Foreign Income & FBAR
FinCEN 114, Form 8938, Form 1116, Form 1040
FBAR and Form 8938 reporting for UK accounts, with the income those accounts produce reported correctly on the US return.
What does Foreign Income & FBAR involve?
To the US, every UK bank account, ISA and pension is a foreign financial account. Two separate reports may be due on them each year, to two different agencies, with different thresholds. The income the accounts produce is a third matter, reported on the tax return itself.
Forms and filings involved
- FinCEN 114
The annual report of foreign accounts filed with FinCEN, separate from the tax return, once combined balances pass the threshold.
- Form 8938
The FATCA asset statement attached to the tax return, with higher thresholds for filers who live abroad than for those in the US.
- Form 1116
The form that turns UK income tax into a credit against US tax on the same income, with carryovers for unused amounts.
- Form 1040
The annual federal return for US citizens, green card holders and US residents, reporting worldwide income wherever the filer lives.
Reporting UK accounts and the income from them
The FBAR, FinCEN Form 114, is filed with FinCEN and not with the IRS or the tax return.
It is required when the combined maximum value of all foreign financial accounts exceeds $10,000 at any time in the year. The threshold is an aggregate, so five small accounts can cross it together. Accounts over which you have signature authority count, even if the money belongs to an employer or a parent. The report is due 15 April, extended automatically to 15 October.
Form 8938 is a separate report, filed with Form 1040, and covers a wider class of assets, including some interests that are not held in an account at all. For a filer living abroad who does not file jointly, it applies when specified foreign assets exceed $200,000 at year end or $300,000 at any time. For joint filers abroad the figures are $400,000 at year end or $600,000 at any time. The initial penalty for not filing is $10,000. Many UK residents must file both, reporting the same accounts twice in different formats.
Reporting an account is separate from reporting the income it produces. UK bank interest, dividends, rent and pension income all go on Form 1040 in dollars, whether or not they are taxable in the UK. Interest inside a cash ISA and premium bond prizes are common omissions, because UK residents are used to ignoring them. Non-wilful FBAR penalties apply per report and not per account, following Bittner v. United States in 2023. That limits the exposure. It does not remove the obligation.
Accounts and income we report
- 01
- FinCEN 114 covering every account, including joint and signature-only accounts
- 02
- Maximum balances converted at the Treasury year-end exchange rate
- 03
- Form 8938 where specified foreign assets pass the filing threshold
- 04
- UK pensions, ISAs and investment accounts classified for each form
- 05
- UK interest, dividends and rent reported on the return in dollars
Who this is for
Americans in the UK with current accounts, savings, ISAs or pensions
- Employees with signing authority over a UK employer's bank accounts
- Joint account holders where only one spouse is a US person
- Green card holders who kept UK accounts after moving to the US
Why US UK Tax Returns
Each return is prepared with the other country's return open beside it, so a credit, election or disclosure on one is supported by the other.
One File
US and UK returns prepared in the same engagement and reconciled line by line.
Primary Sources
Every position traced to the Code, the treaty, IRS instructions or HMRC guidance.
Scope First
Returns, forms, years and fee agreed in writing before work begins.
The Same People
The team that files this year carries the elections and credits into the next.
Questions we are asked
Do I need to file an FBAR if no single account ever went over the limit?
Possibly. The $10,000 test is applied to the total of the highest balances of all your foreign accounts during the year, not to each account. A current account, a savings account and an ISA that are each small can together require a report. Once the threshold is passed, every account is listed, including those with very little in them. Pensions and joint accounts are counted too.
What is the difference between the FBAR and Form 8938?
They overlap but are not the same. The FBAR goes to FinCEN, has a low aggregate threshold, and includes accounts you can sign on but do not own. Form 8938 goes to the IRS with your return, has much higher thresholds that vary with filing status and country of residence, and reaches some assets outside accounts, such as directly held foreign shares. Filing one does not satisfy the other.
I can sign on my employer's account but none of the money is mine. Does that count?
Generally it does. The FBAR covers accounts over which you have signature or other authority, as well as those you own, because the rule is aimed at control and not only at wealth. There are limited exceptions for officers and employees of certain regulated or listed entities. The income in the account is not yours and does not go on your return. Whether an exception applies depends on the employer.
Primary sources
What this page says is drawn from the official material below. Read it yourself; we would rather be checked than trusted.
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