If you’re an American citizen who has lived overseas for some time, you’re already aware of your requirement to file a tax return with the IRS each year regardless of where your income is earned, what taxes you pay to other countries, or what currency your earnings are in. Filing these tax returns will keep you compliant with the IRS. However, what many expats don’t know is that they are also required to report certain foreign bank and financial accounts to the U.S. Department of the Treasury. To fulfill this obligation, expats must file the Foreign Bank Account Reporting form, or FBAR, every year they meet the requirements.
Allow us to explain the FBAR filing requirements, penalties for failing to file, and how to complete the FBAR in order to stay compliant with the US Treasury Department.
Although many are unaware of the obligation, Americans living abroad are required to file a report of their foreign bank accounts in addition to filing their US expat taxes. These reports are filed with the US Treasury Department. You must file the FBAR electronically via FinCEN 114 on the BSA e-filing site. (Paper filings of old Form TD 90-22.1 are no longer accepted.)
American citizens and Green Card holders are required to file the FBAR if their balances, when added together, are more than $10,000. It does not matter how many accounts this $10,000 is spread across. You are required to file FBAR in addition to your US expat taxes if the $10,000 threshold is met by the sum of all your foreign accounts, not just one account with a balance higher than $10,000.
For example, if an expat in the UK has a securities account with a balance of $3,000, a savings account with a balance of $6,000, and a second joint account with their foreign-national, non-resident spouse with a balance of $2,000, and a retirement account with $2,000 in it; all four accounts would need to be reported to the US Treasury Department through Form FinCEN 114.
The same is true for an expat in Spain who has $11,000 in a single Spanish checking account. They both are required to file the FBAR, and can both do so with Form FinCEN 114.
Want all the facts on FBAR requirements? Watch our free webinar to find out everything expats need to know.
If a US citizen or Green Card holder fails to disclose their overseas bank accounts, the treasury department can and will enforce penalties on the taxpayer. The penalties can be much more severe than the penalties assessed by the IRS for delinquency on US expat taxes. However, it should be noted that penalties for US Expats who did not know about the requirement to file the FBAR have been forgiven in many cases.
The penalties will depend on the reason for the violation. The US Treasury Department has both civil and criminal penalties for failure to file. Generally, the US Treasury Department will only impose one of the penalty types on an individual taxpayer, but it does reserve the right to impose both if it is deemed to be suitable for the specific situation.
The current FBAR penalties for not reporting overseas bank accounts are as follows (penalties are adjusted each year for inflation):
|U.S. Code Citation||Violation Type||Civil Penalty (2020)|
|31 U.S.C. 5321(a)(5)(B)(i)||Non-Willful||$12,921|
|31 U.S.C. 5321(a)(5)(C)||Willful||Greater of $129,210, or 50% of the amount per 31 U.S.C.5321(a)(5)(D)|
|31 U.S.C. 5321(a)(6)(A)||Negligent||$1,118|
|31 U.S.C. 5321(a)(6)(B)||Pattern of Negligent Activity||$86,976|
In addition to the civil penalties shown above, higher penalties may be assessed for criminal acts in which a citizen is hiding money overseas, a case by case basis. The IRS does say in the instructions for the FBAR that “If there is a reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed.” Needless to say, it is best to get caught up with delinquent tax returns and FBARs in order to avoid the risk of a change in enforcement in the future.
Want detailed instructions on how to file FBAR electronically. Read this blog post.
Want help filing FBAR?
If you have any questions about your FBAR filing requirements or need help preparing FinCEN 114, please contact us. We can help you determine which foreign financial accounts to report, provide additional resources, and recommend expat tax services based on your specific filing needs.