How to report foreign assets to IRS: Form 8938 vs 3520 vs 5471 vs 8865

US expats with foreign bank accounts, overseas businesses, trusts, or large gifts from abroad typically need to file one or more international information returns alongside their regular Form 1040.

The four main forms are Form 8938, Form 3520, Form 5471, and Form 8865.

Each one covers a different type of asset, entity, or transaction.

Filing one form does not satisfy another. A US citizen living in London with a brokerage account, shares in a UK limited company, and a gift from a parent abroad could owe three separate returns on top of the FBAR.

The US foreign assets disclosure scheme is not a single form – it is a system of overlapping information returns, each with its own threshold, deadline, and penalty structure. This article walks through each form, explains who files it, and shows how they interact.

What counts as foreign assets disclosure for the IRS

The IRS treats “foreign asset” differently depending on which form you are looking at. The broadest category – specified foreign financial assets – applies to Form 8938. Other forms target specific entities or events such as corporations, partnerships, trusts, gifts, and inheritances.

Reportable foreign assets include:

• Foreign bank and brokerage accounts
• Stock or securities issued by a non-US person
• Interests in foreign entities – partnerships, trusts, estates
• Financial instruments or contracts with non-US counterparties or issuers
• Foreign-issued life insurance policies with cash value

Common items that are NOT specified foreign financial assets:

• Real estate held directly in your name, not through an entity
• Accounts at US-based financial institutions, even if the money came from abroad
• US-issued securities held in a foreign brokerage account – the account is reportable, but the securities themselves are not foreign
• US retirement accounts such as IRAs and 401(k)s

Does this count?

• Foreign bank account → Yes – FBAR and potentially Form 8938
• Foreign brokerage account → Yes – same as above
• Cash-value life insurance policy held abroad → Yes – Form 8938
• Foreign pension or retirement account → Yes – generally a specified foreign financial asset for Form 8938; may also involve Form 3520 if structured as a trust
• Direct ownership of foreign real estate → No – not a specified foreign financial asset, but see the section on foreign real estate below
• Ownership interest in a foreign entity that holds property → Yes – the interest in the entity is reportable

One taxpayer can have both account-based and entity-based reporting duties at the same time. A US person who owns a UK bank account and 40% of a UK limited company files the FBAR for the bank account, Form 8938 for both, and Form 5471 for the company.

The four forms above are the core international information returns – the broader set of US tax forms for expats also includes FEIE, foreign tax credit, and treaty-based return positions.

Foreign asset reporting checklist

Before moving to the form-by-form details, scan this checklist to identify which asset categories apply to you.

Foreign asset reporting for expats involves up to five separate IRS and FinCEN forms, and multiple “yes” answers usually mean multiple filings.

• Foreign bank or brokerage account with a balance that exceeded $10,000 at any point during the year
• Specified foreign financial assets exceeding $200,000 on the last day of the tax year or $300,000 at any point, as a single filer living abroad (2025)
• Gift or inheritance from a foreign person or foreign estate exceeding $100,000 (2025)
• Gift from a foreign corporation or partnership exceeding $20,116 (2025)
• Transactions with a foreign trust, ownership of a foreign grantor trust, or distributions from a foreign trust
• 10% or greater ownership of a foreign corporation that qualifies as a controlled foreign corporation
• Contribution of property to a foreign partnership, or 10% or greater ownership of one

If any answer is yes, continue to the decision table below.

What to gather next: foreign account statements, entity formation documents, transfer records, gift documentation, and fair market value appraisals.

FinCEN Form 114 has its own threshold, deadline, and electronic filing requirement – it is separate from Form 8938 and must be filed with FinCEN, not the IRS.

Foreign real estate and retirement accounts

Two asset types cause the most confusion: directly held foreign real estate and foreign pension or retirement accounts.

Foreign real estate

Directly held foreign real estate – a house, apartment, or land in your personal name – is generally NOT a specified foreign financial asset for Form 8938 purposes.

If you hold the property through a foreign entity such as a corporation, partnership, or trust, the interest in that entity IS reportable.

A US person who owns a flat in Paris through a French SCI – société civile immobilière – reports the SCI interest on Form 8938. Depending on the entity type, Form 5471 or Form 8865 may also apply.

 

Foreign pension and retirement accounts

Foreign pension and retirement accounts are generally treated as specified foreign financial assets for Form 8938. If the account is structured as a foreign trust – as many non-US pension systems are – it may also trigger Form 3520 reporting.

The analysis depends on the account structure and the country involved. If you are unsure, get professional help before filing.

Foreign pension income is generally taxable in the US, though treaty provisions vary by country and may reduce or eliminate double taxation on retirement distributions.

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Quick decision table: which form do you file?

Below is a list of foreign asset disclosure forms the IRS may require, depending on the type of asset and entity involved.

 

Multiple entity types can require multiple forms. An expat who owns a foreign bank account, holds shares in a foreign corporation, and receives a trust distribution could file the FBAR, Form 8938, Form 5471, and Form 3520 – all for the same tax year.

Start here: identify the asset, identify the entity, then identify the transaction.

Form 8938: when you report foreign financial assets under FATCA

Form 8938 – the Statement of Specified Foreign Financial Assets – is the form filed under the Foreign Account Tax Compliance Act, commonly known as FATCA. It applies to US citizens, residents, and certain nonresidents who hold specified foreign financial assets above the applicable threshold.

The disclosure of foreign assets in the income tax return happens through Form 8938, attached directly to your Form 1040.

Filing thresholds – overseas filers (tax year 2025):

 

Filing thresholds – domestic filers (tax year 2025):

 

You meet the threshold if either condition is true – you do not need to exceed both.

The “overseas” thresholds apply if you pass the bona fide residence test or the physical presence test for the relevant tax year. If you do not qualify for either test, the domestic thresholds apply even if you live abroad.

 

Penalties for failure to file (2025):

• Initial penalty: $10,000
• Continuation penalty: $10,000 for each 30-day period after IRS notice, up to $50,000
• Accuracy-related penalty: 40% of any underpayment attributable to an undisclosed foreign financial asset

The full list of specified foreign financial assets subject to Form 8938 includes interests in foreign entities, financial instruments with foreign counterparties, and certain insurance contracts – not just bank accounts.

When Form 8938 does not replace other foreign asset reporting forms

Form 8938 does not replace the FBAR or any other international information return. Both may apply to the same asset.

When you timely report a foreign asset on Form 3520, 3520-A, 5471, 8621, or 8865, you generally identify that form and the asset in Part IV of Form 8938 instead of completing the full asset detail. You still count the asset toward your Form 8938 threshold.

Common overlap situations:

• You hold a foreign bank account above $10,000 → file both FBAR and Form 8938 if above FATCA thresholds
• You own shares in a foreign corporation → file Form 5471 if a filer category applies, and report the interest on Form 8938
• You received a distribution from a foreign trust → file Form 3520 and report the trust interest on Form 8938
• You own an interest in a foreign partnership → file Form 8865 if a category applies, and report the interest on Form 8938

Test ownership, control, and transfer activity separately for each form.

The FBAR vs. Form 8938 comparison matters because the two forms use different thresholds, different filing agencies, and different definitions of what counts as a reportable asset.

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Form 3520: foreign trusts, large foreign gifts, and inheritances

Form 3520 is an information return for US persons involved with foreign trusts or who receive large gifts or inheritances from foreign sources. It covers three distinct triggers.

Common triggers:

• Foreign trust transactions – transferring property to a foreign trust, owning a foreign grantor trust, or receiving distributions from a foreign trust
• Large foreign gifts – receiving gifts or bequests from nonresident alien individuals or foreign estates exceeding $100,000 in aggregate (2025)
• Gifts from foreign entities – receiving gifts from foreign corporations or partnerships exceeding $20,116 in aggregate (2025)

The $100,000 threshold is statutory and not inflation-adjusted. The $20,116 threshold IS the inflation-adjusted amount for tax year 2025.

Not every foreign inheritance triggers Form 3520. An inheritance from a US person’s estate – even if the assets are located abroad – is generally not reportable on Form 3520. What matters is whether the decedent was a nonresident alien or the estate is a foreign estate.

Example 1: Your father, a US citizen living in Spain, passes away and leaves you $200,000. His estate is a US estate because he was a US citizen. No Form 3520.

Example 2: Your uncle, a French citizen with no US ties, leaves you $150,000. His estate is a foreign estate. You file Form 3520 because the bequest exceeds $100,000 (2025).

Be careful with transfers through trusts. A payment from a foreign trust is not the same as a gift from a foreign individual, even if the trust was set up by a family member. Trust distributions have separate reporting rules and may require a different section of Form 3520.

Penalties for failure to file:

• foreign trust transfer or distribution penalties: the greater of $10,000 or 35% of the gross value of the transfer or distribution
• foreign trust ownership penalties: the greater of $10,000 or 5% of the trust’s assets treated as owned by the US person, for failing to report ownership of a foreign trust, including ensuring Form 3520-A is filed
• foreign gift penalties: 5% of the gift amount per month the return is late, up to 25%

Trust transactions and gifts are both reported on Form 3520, but they use different sections and carry different penalty structures.

Gift-specific thresholds and filing procedures are separate from trust reporting requirements.

The foreign gift tax rules differ from trust reporting – they use different thresholds, different penalty rates, and different sections of Form 3520.

Do you need Form 3520 for a foreign inheritance or gift?

Ask these questions in order:

1. Source of the money. A foreign person – nonresident alien individual or foreign estate – or a foreign entity such as a corporation or partnership.
2. Amount. Over $100,000 from a foreign individual or estate, or over $20,116 (2025) from a foreign corporation or partnership.
3. Transfer method. Directly, or through a trust.

If the gift came directly from a foreign individual or foreign estate and the aggregate exceeds $100,000 (2025), file Form 3520.

If the gift came from a foreign corporation or partnership and the aggregate exceeds $20,116 (2025), file Form 3520.

If the money passed through a foreign trust, the trust distribution rules apply instead – and you may need Form 3520 for the distribution rather than as a gift report.

Form 5471: when foreign corporation ownership triggers reporting

Form 5471 – Information Return of US Persons With Respect to Certain Foreign Corporations – is one of the most complex international information returns.

The form itself is six pages, with 18 or more schedules and attachments depending on the filer category.

Filing Form 5471 does not depend on ownership percentage alone. You need an applicable filer category.

Filer categories:

• Category 1 – A US shareholder of a section 965 specified foreign corporation (SFC). The IRS splits this into three sub-categories: 1a for the general case, 1b for an unrelated section 958(a) US shareholder of a foreign-controlled SFC, and 1c for a related constructive US shareholder of a foreign-controlled SFC – each attaches different schedules.
• Category 2 – US citizen or resident who is an officer or director of a foreign corporation when a US person acquires a 10% or greater interest
• Category 3 – A US person who acquires stock that brings ownership to 10% or more, acquires stock that by itself, without counting stock already owned, meets the 10% threshold, becomes a US person while already owning 10% or more, is treated as a US shareholder under section 953(c) with respect to certain foreign insurance companies, or disposes of stock that drops ownership below 10% – triggered by the event, not by ongoing ownership
• Category 4 – US person who had control, meaning more than 50% of voting power or value, at any time during the annual accounting period
• Category 5 – A US shareholder owning 10% or more by vote or value of a controlled foreign corporation (CFC) – a foreign corporation that is itself more than 50% owned by US shareholders. The IRS splits this into three sub-categories: 5a for the general case, 5b for an unrelated section 958(a) US shareholder of a foreign-controlled CFC, and 5c for a related constructive US shareholder of a foreign-controlled CFC – each attaches different schedules.

Category 5 is the most common trigger for expats. It requires two things: you own 10% or more, AND the corporation is a CFC. A US person who owns 10% of a foreign company that is NOT more than 50% US-owned does not file under Category 5.

Passive ownership can trigger reporting when a filer category applies. Being a minority shareholder does not automatically exempt you if the corporation qualifies as a CFC through combined US ownership.

Penalties for failure to file (2025):

• $10,000 per annual accounting period per foreign corporation
• Additional $10,000 for each 30-day period after IRS notice, up to $50,000
• 10% reduction in foreign tax credits otherwise available, plus an additional 5% reduction for each three-month period, or part of one, the failure continues beyond 90 days after IRS notice

The Form 5471 filer categories each carry different schedule requirements, with Category 5 being the most complex.

A corporation qualifies as a CFC when combined US ownership exceeds 50% – family attribution and entity attribution can push the total above the threshold even when no single person holds a majority.

Common expat situations that can trigger Form 5471

These are the scenarios we see most often with expat clients filing Form 5471.

Starting a company abroad – You register an LLC-equivalent in your country of residence. If you control it with more than 50% ownership, you are a Category 4 filer. If other US persons also own shares and combined US ownership exceeds 50%, it becomes a CFC and Category 5 applies.

Inheriting foreign shares – You inherit 15% of a family-owned foreign corporation. If the company already has enough US shareholders to qualify as a CFC, your 10%+ stake makes you a Category 5 filer.

Joining a family-owned company – You are added as a director or minority shareholder. If another US person acquires 10% or more at the same time, you may be a Category 2 filer for that year.

Being paid in equity – Your foreign employer grants you stock that pushes you above 10% of a CFC. Category 5 applies.

Dormant foreign corporations

If your foreign corporation had no business activity, minimal income and expenses, and limited assets during the entire annual accounting period, it may qualify for simplified reporting.

Revenue Procedure 92-70 allows qualifying dormant corporations to file only page 1 of Form 5471.

Label page 1 “Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporation.”

Per section 3 of Rev. Proc. 92-70, as referenced in the current Instructions for Form 5471, the dormant corporation must meet all qualifying conditions, including gross receipts and expenses each at or below $5,000 and total assets at or below $100,000.

Constructive ownership rules can attribute shares from family members and related entities to you – pushing you into a filer category you did not expect.

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Form 8865: when a foreign partnership interest must be reported

Form 8865 – Return of US Persons With Respect to Certain Foreign Partnerships – applies to US persons who fall into one of four filer categories. Partnership reporting is separate from corporation reporting, and the triggers differ.

Filer categories:

• Category 1 – US person who controlled the foreign partnership, meaning more than 50% interest, at any time during the tax year
• Category 2 – US person who owned at least 10% while the partnership was controlled by US persons
• Category 3 – US person who contributed property to a foreign partnership AND either owned at least 10% of the partnership right after the contribution, OR the contribution plus other transfers in the preceding 12 months exceeded $100,000
• Category 4 – US person who had a reportable event such as an acquisition, disposition, or change in proportional interest

Category 3 is about contributions and transfers – not ongoing ownership alone. A US person who simply holds a partnership interest without making a transfer during the year does not file under Category 3.

Examples:

• You and a colleague open a consulting firm registered as a foreign partnership. If you own more than 50% of profits, you file as a Category 1 filer.
• You inherit a 25% interest in a foreign partnership. No contribution occurred – you do not file under Category 3 for the inheritance year, though Category 1 or 2 may apply depending on control.
• You transfer $150,000 in equipment to an existing foreign partnership in which you hold a 15% interest. Category 3 applies – both the 10% interest test and the $100,000 transfer test are met.

Penalties for failure to file (2025):

• Categories 1, 2, and 4: $10,000 per tax year, plus up to $50,000 more after IRS notice
• Categories 1, 2, and 4: 10% reduction in foreign tax credits, plus an additional 5% reduction for each three-month period, or part of one, the failure continues beyond 90 days after IRS notice
• Category 3: 10% of fair market value of contributed property, up to $100,000, plus gain recognition

The Form 8865 filing categories each carry different reporting requirements, and misclassifying your category can mean filing the wrong schedules.

Your share of foreign partnership income is generally taxable in the US regardless of whether the partnership distributes cash – allocation and reporting follow US rules, not local law.

Where FBAR fits into the decision tree

The FBAR – FinCEN Form 114 – is not part of the income tax return. It is filed separately with the Financial Crimes Enforcement Network through the BSA E-Filing System.

The general rule: any US person whose aggregate value of foreign financial accounts exceeded $10,000 at any point during the calendar year must file.

This $10,000 threshold is statutory and not inflation-adjusted.

Limited exceptions exist for certain account types, certain employees and officers of financial institutions, and entities that qualify for consolidated reporting. These exceptions are narrow and do not apply to most individual expats.

The FBAR is account-based. It covers foreign bank accounts, securities accounts, and other financial accounts held at a foreign financial institution. It does not cover direct ownership of foreign stock, real estate, or other assets that are not held in an account.

FBAR vs. Form 8938 – key differences:

Both forms can apply to the same account, but they differ in filing agency, thresholds, asset scope, and deadline.

 

An asset may need to be reported on both forms. A foreign bank account above $10,000 is always FBAR-reportable. If your total specified foreign financial assets also exceed the Form 8938 threshold, the same account goes on both.

The FBAR filing process requires electronic submission through the BSA E-Filing System.

Specific rules apply to joint accounts, accounts closed during the year, and maximum-value calculations.

Common mistakes expats make with foreign asset forms

These are the errors we see most often.

• Assuming the FBAR covers everything – The FBAR reports foreign accounts only. It does not cover foreign corporation ownership, partnership interests, trust transactions, or large gifts. Each of those has its own form with its own threshold. Check each form’s triggers independently.
• Missing constructive ownership – The IRS attributes ownership from family members and related entities. You may be treated as owning shares you do not personally hold. This is common with Form 5471, where family attribution can push combined US ownership above the 50% CFC threshold. Review the constructive ownership rules before determining your filer category.
• Confusing gifts with trust distributions – A payment from a foreign trust is not the same as a gift from a foreign individual, even if the trust was set up by a family member. Trust distributions have separate reporting rules and may change which section of Form 3520 applies. Identify whether the money came directly from a person or through a trust structure before choosing the applicable reporting path.
• Overlooking partnership interests – Expats who co-own a foreign business often think of it as a corporation when it is legally structured as a partnership. The reporting form is different – Form 8865 instead of Form 5471 – and the filer categories use different tests. Confirm the entity classification under US tax rules, not just local law, before deciding which form to file.

Review your prior-year filings before submitting this year’s return. If you discover a missed form, the catch-up options in the next section may help.

Common FBAR filing mistakes include misreporting joint accounts, omitting accounts where you have signature authority but no ownership, and using the wrong exchange rate for the maximum value.

Penalties for non-disclosure of foreign assets and information returns

Penalties for missing these forms can be severe, and they accumulate. Missing two forms for the same tax year means two separate penalty tracks.

Penalty comparison table

 

All dollar amounts reflect 2025 inflation-adjusted figures where applicable.

Penalties vary by form and can stack when multiple forms are missed for the same tax year. An expat who fails to file both Form 8938 and the FBAR faces two separate penalty structures running at the same time.

Criminal exposure is primarily associated with willful FBAR violations, tax evasion, and filing false returns. Non-willful failures typically result in civil penalties only, but the amounts can still be substantial.

The penalty risk is the reason to correct past non-filing quickly. The next section covers your options.

The IRS assesses FBAR penalties per report, not per account – one penalty can apply to a single FBAR covering multiple accounts.

FATCA penalties under Form 8938 include both a continuation penalty for ignoring IRS notices and a 40% accuracy-related penalty on any underpayment tied to the undisclosed asset.

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Examples: which form applies in real expat scenarios

Each TFX scenario below walks through the same decision process – identify the asset, identify the entity, check each form’s rules independently.

Scenario 1 – Foreign bank account only

Facts: You are a single US citizen living in Germany with a savings account at Deutsche Bank holding approximately $48,000.

Required forms: FBAR only. The account exceeds the $10,000 FBAR threshold. However, approximately $48,000 is far below the Form 8938 overseas single-filer thresholds of more than $200,000 on the last day of the year or more than $300,000 at any point (2025).

Reason: FBAR has a low threshold. Form 8938 overseas thresholds are much higher.

Scenario 2 – Foreign company shares plus a trust distribution

Facts: You own 25% of a UK limited company that qualifies as a CFC, and you received a £30,000 distribution from a family trust in Jersey.

Required forms: Form 5471 for Category 5 filer status, Form 3520 for the trust distribution, Form 8938 for both the company interest and the trust interest if above FATCA thresholds, and FBAR if you have signature authority over company bank accounts.

Reason: Each asset type has its own form. The trust distribution is separate from the corporation ownership.

Scenario 3 – Inheritance from abroad

Facts: Your aunt, a citizen of India with no US ties, passes away and leaves you $120,000.

Required forms: Form 3520 – the bequest from a nonresident alien’s foreign estate exceeds $100,000 (2025).

Reason: The source is a foreign estate of a nonresident alien, and the amount exceeds the $100,000 threshold.

Scenario 4 – Foreign partnership ownership

Facts: You and two non-US partners operate a consulting business registered as a partnership in Singapore. You own 40% and contributed $80,000 in startup capital.

Required forms: Form 8865 – Category 3 applies because you contributed property and own more than 10% of the partnership right after the contribution. Form 8938 for the partnership interest if above FATCA thresholds.

Reason: The contribution plus 40% interest triggers Category 3 of Form 8865.

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