Reporting Foreign Income and Financial Assets

April 21, 2026

Many Korean immigrants living in the United States hold financial assets in Korea or elsewhere overseas, or receive various forms of foreign income. Failure to report these properly under U.S. tax law can lead to unexpected penalties or other disadvantages, so care is required.

Reporting foreign income

Permanent residents, citizens, and other U.S. tax residents must report income earned worldwide on their U.S. individual returns. U.S. citizens and permanent residents living abroad must also file annual U.S. individual returns reporting their foreign income.

Foreign income includes wages, interest, dividends, capital gains, and rental income. Report income for the year in which it was earned, rather than the year in which it was transferred to the United States.

For foreign earned income, taxpayers meeting certain requirements may qualify for the Foreign Earned Income Exclusion of approximately $130,000 for 2025. Income taxes paid to Korea or another foreign government may also be credited against U.S. tax through the Foreign Tax Credit.

Reporting foreign gifts and inheritances

If you receive gifts of $100,000 or more from a foreign individual during the year, report the details on Form 3520 when filing your individual return. Amounts of approximately $21,000 or more received from a foreign corporation or business in 2025 must likewise be reported on Form 3520.

Receiving property in Korea as a gift or inheritance generally does not create a U.S. gift- or estate-tax payment obligation, but reporting is required. Failure to report, or inaccurate reporting, can result in a penalty of at least $10,000 or 5% of the unreported amount.

Foreign Bank Account Reporting (FBAR)

U.S. tax residents, including U.S. citizens and permanent residents, as well as U.S. corporations and trusts, must report foreign accounts to the U.S. Treasury on FinCEN Form 114 if their combined value exceeds $10,000 at any time during the year. The report includes financial-institution names and addresses, account numbers, and the highest balances during the year.

Reporting covers accounts held in your name and accounts over which you have signatory authority. For 2025, even non-willful failures can carry penalties of approximately $16,000. Willful violations can carry penalties of approximately $160,000 or 50% of the account’s highest balance, whichever is greater.

Foreign Financial Asset Reporting (FATCA)

U.S. tax residents, including citizens, permanent residents, and resident aliens, must report foreign financial assets on Form 8938 with their tax returns if the combined value exceeds specified thresholds. These assets include foreign bank accounts, foreign stocks, bonds, trusts, and derivatives.

For a single taxpayer, reporting is required when assets exceed $50,000 at year-end or $75,000 at any time during the year. For married taxpayers filing jointly, the thresholds are $100,000 at year-end or $150,000 during the year. Failure to report generally carries a $10,000 penalty, which can rise to $50,000 for continued noncompliance. Fraud or willful failure may also lead to penalties of up to 75% of the unreported amount, so particular care is necessary.

Relief for unreported foreign financial assets

The IRS operates Streamlined Filing Compliance Procedures that allow taxpayers who failed to report foreign financial assets to come forward voluntarily.

The procedures can address the issue through amended returns for the latest three years and six years of FBAR filings. Eligible taxpayers living in Korea or another foreign country may be exempt from penalties, while U.S. residents are subject to a 5% penalty on the annual highest balance of omitted foreign financial assets.

To use the procedures, taxpayers must establish that the failure was a non-willful mistake rather than intentional noncompliance. Reporting foreign assets and income is an important U.S. tax obligation, and consulting a professional can help ensure accurate reporting.