PRACTICE AREAS
International Tax Compliance & Offshore Disclosure Checklist
Annual obligations, compliance gaps, and the pathways to resolve them
U.S. persons with foreign financial accounts, foreign business interests, foreign investment holdings, or foreign trust connections are subject to an extensive annual reporting framework — entirely separate from the income tax return. The penalties for non-compliance are severe, FATCA and the OECD Common Reporting Standard have made undisclosed foreign accounts increasingly visible, and the time to come into compliance voluntarily is before the IRS makes contact.
This checklist is organized in two parts. Part A covers the annual compliance obligations that apply on an ongoing basis. Part B covers the remediation pathways for U.S. persons who have discovered prior non-compliance and need a path forward.
Who should use this?
This checklist is for U.S. citizens, green card holders, and other U.S. persons with foreign financial accounts, foreign business interests, foreign investment portfolios, or foreign trust connections. It covers both the annual compliance obligations that apply to everyone in this category and the remediation pathways available to those who have fallen behind. Use Part A for ongoing compliance; use Part B if you have discovered historical gaps.
Part A — Ongoing Annual Compliance
Annual obligations for U.S. persons with foreign accounts, entities, trusts, and investments
Section 1
FBAR — FinCEN Form 114
The FBAR is filed with FinCEN — not the IRS — and is due April 15 with an automatic extension to October 15. It is separate from your tax return and is not filed with it.
- Determine whether you have a financial interest in, or signature authority over, any foreign financial accounts — including bank accounts, brokerage accounts, mutual funds, and foreign pension accounts.
- Calculate the aggregate maximum value of all reportable foreign financial accounts during the calendar year.
If the aggregate maximum value exceeded $10,000 at any point during the year — even for a single day — the FBAR filing obligation is triggered for that year.
- File FinCEN Form 114 electronically through the BSA E-Filing System by April 15 (automatic extension to October 15 — no request needed).
- Report all accounts, not just accounts held in your name — signature authority accounts (e.g., over a family member’s account or a business account) are also reportable.
- Retain records relating to reportable foreign accounts for five years from the FBAR due date.
Willful failure to file FBAR penalties can reach the greater of $100,000 or 50% of the account balance per violation, per year. Non-willful penalties begin at $10,000 per violation.
Section 2
Form 8938 — FATCA (Specified Foreign Financial Assets)
Form 8938 is filed with your U.S. tax return and covers a broader category of specified foreign financial assets than the FBAR. Both may apply to the same account simultaneously.
- Determine whether you hold specified foreign financial assets above the applicable threshold — the threshold varies by filing status and residency.
For U.S. residents filing single/MFS: $50,000 at year-end or $75,000 at any point. For married filing jointly: $100,000/$150,000. For taxpayers abroad: $200,000/$300,000 (single) or $400,000/$600,000 (joint).
- Identify all specified foreign financial assets — including foreign financial accounts but also foreign stock held directly, interests in foreign partnerships, foreign notes, and interests in foreign trusts.
The FBAR covers foreign financial accounts. Form 8938 covers a broader set of specified foreign financial assets — the two forms overlap but are not identical. Both must be filed if applicable.
- Complete and attach Form 8938 to your annual U.S. tax return — it is not filed separately.
- Note that interests in foreign entities (corporations, partnerships, trusts) may need to be reported on both Form 8938 and a separate entity-specific form (Form 5471, 8865, or 3520).
Section 3
Form 5471 — Interests in Foreign Corporations
The U.S. tax classification of a foreign entity is not always obvious and must be determined before the correct reporting form is identified. A foreign entity treated as a corporation for U.S. purposes requires Form 5471; one treated as a partnership requires Form 8865; a disregarded entity requires Form 8858.
- Confirm the U.S. tax classification of each foreign company in which you hold an interest — corporation, partnership, or disregarded entity — under the check-the-box regulations.
The U.S. classification does not automatically follow local law. Certain foreign entities are ‘per se’ corporations under the regulations regardless of local law treatment. Others may elect their classification. The applicable regulations must be reviewed.
- Determine your ‘category of filer’ under Form 5471 — categories 1 through 5 carry different filing obligations based on ownership percentage, officer/director status, and CFC relationship.
- If the foreign corporation is a Controlled Foreign Corporation (CFC) — owned more than 50% in vote or value by U.S. shareholders — confirm that Subpart F income, NCTI (Net CFC Tested Income), and related schedules are properly analyzed.
- File Form 5471 as an attachment to your annual U.S. tax return — one form per foreign corporation per year.
Penalties for failure to file Form 5471 begin at $10,000 per form per year and increase to $50,000 for continued non-compliance. The IRS has significantly increased enforcement in this area.
Section 4
Forms 8865 & 8858 — Foreign Partnerships and Disregarded Entities
U.S. persons with interests in foreign partnerships and foreign disregarded entities have separate information reporting obligations distinct from the foreign corporation regime.
| Step | Action | What to know |
|---|---|---|
| Form 8865 | Confirm Form 8865 filing obligations if you own a 10% or greater interest in a foreign partnership. | Also triggered if you acquired, disposed of, or had a change in proportional interest during the year. |
| Form 8858 | Confirm Form 8858 filing obligations if you own a foreign disregarded entity or a foreign branch. | Applies to disregarded entities and branches — not to entities classified as corporations or partnerships. |
| Classify first | Verify the U.S. tax classification of each entity before selecting the form. | Entity classification determines whether Form 5471, 8865, or 8858 applies. |
| File | File Forms 8865 and 8858 as attachments to your annual U.S. tax return. | Penalties for failure to file Forms 8865 and 8858 mirror those for Form 5471 — beginning at $10,000 per form per year. |
Section 5
Form 8621 — Passive Foreign Investment Companies (PFICs)
Foreign mutual funds, ETFs, and most non-U.S. pooled investment vehicles are PFICs. The default PFIC regime is punitive — annual reporting is required and timely elections can significantly reduce the tax burden.
- Identify all foreign mutual funds, ETFs, unit trusts, and other pooled investment vehicles in your portfolio — these are almost always PFICs.
- Determine whether a QEF (Qualified Electing Fund) or mark-to-market election has been made for each PFIC holding.
Elections must be made on a timely basis. Missing the first-year window for a QEF or MTM election results in the default excess distribution regime — the most punitive outcome. Late elections are available in limited circumstances but require additional steps.
- File Form 8621 for each PFIC annually — one form per PFIC per year is required even if there are no distributions or dispositions in the current year (for certain PFIC categories).
- If you hold PFICs without any election, analyze the default excess distribution rules before any distribution or disposition is made — the tax and interest charge calculation must be done in advance.
Section 6
Forms 3520 & 3520-A — Foreign Trusts
Foreign trusts with U.S. connections trigger some of the most penalized reporting obligations in the international framework. Forms 3520 and 3520-A have different deadlines and different responsible parties.
- Identify all foreign trusts in which you serve as grantor, trustee, or beneficiary, and all foreign gifts and inheritances received during the year.
- If you are a U.S. person who transferred assets to, or received distributions from, a foreign trust — or received a foreign gift or inheritance exceeding the applicable threshold — file Form 3520.
Form 3520 is due on the same date as your income tax return (including extensions). The reporting threshold for foreign gifts from non-corporate foreign persons is $100,000 or more in aggregate. Penalties begin at $10,000 or 35% of the gross reportable amount.
- If you are a U.S. person treated as the owner of a foreign trust (foreign grantor trust) — file, or ensure the foreign trustee files, Form 3520-A.
Form 3520-A is due March 15 (or the 15th day of the 3rd month after the trust’s year-end), with an extension to September 15. The U.S. grantor is responsible for ensuring this form is filed even if the foreign trustee fails to do so. Penalties begin at $10,000 or 5% of the gross value of trust assets.
- Analyze whether distributions received from a foreign non-grantor trust are subject to the throwback rules and interest charges before accepting or planning distributions.
Part B — Compliance Remediation & Offshore Disclosure
For U.S. persons who have discovered prior non-compliance and need a path forward
Section 7
Step 1 — Willfulness Analysis
The most important threshold question in any compliance remediation is whether the non-compliance was willful or non-willful. This determination drives program selection — and selecting the wrong program can create serious exposure.
- Assess the facts and circumstances of the non-compliance — when did you become aware of FBAR and international reporting obligations, and what was the basis for not filing?
- Analyze whether you checked ‘no’ on Schedule B (Line 7a) of your U.S. tax returns for years in which you had reportable foreign accounts.
Checking ‘no’ on Schedule B while having reportable foreign accounts is a significant indicator of willfulness in IRS examinations and court decisions, even if the taxpayer claims lack of awareness.
- Assess the size, number, and nature of the unreported accounts or assets — larger, more numerous, or more actively managed accounts are more likely to support a willfulness finding.
- Assess whether income from the unreported accounts or assets was reported on U.S. tax returns — unreported income is a significant aggravating factor.
- Do not select a disclosure program before the willfulness analysis is complete — this determination should be made with qualified counsel.
Section 8
Step 2 — Disclosure Program Selection
There are several IRS pathways to come into compliance, and each is appropriate for a different set of facts. The programs are not interchangeable.
- If the non-compliance was non-willful and you reside outside the United States: evaluate the Streamlined Foreign Offshore Procedures (SFOP).
SFOP requires: (1) non-willful non-compliance; (2) failure to meet the substantial presence test for at least one of the three most recent tax years; and (3) filing three years of amended or original returns and six years of FBARs with a non-willfulness certification. Penalty: zero.
- If the non-compliance was non-willful and you reside in the United States: evaluate the Streamlined Domestic Offshore Procedures (SDOP).
SDOP has the same substantive requirements as SFOP but applies to U.S. residents. Penalty: 5% miscellaneous offshore penalty calculated on the highest aggregate balance of unreported foreign assets during the covered period.
- If the non-compliance was willful, or if the facts are ambiguous: evaluate the IRS Criminal Investigation Voluntary Disclosure Program (VDP).
VDP requires disclosure before the IRS opens an examination or criminal investigation. It provides no guarantee of non-prosecution but substantially reduces criminal and civil exposure. It involves a more extensive process including a preliminary submission, a conference with IRS-CI, and a closing agreement.
- If the only gap is unfiled FBARs with no unreported income: evaluate the Delinquent FBAR Submission Procedures.
- If the only gap is unfiled international information returns (Forms 5471, 8865, 3520, etc.) with no unreported income: evaluate the Delinquent International Information Return Submission Procedures.
These delinquent procedures are narrower than Streamlined — they apply only when income was properly reported and there is no FBAR issue (for the information return procedures) or no income issue (for the FBAR procedures). If there is any doubt about whether income was fully reported, the Streamlined pathway should be evaluated instead.
Section 9
Step 3 — Remediation Execution
Once the program is selected, execution must be careful and complete. A defective Streamlined or VDP submission can be rejected by the IRS or, worse, treated as a fraudulent submission.
- Gather all relevant account statements, entity documents, and trust records for the years to be covered by the submission.
- Prepare amended or original U.S. federal tax returns for all covered years — ensuring all foreign income previously omitted is included.
- Prepare delinquent FBARs for all covered years — six years for Streamlined, and the full period of non-compliance for VDP.
- For Streamlined submissions: prepare a non-willfulness certification statement that accurately and completely describes the facts and circumstances of the non-compliance.
The non-willfulness certification is the most critical document in a Streamlined submission. It must be factually accurate, thorough, and consistent with the amended returns. IRS examinations of Streamlined submissions often focus on the certification — an inaccurate or incomplete certification can result in the submission being treated as willful.
- For each international information return gap (Forms 5471, 8865, 3520, etc.): prepare the missing forms for inclusion with the amended returns.
- Calculate and include any tax due, interest, and applicable penalties with the submission.
- Retain complete copies of the entire submission package — returns, FBARs, certifications, and payment records — indefinitely.
Section 10
Step 4 — Ongoing Compliance After Remediation
Coming into compliance through a disclosure program is not the end — it is the beginning of a compliant posture that must be maintained going forward.
- Establish a compliance calendar for all annual international reporting obligations — FBAR, Form 8938, and any entity-specific forms — and ensure they are filed on time each year going forward.
- Engage a return preparer with international tax experience who is familiar with all applicable forms and will ask the right questions in future years.
- Notify your financial advisor and foreign bank of your U.S. person status — FATCA requires foreign financial institutions to report U.S. account holders to the IRS, and account information may be shared regardless of whether you file.
- If you completed a Streamlined submission, maintain documentation demonstrating the non-willful nature of the prior non-compliance — this may be relevant if the IRS later examines the submission.
- Review your compliance position annually as your foreign financial circumstances change — new accounts, new entity interests, or trust connections may trigger new reporting obligations.
Questions About Your International Compliance Position?
Concepción Global PLLC advises U.S. persons on the full range of international information reporting obligations — from annual FBAR and Form 8938 advisory to multi-year compliance remediation through the IRS Streamlined Procedures and Voluntary Disclosure Program. We work in English, Spanish, French, and Portuguese.
Christine Alexis Concepción, Esq. caconcepcion@
concepcionlaw.com +1.305.444.6669
201 South Biscayne Boulevard, Suite 2832, Miami, Florida 33131
concepcionlaw.com