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International Tax

FBAR and International Tax CPA: Foreign Accounts, Form 5471, and Streamlined Filing for Bay Area Residents

Updated May 2026 · 13 min read

The Bay Area has one of the highest concentrations of foreign-born residents of any metro in the country, and most of them are doing their US taxes wrong. Not because they are careless. Because the international tax compliance system is genuinely difficult to navigate without a CPA who handles it regularly. A software engineer from China who moved to Sunnyvale on an H-1B visa ten years ago almost certainly has a bank account or a brokerage account back home that requires an annual FBAR filing. The same engineer may own shares in a Chinese technology startup through a variable interest entity structure that technically requires Form 5471. They may be receiving remittances from family that raise gift and trust reporting questions. And their RSUs, which vest in California, were partially earned while they were a Chinese tax resident, creating a sourcing allocation and foreign tax credit issue that most CPAs never see.

Silicon Valley Tax prepares international tax returns for Bay Area residents from India, China, Taiwan, South Korea, Vietnam, the Philippines, Israel, and across Europe and Latin America. Our office is at 2051 Junction Ave, San Jose CA 95131. Call (408) 383-9870 or book a free consultation online.

Who Needs International Tax Help in the Bay Area

The international tax compliance obligation attaches to US persons, not US citizens alone. A US person for FBAR and FATCA purposes includes citizens, lawful permanent residents (green card holders), and resident aliens who meet the substantial presence test. If you have lived in the US for 183 days in the current year, or meet the 183-day weighted test across three years, you are likely a US tax resident for the year regardless of visa status.

The populations we serve most often:

H-1B and L-1 visa holders from India, China, South Korea, and other countries who have bank accounts, brokerage accounts, or family-owned business interests in their home countries.
Green card holders who became permanent residents in the US but maintain financial ties to their home country, including real property, retirement accounts, and family trusts.
US citizens who spent part of the year abroad for work assignments or personal reasons, or who were born abroad to US citizen parents and have never filed a US return.
Tech workers with RSUs that partially vested abroad, creating a sourcing allocation between US and foreign income and a foreign tax credit question on income taxed in two countries.
Founders and executives with foreign subsidiaries or ownership stakes in foreign companies that trigger Form 5471 or Form 8865 filing obligations.
Individuals who have never filed FBAR and are now concerned about past non-compliance, who may qualify for the streamlined filing procedures.

FBAR: FinCEN Form 114

The FBAR (Report of Foreign Bank and Financial Accounts, FinCEN Form 114) is not filed with the IRS. It is filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department, through the BSA E-Filing System. This separation causes confusion: clients assume their CPA handles it when they file their tax return, but the FBAR is a separate electronic submission with its own deadline.

Who Must File

A US person must file the FBAR if, at any point during the calendar year, the aggregate maximum value of all foreign financial accounts exceeded $10,000. The $10,000 threshold is not per account. It is the aggregate across all foreign accounts. An H-1B holder with three Indian bank accounts totaling $15,000 at peak must file even if each account individually is below $5,000.

Foreign financial accounts include:

Bank accounts (checking, savings, fixed deposits)
Securities accounts (brokerage, trading, demat accounts)
Mutual funds held at a foreign institution
Certain foreign retirement accounts (discussed below)
Accounts in foreign branches of US banks

Signature Authority

Even if you do not own a foreign account, you may have FBAR filing obligations if you have signature authority over a foreign account belonging to your employer, a trust, or a family member. A Bay Area tech executive who is a signatory on the company's Singapore operating account must file the FBAR for that account even if they have no ownership interest in it. This requirement catches many professionals off guard.

Deadlines and Extensions

The FBAR deadline is April 15. Unlike the tax return, the extension to October 15 is automatic and does not require a separate request. There is no FBAR extension beyond October 15.

Penalties

The penalties for failing to file the FBAR are severe and are assessed per account per year, not per return. A non-willful failure can result in a civil penalty of up to $10,000 per account per year. A willful failure can result in a civil penalty of the greater of $100,000 or 50% of the account's highest balance per year, plus potential criminal prosecution. Courts have upheld penalties that exceeded the account balance in cases of sustained willful non-compliance.

The IRS distinguishes between willful and non-willful violations based on intent and knowledge. Claiming you did not know about the FBAR requirement is increasingly difficult as awareness of international reporting obligations is presumed among sophisticated taxpayers. We evaluate each client's specific facts carefully before characterizing prior non-compliance.

FATCA: Form 8938

FATCA (the Foreign Account Tax Compliance Act, enacted in 2010) created a separate but overlapping reporting requirement for specified foreign financial assets above threshold. Form 8938 is filed with the federal tax return, not separately with FinCEN, and covers a broader set of assets than the FBAR.

Thresholds

Filing Status	Year-End Balance Threshold	Any-Point-in-Year Threshold
Single, living in the US	$50,000	$75,000
Married filing jointly, living in the US	$100,000	$150,000
Single, living abroad	$200,000	$300,000
Married filing jointly, living abroad	$400,000	$600,000

What Form 8938 Covers Beyond FBAR

Form 8938 covers specified foreign financial assets, which includes everything on the FBAR list plus:

Foreign stocks or securities not held in a financial account
Foreign partnership interests
Foreign financial instruments (contracts with a foreign counterparty)
Interests in foreign trusts and foreign estates
Any financial instrument or contract that has a foreign issuer or counterparty

An interest in a family-owned LLC in Taiwan that holds real property, for example, may require Form 8938 reporting even though it is not a financial account and would not appear on the FBAR.

Form 5471: Foreign Corporations

Form 5471 (Information Return of US Persons With Respect to Certain Foreign Corporations) is required for multiple categories of US persons with interests in foreign corporations. The most common trigger for Bay Area tech workers:

Category 5 filer: US shareholder who owns 10% or more of the total combined voting power of a controlled foreign corporation (CFC). A CFC is a foreign corporation in which US shareholders (each owning at least 10%) collectively own more than 50% of the total combined voting power or value.

Form 5471 is a comprehensive informational return covering the foreign corporation's income statement, balance sheet, earnings and profits, and any inclusions required under the Subpart F rules (IRC Section 951) or the GILTI regime (IRC Section 951A).

GILTI: Global Intangible Low-Taxed Income

GILTI was enacted as part of the TCJA and requires US shareholders of CFCs to include in their US taxable income a share of the CFC's net income above a 10% return on the CFC's tangible assets. For C corporations, the Section 250 deduction reduces the GILTI inclusion by 50%, and a 80% foreign tax credit is available, effectively creating a US minimum tax on CFC income. For individuals who own CFCs directly (not through a US corporation), the Section 250 deduction is not available at all in the default case, making the effective US tax on GILTI higher for pass-through or direct individual ownership than for corporate ownership. A Section 962 election allows individuals to be taxed on GILTI at corporate rates with access to foreign tax credits, but the mechanics are complex. We analyze the Section 962 election for every individual client with CFC ownership.

Form 8865: Foreign Partnerships

Form 8865 (Return of US Persons With Respect to Certain Foreign Partnerships) parallels Form 5471 for foreign partnerships. A US person who controls a foreign partnership (more than 50% of profits, losses, or capital) or who is a 10% partner in a controlled foreign partnership files Form 8865. The form reports the partnership's income, deductions, and the US person's distributive share.

Bay Area investors who participate in foreign real estate partnerships, foreign private equity funds, or offshore investment vehicles through partnership structures will commonly need Form 8865.

PFIC: Passive Foreign Investment Company Reporting

A passive foreign investment company (PFIC) under IRC Section 1297 is a foreign corporation where at least 75% of gross income is passive, or at least 50% of assets produce or are held to produce passive income. This definition sweeps in most foreign mutual funds, certain foreign insurance companies, and foreign corporations held for investment.

The tax consequences of owning PFIC shares without proper elections are severe. Under the default "excess distribution" rules, any distribution or gain from the PFIC is allocated back to each year the stock was held, taxed at the highest marginal rate for each year, and subjected to an interest charge (currently the IRS underpayment rate plus 3 percentage points). This can produce an effective tax rate well above the top marginal rate, and the interest charge continues to accumulate.

Two elections mitigate the harsh default rules:

QEF election (Qualified Electing Fund): under IRC Section 1295, the investor includes their pro-rata share of the PFIC's ordinary earnings and net capital gains in income each year, avoiding the excess distribution regime. Requires the foreign company to provide annual information statements (PFIC Annual Information Statements).
Mark-to-market election: under IRC Section 1296, the investor marks the PFIC shares to fair market value at year end and recognizes gain or loss annually as ordinary income. Simpler but requires liquid, publicly traded PFICs.

Bay Area residents who hold foreign mutual funds through offshore accounts, or who invested in foreign fintech or startup funds, frequently have unrecognized PFIC positions that have never been reported. We identify these positions and evaluate the remediation options, including a "purging election" that allows certain existing PFIC positions to be converted to QEF treatment with a deemed sale and restarted basis.

Foreign Retirement Accounts

Retirement accounts in foreign countries get complex, inconsistent tax treatment in the US because the US generally treats them as ordinary investment accounts unless a specific treaty provision says otherwise.

Indian provident funds (EPF, PPF): the US-India income tax treaty does not have a pension article that covers EPF or PPF with any clarity. Income earned inside an Indian provident fund account is generally taxable in the current year for US tax purposes, and the accounts must be reported on the FBAR and potentially on Form 8938. The value is included in the Form 8938 threshold calculation.

Canadian RRSPs: the US-Canada treaty specifically covers RRSPs. A US resident can elect under Article XVIII(7) to defer US tax on income accruing inside the RRSP until distributions are made, mirroring the Canadian treatment. This election must be filed, and we prepare it for clients who hold Canadian retirement accounts.

UK SIPPs and ISAs: ISAs (Individual Savings Accounts) do not receive treaty-based deferral. Income inside a UK ISA is currently taxable in the US even though it grows tax-free in the UK. UK SIPPs (Self-Invested Personal Pensions) can receive treaty-based deferral under Article 17 of the US-UK tax treaty, but the mechanics require annual election filings and information reporting that most CPA firms do not prepare.

Foreign Tax Credits: Form 1116

The foreign tax credit allows US taxpayers to reduce their US tax liability by the amount of foreign income tax paid on the same income, subject to limitations. The credit is computed on Form 1116 and is limited to the ratio of foreign income to total income, times the US tax liability. Excess credits carry forward ten years.

For Bay Area tech workers with RSUs that vested partly abroad, the foreign tax credit analysis requires allocating the RSU income between the US and foreign tax years, matching the foreign taxes paid against the correct income category (general limitation versus passive), and applying the limitation calculation. When a worker moved from India to California mid-vesting period, the Indian taxes paid on the India-source RSU income may create a usable foreign tax credit against the US tax on that same income. We prepare the Form 1116 allocation with a supporting schedule that survives examination.

Streamlined Filing Compliance Procedures

The IRS Streamlined Filing Compliance Procedures (SFCP) are the primary path back into compliance for taxpayers who have non-willfully failed to file FBARs or report foreign income. The program has been available since 2012 and was revised to its current form in 2014. It provides a predictable, reduced-penalty path compared to the risk of examination and full penalties.

Streamlined Domestic Offshore (SDOP)

For US residents who are in the country (or were in the country during the non-compliance period):

File amended federal returns (Form 1040X) for the three most recent tax years
File FBARs for the six most recent years
Pay all back taxes and interest
Pay a miscellaneous offshore penalty of 5% of the highest aggregate balance of unreported foreign financial assets across the six-year FBAR lookback period
Submit a certification that the failure was non-willful

Streamlined Foreign Offshore (SFOP)

For taxpayers who lived abroad (met a non-residency test for any one of the three years in the lookback period):

Same filing requirements as SDOP
No miscellaneous offshore penalty
Must meet the non-residency requirement (fewer than 35 days in the US in at least one of the three years)

The streamlined procedures require a detailed narrative certification that the non-compliance was non-willful. The word "non-willful" is defined as conduct that was due to negligence, inadvertence, mistake, or conduct that was the result of a good-faith misunderstanding of the requirements of law. We help clients write clear, factually accurate certifications that address each element of the non-willfulness standard without overstating or understating the client's culpability.

When Streamlined Is Not Available

If the IRS or FinCEN has already initiated a civil examination or criminal investigation, the streamlined procedures are not available. Clients who become aware of such examinations should seek guidance immediately. We assess whether voluntary disclosure through the IRS Criminal Investigation Voluntary Disclosure Practice (VDP) is appropriate in those circumstances.

Treaty Positions and Dual-Status Returns

The US has income tax treaties with more than 65 countries. Treaty provisions can reduce withholding rates on dividends and interest, exempt certain types of income from US tax, provide tie-breaker rules for dual residents, and define residency status for treaty purposes. Taking a treaty position requires disclosure on Form 8833 (Treaty-Based Return Position Disclosure) in most cases.

Dual-status returns arise in the year a taxpayer becomes a US resident or terminates US residency. A dual-status return covers a period as a nonresident alien and a period as a US resident, each with different tax rules. RSUs that vest during the resident period are fully taxable; RSUs that vest during the nonresident period are subject to US withholding only on US-source income. Preparing dual-status returns correctly requires coordinating the resident and nonresident portions of the return and applying treaty provisions to the nonresident period where applicable.

Our International Tax Services at a Glance

FBAR (FinCEN 114) preparation and filing for all foreign financial accounts
FATCA Form 8938 preparation and threshold analysis
Form 5471 for US shareholders of foreign corporations, including GILTI inclusions and Section 962 elections
Form 8865 for US persons with interests in foreign partnerships
Form 8621 for PFIC reporting, including QEF and mark-to-market elections
Form 1116 foreign tax credit calculations with RSU sourcing allocations
Streamlined domestic and foreign offshore procedure submissions
Foreign retirement account analysis (EPF, RRSP, UK SIPP, Israeli pension)
Treaty-based return positions and Form 8833 disclosures
Dual-status returns for the year of arrival or departure from the US
Form 3520 and 3520-A for foreign trusts and foreign gifts
International tax planning for Bay Area executives on global assignments

Frequently Asked Questions

What is the FBAR and who has to file it?

The FBAR (FinCEN Form 114) must be filed by any US person who has a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate maximum value exceeded $10,000 at any point during the calendar year. US persons include citizens, green card holders, and resident aliens. Penalties for non-willful violations can reach $10,000 per account per year; willful violations can be $100,000 or 50% of the account balance, whichever is greater, per account per year.

What is the difference between FBAR and FATCA Form 8938?

FBAR (FinCEN 114) and FATCA Form 8938 often cover the same accounts but are separate requirements with different thresholds, different filing bodies, and different penalty structures. FBAR is filed with FinCEN if aggregate foreign accounts exceed $10,000 at any point in the year. Form 8938 is filed with the IRS if specified foreign financial assets exceed $50,000 on the last day of the year ($75,000 at any point) for single filers in the US. Form 8938 has broader scope, covering certain foreign-held interests and foreign trusts. Many clients must file both.

I missed FBAR filings for several years. What is the streamlined filing procedure?

The IRS Streamlined Filing Compliance Procedures allow taxpayers who non-willfully failed to report foreign financial assets to come into compliance with reduced penalties. For US residents, the penalty is 5% of the highest aggregate balance across the six-year lookback. For qualifying non-residents, the penalty is zero. The procedures require filing amended returns for three years and FBARs for six years, along with a non-willfulness certification. We prepare streamlined submissions regularly and can evaluate whether your situation qualifies.

I own shares in a foreign corporation. Do I need to file Form 5471?

Form 5471 is required for US shareholders who own 10% or more of a controlled foreign corporation, among other categories. The form covers the foreign corporation's income, assets, and any GILTI or Subpart F inclusions. GILTI requires US shareholders to include a share of the CFC's net income above a 10% routine return. For individuals owning CFCs directly, a Section 962 election may allow access to corporate rates and foreign tax credits on the GILTI inclusion.

How are RSUs taxed for H-1B visa holders who were outside the US during part of the vesting period?

RSU income is sourced based on where services were performed during the grant-to-vest period. If an H-1B worker received a grant while living in India and transferred to the US mid-vesting, California and federal income is prorated to the US portion. The foreign-source portion may be taxable in India, and a foreign tax credit on Form 1116 can offset the US tax on doubly-taxed income. We prepare these allocations grant-by-grant for Bay Area tech workers on H-1B and L-1 visas.

Why International Tax Clients Choose Silicon Valley Tax

International tax compliance errors are expensive and difficult to unwind. A missed FBAR for five years with three accounts averaging $50,000 each creates $150,000 of potential non-willful penalty exposure before any tax underpayment is addressed. A PFIC that has accumulated for 10 years without a QEF election can produce an effective tax rate above 60% when the interest charge is included. These are not edge cases for Bay Area residents. They are the normal situation for a significant fraction of our community.

We handle international tax filings year-round. We are familiar with the specific account types and reporting requirements for residents from India, China, Taiwan, South Korea, Israel, the UK, Canada, and elsewhere. We prepare streamlined submissions and coordinate with FinCEN and IRS examination when necessary. If you have overseas accounts, foreign company interests, or simply want to verify that your international compliance is correct, call us at (408) 383-9870 or book a free consultation.