Unreported Foreign Financial Assets: Relief Through Streamlined Procedures

June 24, 2026

Many Korean American taxpayers with financial assets in Korea were unaware of the reporting obligation itself. If the failure was nonwillful, an official relief procedure can still bring the filings into compliance.

FBAR and FATCA: Two Reporting Obligations

Two main reporting obligations apply when U.S. taxpayers hold foreign financial assets.

Category	Threshold	Filed with
FBAR (FinCEN Form 114)	Aggregate foreign financial account balances exceeding $10,000	Treasury Department (FinCEN)
FATCA (Form 8938)	Foreign financial assets of $50,000 or more	IRS, attached to the tax return

The two systems have different thresholds and filing destinations, and both may apply at the same time. Failure to report can result in penalties reaching $10,000 or more per violation.

Scope of Reportable Assets

Many people assume that only bank deposit and savings accounts are covered, but the scope is much broader.

Reportable: bank deposit and savings accounts; brokerage accounts and funds; annuity and cash-value insurance; directly held Korean stocks; and account balances containing proceeds from a real estate sale.

Excluded: Korean real estate itself is not reportable on the FBAR. Korea’s National Pension is also generally interpreted as not subject to reporting.

Private and retirement pensions, however, may be treated differently depending on the circumstances and require professional review.

Streamlined Procedures: Official IRS Relief

The IRS operates this official relief procedure for taxpayers who failed to meet reporting obligations without willfulness. Unlike ordinary amended filings, it can substantially reduce or eliminate penalties.

Category	Eligibility	Penalty
Foreign residents: Streamlined Foreign Offshore	At least 330 consecutive days abroad in at least one of the most recent 3 years	Fully waived
U.S. residents: Streamlined Domestic Offshore	The above condition is not met	Fixed at 5% of the unreported asset balance

Both categories require 3 years of amended tax returns and 6 years of FBARs.

When You Cannot Apply

You are not eligible for Streamlined Procedures if any of the following applies.

• Assets were deliberately concealed

• An IRS or DOJ examination has already begun

• You do not have a taxpayer identification number, SSN or ITIN

In these cases, a separate voluntary disclosure program (VDP) should be considered.

Who May Be Affected

Case 1: Korean Americans Living in the United States

Some people immigrate while leaving Korean severance pay in a Korean account; others retain savings inherited from their parents or real estate sale proceeds in Korea. Many assume that money producing no U.S. income need not be reported. FBAR and FATCA reporting, however, depends on balances regardless of whether income is earned.

Case 2: U.S. Citizens by Birth Living in Korea

This includes people born while their parents studied or worked on assignment in the United States, who acquired citizenship automatically but have continued living in Korea. U.S. citizens must report worldwide income regardless of residence. Because they live in Korea, they may qualify for the foreign-resident procedure with a full penalty waiver.

The Key Document: Non-Willfulness Certification

The central document is the Non-Willfulness Certification. The IRS examines it closely. If poorly prepared, it may instead become evidence of willfulness and invalidate the relief application itself.

Eligibility is lost as soon as an IRS examination begins. If you know of an unreported filing obligation, act promptly. Always prepare the submission with an experienced tax professional.

This column provides general information and does not replace individual tax advice.

Consultation Inquiries

Dow & Sohn CPAs (Los Angeles) T. 213-487-3690 · peter@dowsohncpas.com · www.dowsohncpas.com

Opus Advisors (Seoul) T. 010-5424-3690 · aiden@opusadvisors.co.kr · www.opusadvisors.co.kr