As the 2026 tax filing season approaches, for many Chinese Americans in the United States, in addition to reporting income within the U.S., the declaration of overseas assets is equally important. Under U.S. tax law, U.S. citizens, green card holders, or U.S. tax residents who meet the Substantial Presence Test are required to report their worldwide income to the Internal Revenue Service (IRS). Additionally, if they hold overseas financial accounts or assets above a certain threshold, they also need to file related forms. Failure to report could lead to hefty fines, and in severe cases, criminal liability.
Currently, overseas asset reporting mainly involves two regulations: the Foreign Bank and Financial Accounts Report (FBAR) under the Bank Secrecy Act and Form 8938 under the Foreign Account Tax Compliance Act (FATCA).
The reporting threshold for FBAR is relatively low: if a taxpayer’s aggregate highest total value of overseas financial accounts exceeds $10,000 at any point during the year, they must report it to the Financial Crimes Enforcement Network (FinCEN) through Form FinCEN114. The accounts to be reported include overseas bank accounts, securities accounts, mutual funds, and even insurance or annuity accounts with cash value. The deadline for FBAR reporting is April 15th each year, with an automatic extension until October 15th, and taxpayers do not need to apply for an extension separately.
In contrast, the reporting threshold for FATCA is higher and requires Form 8938 to be submitted to the IRS along with the individual tax return. For single taxpayers residing in the U.S., if the aggregate value of their overseas financial assets exceeds $50,000 at the end of the year or $75,000 at any point during the year, they must file Form 8938. For married filers, the thresholds are doubled to $100,000 at the end of the year and $150,000 at any point during the year. Unlike FBAR, Form 8938 must be submitted to the IRS along with the individual tax return. Even if FBAR has been filed, if the FATCA threshold is met, Form 8938 must be separately completed; the two cannot be substituted for each other.
Many Chinese taxpayers have misunderstandings about reporting overseas assets. Firstly, many believe that the IRS’s income information query service covers overseas accounts, which is not the case. Taxpayers must independently organize and proactively report this information. Additionally, even if they do not meet the FBAR or FATCA thresholds, they still need to honestly answer whether they hold overseas accounts in Schedule B of their tax return.
Moreover, if minor children hold overseas accounts exceeding the threshold under their names, they generally have reporting obligations themselves. If children are unable to report due to age or other reasons, parents or guardians are responsible for handling it on their behalf.
The penalties for not reporting overseas assets are severe. For FBAR violations, non-willful violators can be fined up to $16,536 annually (adjusted for inflation), while willful violators may face fines up to 50% of the account balance or $165,353 (whichever is higher), and in severe cases, criminal liability. Regarding FATCA, non-reporters face an initial penalty of $10,000 per asset, and if reporting is not fulfilled, the penalty and interest will further accumulate.
For taxpayers who have not timely reported their overseas assets, the IRS offers Streamlined Filing Compliance Procedures and FBAR submission procedures, allowing eligible individuals to correct their filings before being contacted by the IRS, potentially reducing or waiving penalties.
Danny Huang, a U.S. tax law expert and former employee of one of the Big Four accounting firms, 88 Accounting Firm, reminds Chinese friends that reporting overseas assets is a crucial part of U.S. tax compliance that should not be neglected. He advises everyone to review their own and their family’s overseas accounts and assets as early as possible, seek advice from professionals if needed, and ensure completion of all necessary reporting. ◇
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