Introduction
When most foreign founders are first setting up their LLC, they usually don’t think about state taxes. The early focus is usually practical: forming the company, opening a bank account, setting up Stripe, and starting sales. State-level tax questions tend to appear later — often after a notice arrives, an accountant asks for missing filings, or a payment processor requests confirmation of compliance.
By 2026, state tax enforcement has become far less forgiving, especially for foreign-owned LLCs operating online. Being compliant at the federal level does not automatically mean you are compliant with the states. Understanding how state taxes actually work — and when they apply — can prevent penalties, registration issues, and disruptions to your business. By 2026, state tax enforcement has become far less forgiving, especially for foreign-owned LLCs operating online. Being compliant at the federal level does not automatically mean you are compliant with the states. Understanding how state taxes actually work — and when they apply — can prevent penalties, registration issues, and disruptions to your business. Read our updated guide on foreign-owned LLC state taxes.
What Is FBAR (FinCEN Form 114)?
FBAR stands for Report of Foreign Bank and Financial Accounts. We can fill it by using FinCEN Form 114, which is required under U.S. anti–money laundering laws.
FBAR is not an income tax form and is not submitted with your IRS tax return. Instead, it is filed electronically through the U.S. Treasury’s reporting system. The purpose is simple: to disclose foreign financial accounts held or controlled by U.S. persons.
Who Must File FBAR?
An FBAR filing is required if:
- You are considered a U.S. person (this can include individuals, LLCs, corporations, partnerships, trusts, and estates), and
- You had a financial interest in or signature authority over one or more foreign financial accounts, and
- The combined value of all foreign accounts exceeded $10,000 at any point during the calendar year
The $10,000 threshold is based on the total of all accounts combined, not per account. Even briefly exceeding the threshold for a single day can trigger a filing requirement. Foreign founders often assume these rules apply only to U.S. citizens living in the U.S. That assumption leads to problems. FBAR and FATCA obligations can arise when you personally hold foreign assets or company funds are held outside the U.S. Learn why U.S. banks may reject foreign-owned LLC applications and how to get approved.
What Counts as a Foreign Financial Account?
Foreign accounts typically include:
- Bank and savings accounts held outside the U.S.
- Foreign brokerage and investment accounts
- Mutual funds or similar pooled funds held abroad
- Certain foreign pension or retirement accounts
Accounts must be reported even if they earned no income and even if they were rarely used.
FBAR Filing Deadline
FBAR is due on April 15. If you need more time, it automatically extends to October 15. You don’t have to ask for an extension — it just happens.
What Is FATCA (Form 8938)?
Form 8938 is for reporting certain foreign financial assets with your tax return. Unlike FBAR, it’s not just about bank accounts, as it can include other assets too.
Key Differences Between FBAR and FATCA
Despite some overlaps in the two filings, they are distinct:
- FBAR goes to the Treasury Department, while FATCA goes to the IRS
- FATCA (Form 8938) is submitted along with your IRS tax return
- The reporting thresholds are different
- The types of assets covered are not identical
It is common for taxpayers to be required to file both in the same year.
Who Must File Form 8938 in 2026?
Form 8938 applies only if all of the following are true:
- You are required to file a U.S. income tax return
- You hold specified foreign financial assets
- The total value of those assets exceeds the applicable threshold
FATCA Reporting Thresholds
Thresholds vary depending on filing status and whether you live inside or outside the U.S.:
- Single filers living in the U.S.: Assets over $50,000 at year-end or $75,000 at any time
- Married filing jointly (U.S. residents): Over $100,000 at year-end or $150,000 at any time
- Individuals living abroad: Significantly higher thresholds apply
Specified foreign financial assets can include:
- Foreign bank and investment accounts
- Foreign stocks or securities held outside U.S. accounts
- Ownership interests in foreign entities
- Foreign trusts and certain contractual investment arrangements
Penalties for Missing FBAR or FATCA Filings
The most serious risk with FBAR and FATCA is not confusion—it is penalties.
FBAR Penalties
If you miss a filing without trying to hide anything, the penalty can reach up to $10,000 per account.
For deliberate violations, the fines are much higher — the IRS can charge either 50% of the account balance or a set dollar amount, per account, per year.
In extreme cases, criminal charges may also be possible.
FATCA (Form 8938) Penalties
- If you do not submit Form 8938, then you may face a penalty of $10,000. Additional fines may apply if the issue isn’t corrected promptly.
- Higher penalties if the underreported income is tied to undisclosed foreign assets.
These penalties apply even when no tax was owed. Working with professionals experienced in international compliance helps prevent costly errors, such as incorrect reporting of foreign accounts. This is similar to how foreign business owners handle IRS forms correctly, such as the W-8BEN, to ensure proper documentation. Check our W-8BEN guide for foreign business owners.
Why FBAR and FATCA Matter for U.S. LLC Owners
Foreign founders often assume these rules apply only to U.S. citizens living in the U.S. That assumption leads to problems.
FBAR and FATCA obligations can arise when:
- You have signing authority over foreign business accounts
- Company funds are held outside the U.S.
- You personally hold foreign assets while filing U.S. tax returns
- Ownership or control structures cross borders
For example, a U.S. LLC owner who controls a foreign bank account used for operations may have FBAR obligations even if the business itself pays no U.S. income tax.
Best Practices for Staying Compliant in 2026
To avoid issues:
- Review foreign account balances every year
- Track peak account values, not just year-end balances
- Separate business and personal accounts clearly
- File FBAR electronically by the deadline
- Include Form 8938 with your tax return when required
- Maintain clear records of ownership, control, and account activity
Working with professionals experienced in international compliance helps prevent costly errors.
FAQs
1. Do I need to file FBAR if the account belongs to my company?
It is possible. The FBAR requirement can still apply if you are a signatory or have the right to control a foreign account, even if the account is held by a company.
2. If I file FBAR, do I still need Form 8938?
Yes, but in some cases, as FBAR and FATCA are separate requirements with different thresholds and reporting rules.
3. What happens if I discover I missed past filings?
In most cases, late filings can be amended, but not taking action will lead to an increased risk. Most of the time, the earlier the mistake is recognized, the better the resolution is.
4. Do foreign founders living outside the U.S. have to file these forms?
It is possible, depending on their tax residency, filing obligations, and asset levels. Location alone does not eliminate reporting requirements.
