International divorce frequently triggers a foreign-asset reporting cascade: accounts that were previously “handled by the other spouse,” jointly titled assets that get split, and new single-filer thresholds can turn a historically quiet situation into an immediate U.S. compliance problem, often with large civil penalties and, in willful cases, criminal exposure. The enforcement environment is also more aggressive, with enhanced IRS enforcement funding and more sophisticated analytics, increasing the likelihood that previously missed foreign reporting gets detected.
Foreign Asset Reporting: The “Big Three” Regimes (Quick Comparison)
| Regime | What It Reports | Where Filed | Core Trigger | Due Date (for 2025 calendar year) | Key Penalty Framework |
| FBAR (FinCEN Form 114) | Foreign financial accounts (including bank, securities, some insurance/annuity accounts) | Separately from the tax return (FinCEN e-filing) | Aggregate foreign account value > $10,000 at any time during the year (all foreign accounts combined) | April 15, 2026 with automatic extension to October 15, 2026 | For 2025 (inflation-adjusted): non-willful up to $16,536 per report; willful greater of $165,353 or 50% of the account balance per violation; criminal possible |
| FATCA (Form 8938) | Specified foreign financial assets (broader than FBAR: accounts plus many non-account assets like foreign stock/partnership interests, foreign pensions, etc.) | Attached to annual income tax return | Filing-status/residency thresholds (often $50,000/$75,000 for U.S. residents who are single/MFS) | Due with Form 1040 (generally April 15; expats often June deadline) | $10,000 failure-to-file plus $10,000 per 30 days after IRS notice up to $50,000 |
| Foreign trust reporting (Forms 3520 / 3520-A) | Foreign trust transfers, distributions, ownership, gifts and annual foreign trust reporting | IRS (information returns) | Triggered by foreign trust transactions/ownership (common in international family wealth and divorce settlements)[1] | Form 3520-A due 15th day of 3rd month after trust year-end (calendar-year trust: March 15; 6‑month extension available via Form 7004) | Form 3520: often greater of $10,000 or 35% of reportable amount (depending on part); Form 3520‑A: generally greater of $10,000 or 5% of gross reportable amount |
Critical Overlap Point: Filing Form 8938 does not replace FBAR. If you meet both sets of rules, you generally file both.
1) FBAR (FinCEN Form 114): What Divorce Changes (And Why It Gets Missed)
The Filing Trigger (The “$10,000 Aggregate” Test)
FBAR is required when the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the year, a low threshold that is easy to cross when accounts exist in multiple countries or when a spouse holds several accounts.
Divorce-Specific Trap: People often assume FBAR only applies if they own the account. In divorce situations, the risk is that a taxpayer had signature authority or another filing obligation over accounts tied to the other spouse (for example, family business accounts or accounts in the spouse’s name).
Deadline And Extension (For 2025 Accounts)
For the 2025 calendar year, the FBAR is due on April 15, 2026, with an automatic extension to October 15, 2026 (no separate extension form required).
Recordkeeping Expectation (Practical Audit Defense)
FBAR filers should retain supporting documentation with their tax records for at least five years.
In a divorce context, that retention period matters because spouses may lose access to account statements during or after separation; proactively preserving statements and proof of balances is often essential.
Penalties (Inflation-Adjusted Amounts For 2025)
- Non-Willful FBAR Penalty (Civil) – up to $16,536 per report
- Willful FBAR Penalty (Civil) – the greater of $165,353 or 50% of the account balance per violation
Criminal exposure is possible (especially in willful scenarios).
These numbers underscore why “we didn’t know” is not a strategy, particularly when divorce discovery, bank files, and cross-border information flows can surface old accounts.
Statute Of Limitations (Why Old Years Can Still Be In Play)
Standard audit limitation periods may not protect taxpayers when foreign reporting is missing. FBAR has a six-year period, and for certain failures (and fraud) older years may remain examinable.
2) FATCA Form 8938: “Specified Foreign Financial Assets” And Why Filing Status Changes Matter
What Form 8938 Covers (Broader Than Bank Accounts)
Form 8938 is required for certain U.S. taxpayers who hold specified foreign financial assets exceeding applicable thresholds. The IRS describes the basic rule as reporting when aggregate value exceeds $50,000 (with thresholds varying by taxpayer circumstances).
Form 8938 reaches beyond bank accounts and can include:
- foreign securities,
- foreign partnership/corporate interests,
- trusts, and
- foreign pensions.
This breadth is exactly why divorce restructurings (splitting entities, transferring shares, receiving pension rights) can suddenly trigger reporting even if “no foreign bank account” exists.
The Thresholds (Treas. Reg. §1.6038D-2): U.S. Residents vs. Living Abroad
The filing requirement turns on aggregate value exceeding a threshold that depends on residency and filing status.
Below are the thresholds expressly stated in the Form 8938 regulations:
Taxpayers Living In The U.S.
- Unmarried / Married Filing Separately – file if aggregate value exceeds $50,000 on the last day of the year or $75,000 at any time during the year.
- Married Filing Jointly – file if aggregate value exceeds $100,000 on the last day of the year or $150,000 at any time during the year.
Taxpayers Living Abroad (Qualified Individuals Under §911(d)(1))
- Unmarried (Or Not Filing Jointly) – file if aggregate value exceeds $200,000 on the last day of the year or $300,000 at any time during the year.
- Married Filing Jointly (Living Abroad) – file if aggregate value exceeds $400,000 on the last day of the year or $600,000 at any time during the year.
Divorce-Specific Trap: filing status changes (e.g., moving from married filing jointly to single or married filing separately) can materially lower the applicable threshold and create a new Form 8938 requirement even when the assets did not change. The regulation thresholds above show why: the U.S.-resident MFJ threshold is $100,000/$150,000, but single/MFS is $50,000/$75,000.
Deadline (Tied To The Income Tax Return)
Form 8938 is filed with the annual income tax return (as an attachment), not separately like FBAR. This creates a common divorce-year failure mode: the return gets filed on time, but the foreign asset schedule is omitted, even when FBAR was filed (or vice versa).
Penalties (And Why They Can Snowball)
- Initial Failure-To-File Penalty – $10,000
- Continuation Penalty After IRS Notice – $10,000 for every 30 days of continued noncompliance after notice, up to $50,000 maximum (per year)
Statute Of Limitations Risk
Missing Form 8938 can keep the statute of limitations open, which means taxpayers may find that very old years are still exposed once the IRS identifies an unreported foreign asset footprint.
3) Foreign Trust Reporting (Forms 3520 And 3520-A): The Divorce Settlement Danger Zone
International divorces frequently involve structures that are “trust-like” (even when they aren’t labeled as such), offshore family arrangements, or wealth vehicles that make distributions or transfers as part of a settlement.
Form 3520 – when penalties can be a percentage of the transfer/distribution.
The Internal Revenue Manual section provided includes detailed penalty computations that are especially important in divorce cases because transfers/distributions are exactly what settlements do.
For late-filed Form 3520, the IRS penalty computation depends on what is being reported:
If Form 3520 Part I (generally, certain foreign trust transactions such as transfers) is triggered, assess a penalty equal to the greater of $10,000 or 35% of the total amount reported (with specific line references in the IRM guidance).
• The IRM also provides that the aggregate penalty for Part I cannot exceed the gross reportable amount.
If Form 3520 Part III (generally, certain foreign trust distributions) is triggered, assess a penalty equal to the greater of $10,000 or 35% of the amount reported (again with detailed line references).
• The IRM similarly limits the aggregate penalty so it cannot exceed the gross reportable amount.
Form 3520-A: Annual Return For Foreign Trusts With A U.S. Owner
A foreign trust must file Form 3520-A annually when a U.S. person is treated as an owner of any portion of the foreign trust under the grantor trust rules (sections 671–679), and Form 3520-A includes required owner and beneficiary statements.
To avoid penalties for failure to timely file Form 3520-A, the U.S. owner must ensure the foreign trust timely files it, or the U.S. owner must file a substitute Form 3520-A with a timely-filed Form 3520.
Due Date
Form 3520-A is due the 15th day of the 3rd month following the end of the trust’s tax year (e.g., for a calendar-year trust, March 15), with a 6-month extended due date if the trust files an extension (Form 7004).
Penalty Framework (Form 3520-A)
The IRM states: the initial penalty for failure to file Form 3520-A generally is the greater of $10,000 or 5% of the gross reportable amount, where the gross reportable amount is the gross value of the portion of the trust’s assets treated as owned by each U.S. owner at year-end.
4) A Key Practical Point: “FBAR vs. Form 8938” Is Not Either/Or
A recurring compliance failure in international divorce matters is assuming that one form “covers” the other. It does not.
Form 8938 is filed with the IRS as part of the income tax return and covers “specified foreign financial assets.”
FBAR is a separate filing with its own threshold and due date mechanics (including automatic extension).
Filing Form 8938 does not relieve the taxpayer from filing FBAR when the FBAR rules are triggered.
Divorce Implication: You can be “compliant” on the tax return and still have FBAR exposure, or you can have FBAR filed and still have Form 8938 exposure, especially after filing status changes lower the 8938 threshold.
5) Common International Divorce Reporting Triggers That Deserve Special Attention
A. “I Never Benefited From The Account” (But Had An Obligation)
Divorce can reveal unrecognized historical obligations tied to a spouse’s accounts or business (including signatory authority). This matters because the FBAR regime is driven by account access/relationship and aggregate balances, not just whether you considered it “your money.”
B. Filing Status Shift Can Turn “No Form 8938” Into “Form 8938 Required”
The reporting thresholds change significantly when filing status changes (MFJ to single/MFS), creating new reporting requirements. The regulation thresholds show exactly how large the shift can be for U.S. residents: $100,000/$150,000 (MFJ) versus $50,000/$75,000 (single/MFS).
C. Trust Structures Embedded In Settlements (Or Foreign “Pensions” That Behave Like Trusts)
If a settlement causes a transfer to a foreign trust or a distribution from one, the IRM penalty computations show why the exposure can be economically severe (35% regimes for certain Form 3520 failures; 5% asset-value penalty for certain Form 3520-A failures).
D. Deadlines And “Hidden” Annual Compliance Calendars
FBAR – April 15 with automatic extension to October 15 (for 2025, due April 15, 2026 / Oct 15, 2026).
Form 8938 – with the tax return.
Form 3520-A – March 15 for calendar-year trusts (15th day of the 3rd month), extension possible via Form 7004.
International divorce clients often focus on the divorce timeline (court deadlines, settlement deadlines) and miss that these compliance calendars run independently.
E. Old-Year Exposure Can Persist When Foreign Reporting Is Missing
For most tax issues, the IRS has three years to audit (six years if the income understatement exceeds 25%). But foreign reporting failures have different rules:
- No Form 8938 File – Statute never begins to run on the entire return
- No FBAR Filed – Six-year statute of limitations under Bank Secrecy Act
- Fraudulent Return – No statute of limitations ever
Real-World Impact: The IRS can audit a 2015 return in 2026 if foreign asset reporting was required but not filed.
Conclusion: International Divorce Turns “Foreign Assets” Into An Active Compliance Event
The foreign reporting rules are deliberately complex. The IRS uses this complexity as a weapon, assuming that confusion equals willful violation. In international divorce cases, the complexity multiplies because you’re dealing with:
- Changing filing statuses mid-year
- Assets you may not have known existed
- Reporting obligations that weren’t yours during marriage but became yours after divorce
- Settlement agreements that don’t account for international tax issues
When divorce changes ownership, access, filing status, and documentation availability all at once, the safest posture is to treat foreign-asset reporting as its own workstream—with clear form-by-form mapping, threshold testing, deadline management, and record retention aligned to the regimes above.