))^TY2026

What the FBAR covers. a financial interest in, or signature or other authority over, at least one financial account located outside the United States — and generally an account at a financial institution located outside the United States is a foreign financial account, whether or not it produced taxable income^TY2026

And the exclusions from that. 7 categories the IRS lists as not reportable — correspondent or Nostro accounts, accounts owned by a governmental entity, accounts owned by an international financial institution, accounts maintained on a U.S. military banking facility, accounts held in an IRA of which the person is owner or beneficiary, accounts held in a retirement plan of which the person is participant or beneficiary, and accounts held in a trust of which the person is a beneficiary where a U.S. person files an FBAR reporting them^TY2026

The branch rule. an account at a foreign branch of a United States institution is reportable on the FBAR but not on Form 8938; an account at a United States branch of a foreign institution is reportable on neither — location of the branch decides the FBAR, and the status of the institution decides Form 8938^TY2026

Signature authority. signature authority over an account, without any interest in it, is reportable on the FBAR subject to exceptions but is not a Form 8938 asset unless the filer otherwise has an interest — which is why an employee with authority over a company account can have an FBAR obligation and no tax reporting at all^TY2026

Assets that are not accounts. foreign stock or securities held outside an account, foreign partnership interests, and foreign hedge and private equity funds are Form 8938 assets and are not FBAR accounts — the FBAR reaches accounts, Form 8938 reaches assets^TY2026 But where foreign stock or securities are held in an account at a foreign financial institution, the account is reportable but its contents are not separately reported — on both forms^TY2026

Interests held through something else. an indirect interest in foreign financial assets through an entity is not itself a Form 8938 asset, but gives an FBAR financial interest where the ownership or beneficial interest in the entity is greater than 50 percent^TY2026 And foreign accounts and foreign non-account investment assets held by a foreign or domestic grantor trust of which the filer is the grantor are Form 8938 assets as to both, and FBAR accounts as to the foreign accounts^TY2026

Insurance and funds. a foreign-issued life insurance or annuity contract with a cash value is reportable on both forms, as is a foreign mutual fund — while a domestic mutual fund investing in foreign stocks and securities is reportable on neither^TY2026

What escapes both. neither form reaches foreign real estate held directly, foreign currency held directly, precious metals held directly, personal property held directly such as art, antiques, jewellery, cars and collectibles, or social-security-type benefits provided by a foreign government^TY2026 With one refinement: foreign real estate held through a foreign entity is on neither form directly, but the foreign entity itself is a specified foreign financial asset for Form 8938 and its maximum value includes the value of the real estate^TY2026

Current figures

Item	Rule
Specified foreign financial asset	any financial account within IRC § 1471(d)(2) maintained by a foreign financial institution, plus three categories held outside such an account — stock or a security issued by a non-United States person, a financial instrument or contract held for investment with a non-United States issuer or counterparty, and any interest in a foreign entity (IRC § 6038D(b))^TY2026
Foreign financial account	a financial interest in, or signature or other authority over, at least one financial account located outside the United States — and generally an account at a financial institution located outside the United States is a foreign financial account, whether or not it produced taxable income^TY2026
FBAR exclusions	7 categories the IRS lists as not reportable — correspondent or Nostro accounts, accounts owned by a governmental entity, accounts owned by an international financial institution, accounts maintained on a U.S. military banking facility, accounts held in an IRA of which the person is owner or beneficiary, accounts held in a retirement plan of which the person is participant or beneficiary, and accounts held in a trust of which the person is a beneficiary where a U.S. person files an FBAR reporting them^TY2026
Branch rule	an account at a foreign branch of a United States institution is reportable on the FBAR but not on Form 8938; an account at a United States branch of a foreign institution is reportable on neither — location of the branch decides the FBAR, and the status of the institution decides Form 8938^TY2026
Signature authority	signature authority over an account, without any interest in it, is reportable on the FBAR subject to exceptions but is not a Form 8938 asset unless the filer otherwise has an interest — which is why an employee with authority over a company account can have an FBAR obligation and no tax reporting at all^TY2026
Non-account assets	foreign stock or securities held outside an account, foreign partnership interests, and foreign hedge and private equity funds are Form 8938 assets and are not FBAR accounts — the FBAR reaches accounts, Form 8938 reaches assets^TY2026
Contents of an account	where foreign stock or securities are held in an account at a foreign financial institution, the account is reportable but its contents are not separately reported — on both forms^TY2026
Indirect interests	an indirect interest in foreign financial assets through an entity is not itself a Form 8938 asset, but gives an FBAR financial interest where the ownership or beneficial interest in the entity is greater than 50 percent^TY2026
Grantor trusts	foreign accounts and foreign non-account investment assets held by a foreign or domestic grantor trust of which the filer is the grantor are Form 8938 assets as to both, and FBAR accounts as to the foreign accounts^TY2026
Insurance and mutual funds	a foreign-issued life insurance or annuity contract with a cash value is reportable on both forms, as is a foreign mutual fund — while a domestic mutual fund investing in foreign stocks and securities is reportable on neither^TY2026
Real estate through an entity	foreign real estate held through a foreign entity is on neither form directly, but the foreign entity itself is a specified foreign financial asset for Form 8938 and its maximum value includes the value of the real estate^TY2026
Outside both regimes	neither form reaches foreign real estate held directly, foreign currency held directly, precious metals held directly, personal property held directly such as art, antiques, jewellery, cars and collectibles, or social-security-type benefits provided by a foreign government^TY2026
FBAR threshold	an aggregate value greater than $10,000 at any time during the calendar year^TY2026
FBAR valuation	the maximum value of each account during the year, taken from periodic account statements in the currency of the account and converted at the end-of-calendar-year exchange rate — the maximum balance, not the closing balance^TY2026
Form 8938 valuation	the maximum value of each specified foreign financial asset, at fair market value in United States dollars in accordance with the Form 8938 instructions, converted at the end-of-taxable-year exchange rate^TY2026

How it works in practice

Ask two different questions, in two different vocabularies. For the FBAR: is there an account, and is the institution holding it located outside the United States? For Form 8938 (IRC § 6038D(b)): is there an asset, and is the institution or issuer or counterparty a foreign person? A client’s answer to one does not settle the other.

The branch rule is the cleanest discriminator and the one most often got wrong. An account at a foreign branch of a domestic bank is FBAR-reportable — the branch is outside the United States — but is not a Form 8938 asset, because the institution is not a foreign financial institution. The reverse case, an account at a United States branch of a foreign bank, is on neither form.

Signature authority is an FBAR concept and not a Form 8938 one. A bookkeeper or officer with authority over an employer’s foreign account has an FBAR obligation, subject to the exceptions, and no Form 8938 obligation at all unless they have their own interest. Ask about this explicitly: clients do not volunteer authority over money that is not theirs.

Do not report the contents of a reported account. Where foreign shares sit in an account at a foreign institution, the account is reported and the holdings inside it are not listed separately. The same holdings held outside any account are a Form 8938 asset in their own right and are not on the FBAR at all.

Say plainly what is outside both. Foreign real estate held directly, foreign currency in hand, precious metals in a vault, art and jewellery, and foreign state pension entitlements are not reportable on either form. Clients who have heard that “foreign assets must be reported” often assume the holiday apartment is the problem, and it is not — the small bank account opened to pay its utility bills is.

Watch the entity wrapper. Holding the same apartment through a foreign company changes the answer for Form 8938: the apartment is still not reportable, but the interest in the company is a specified foreign financial asset, and its value includes the property.

The account at the Frankfurt branch

A client on a two-year assignment in Germany opened a current account at the Frankfurt branch of a large United States bank, to receive her local salary. It peaked at $84,000.

The account is FBAR-reportable: the branch holding it is located outside the United States, and the aggregate exceeded the threshold. It is not a Form 8938 specified foreign financial asset, because the institution maintaining it is not a foreign financial institution. She files an FBAR and — assuming no other foreign assets — no Form 8938, and the answer turns entirely on the corporate identity of the bank rather than on where she banked.

The bookkeeper with no money of her own

A client is the office manager of a company with a supplier account in Mexico. She can authorise payments from it. She owns nothing abroad.

She has an FBAR obligation, subject to the exceptions for certain officers and employees, because signature or other authority over a foreign financial account triggers the report whether or not she has any interest in the funds. She has no Form 8938 obligation, because signature authority is not an interest in a specified foreign financial asset. It is the one common case where the FBAR reaches someone with no foreign wealth at all.

The shares in the drawer

A client inherited certificated shares in a French company from his grandmother. They are worth $310,000. There is no brokerage account; the certificates are registered in his name and kept at home. He also has no foreign bank account.

He has a Form 8938 obligation and no FBAR obligation. Stock issued by a person other than a United States person, held outside an account maintained by a financial institution, is a specified foreign financial asset under IRC § 6038D(b)(2)(A). There is no account for the FBAR to reach. Had the same shares been held in a French brokerage account, the account would have been on both forms and the shares would not have been separately listed on either.

The apartment and the company that owned it

A client owns a flat in Lisbon worth $480,000 outright. She reports nothing, correctly. Two years later her adviser restructures the ownership into a Portuguese company of which she is the sole shareholder.

The flat is still not reportable on either form. But her interest in the company is now a specified foreign financial asset for Form 8938, and its maximum value includes the value of the flat — so a transaction undertaken for local law reasons has created a reporting obligation on an asset that had none. The restructuring changed nothing about what she owns and everything about what she must file.

Treating the two regimes as one enquiry. The FBAR asks about accounts and where they are; Form 8938 asks about assets and who issued or holds them.

Getting the branch rule backwards. Foreign branch of a domestic bank: FBAR yes, Form 8938 no. Domestic branch of a foreign bank: neither.

Overlooking signature authority. It is an FBAR trigger and not a Form 8938 one, and it catches employees who own nothing abroad.

Listing the contents of a reported account. The account is reported; the holdings inside it are not separately reportable on either form.

Assuming foreign real estate is reportable. Held directly it is on neither form. Held through a foreign entity, the entity is a Form 8938 asset and carries the property’s value with it.

Assuming an IRA-held foreign account must be reported. An account held in an individual retirement account of which the client is owner or beneficiary is among the FBAR exclusions.

Reporting a domestic fund that invests abroad. A domestic mutual fund holding foreign stocks and securities is on neither form; a foreign mutual fund is on both.

Treating a foreign state pension as an asset. Social-security-type benefits provided by a foreign government are outside both regimes.

How this has changed

The FBAR’s coverage rests on Bank Secrecy Act regulations that have been substantially settled for years. The Form 8938 regime arrived with FATCA in 2010, and its definition of a specified foreign financial asset borrows wholesale from the FATCA withholding definitions (IRC §§ 1471, 1473) — which is why the Form 8938 boundary tracks the status of the institution rather than its location. That single drafting choice produces the branch rule and most of the divergence between the two forms.

Pub. L. 119-21 amended neither regime. The Service’s comparison table remains the working authority for the asset-by-asset answers, and it is worth checking rather than reasoning from first principles: several of its rows — indirect interests through entities, grantor trusts, real estate in a wrapper — resolve in ways the statutes do not obviously predict.

The practical shift over the last decade has been in who is affected. Automatic information exchange means foreign institutions now report accounts to the Service directly, so an unreported account is far more likely to be identified than it was, and the population of clients discovering a historic obligation has grown accordingly. The rules have not moved; the probability of the failure surfacing has.

Exam focus

Expect an “all of the following except” list of asset types. The reliable discriminators are: real estate held directly (neither), currency and precious metals held directly (neither), personal property (neither), foreign state pension benefits (neither), foreign stock outside an account (Form 8938 only), partnership interests and hedge or private equity funds (Form 8938 only), and signature authority (FBAR only).

Know the branch rule in both directions, and know that a foreign-issued life insurance or annuity contract with a cash value is on both forms while a domestic fund investing abroad is on neither.

The IRA exclusion is a recurring FBAR item, as is the point that whether an account produced taxable income is irrelevant to whether it is reportable.

Check yourself

1. A client holds an account at the Singapore branch of a United States bank. Which form reaches it?

Answer: The FBAR only. The account is at a financial institution located outside the United States, so it is a foreign financial account; but the institution is not a foreign financial institution, so it is not a specified foreign financial asset for Form 8938.

2. A client owns foreign partnership interests worth $220,000 and has no foreign accounts. What must she file?

Answer: Form 8938 if she is over the applicable threshold. Foreign partnership interests are specified foreign financial assets and are not FBAR accounts, so no FBAR arises.

3. A client has signature authority over his employer’s foreign bank account but no interest in it. What must he file?

Answer: An FBAR, subject to the exceptions for certain officers and employees. Signature or other authority triggers the FBAR; it is not an interest in a specified foreign financial asset, so Form 8938 does not apply.

4. A client owns a villa in Italy directly, worth $900,000. Is it reportable?

Answer: No, on either form. Foreign real estate held directly is outside both regimes. Held through a foreign entity, the entity would be a specified foreign financial asset for Form 8938 and its maximum value would include the villa.

5. A client holds foreign shares in an account at a foreign bank. Must the shares be listed separately?

Answer: No. Where foreign stock or securities are held in a financial account at a foreign financial institution, the account is subject to reporting but the contents of the account are not separately reported — on either form.

Change log

2026-08-21Initial draft. Sets out what each regime actually covers — the IRC § 6038D(b) definition of a specified foreign financial asset and the Bank Secrecy Act's foreign financial account — with the branch rule, signature authority, non-account assets, indirect interests through entities, grantor trusts, and the categories that escape both forms entirely.