FBAR: Requirements, Deadlines, and How to File

While filing US tax returns is a well-known responsibility of Americans living abroad, requirements such as the Foreign Bank Account Report (FBAR) are often forgotten. What’s the big deal, you ask? Failing to file the FBAR can draw the attention of the IRS and lead to harsh penalties. To ensure you stay compliant (and off the IRS’s radar!), we have compiled the things you need to know about FBAR reporting and FBAR Filing requirements.

What Is the FBAR (Foreign Bank Account Report)?

The Foreign Bank Account Report (FBAR) is an annual report that all U.S. citizens, residents, and certain other persons must file with the United States Treasury Department in which the person has a financial interest in, or signature authority over, a financial account in a foreign country with an aggregate value of more than $10,000 at any time during the calendar year.

Keep in mind that those filing FBAR aren’t taxed on the balance of the accounts or anything of the sort. This is a reporting requirement, so the IRS knows what money lies overseas.

If you’re an expat with foreign financial accounts, ignoring your requirements can result in penalties and legal consequences. The United States government has stepped up efforts to investigate and prosecute expats who fail to report their foreign-held financial assets. This means that the risk of non-compliance with FBAR regulation is more significant than ever.

Thankfully, there are plenty of easy ways to comply with your requirements. This guide will explain everything you need to know about the FBAR, including:

• Who needs to file the FBAR
• How to file your foreign bank account report
• FBAR deadlines and when to file
• Related topics like the Foreign Account Tax Compliance Act (FATCA)

Who Needs to File the FBAR?

Any US person (that is, any person considered a US tax resident) with a foreign account balance of $10,000 or more at any point during the tax year will need to file the FBAR. This requirement is triggered even if the balance hits $10,000 for just one day (or one minute)!

The FBAR filing threshold is also an aggregate amount—meaning if you have multiple accounts, the total balance of all of your accounts is what would trigger a filing requirement. So, if you think that keeping $4,000 in one account and $7,000 in another will enable you to avoid filing, this isn’t the case.

Report Joint Accounts and All Others You Can Access

FBAR filing requirements apply to all foreign financial accounts in which you have a financial interest or signature authority.

• Financial interest is determined based on who is the owner of the record or legal title.
• Signature authority means that you have some level of control over the disposition of assets through direct communication with the institution.

So, for example, if you were a signatory on one of your employer’s bank accounts, this account should be reported on your form. You should also report joint accounts with your spouse on the FBAR.

FBAR Applies to All US Persons, Not Just Citizens

The IRS says that the FBAR is required for “United States persons” who meet the reporting threshold. The term “US persons” refers to:

• Citizens
• Resident aliens
• Trusts
• Estates
• Domestic entities

How to File the FBAR

The FBAR is a separate filing from your federal tax return. It must be submitted separately to the Department of the Treasury, not the IRS. To file the FBAR, you’ll use FinCEN 114 and submit it electronically through the BSA e-filing site.

The process is straightforward and requires you to gather all pertinent account information and enter it into the online system. You can have a third party prepare it for you (i.e., a certified tax preparer), but you must file FinCEN 114a to give the party authority.

Information to Include on the FBAR

Most filers will just be reporting their foreign bank account balances. However, you must also report any of the following that apply:

• Foreign stock or securities held in a financial account at a foreign financial institution (the account itself must be reported, but the contents of the account do not need to be reported separately)
• Financial account held at a foreign branch of a US bank
• Foreign mutual funds
• Foreign-issued life insurance or annuity contract with a cash value

How to Report Joint Accounts on the FBAR

If you and your partner only hold joint accounts, have your spouse sign FinCEN Form 114a to allow you to file the FBAR on their behalf.

If your spouse has other accounts that you are not on (i.e., individual foreign financial accounts), they must file their FBAR separately. When filing separately, you must both include your joint accounts on each of your individual forms.

Good Records Are the Key to Simplified FBAR Filing

Recordkeeping is essential to keeping up with how you file the FBAR. Submitted forms must contain the following information:

• The maximum value (converted to USD using the end-of-year exchange rate) of each account during the reporting period
• The name on the account(s)
• The number/other designation of the account
• The type of account
• The name and address of the institution or other person with whom the account is maintained

Many expats also find that they have to file one year and not the next. For this reason, it is essential to make good record-keeping a habit.

FBAR Deadline for Expats

The FBAR must be filed by April 18th, 2023 (as the 15th falls on a Saturday). If you miss this deadline, there is an automatic extension to October 16, 2023 (as the 15th falls on a Sunday)

What Are the FBAR Penalties for Not Filing?

The penalties for failing to file an FBAR when required can be severe.

• For those whose lack of filing was non-willful (meaning you didn’t know about your reporting obligation)
• If it is determined that you purposely avoided filing, the fine can be $100,000 or 50% of the account’s balance at the time of the violation, whichever is greater.

The penalties for willfully failing to file accurate and/or timely tax returns are severe. A non-willful failure (for which no criminal charges will be brought) carries a $10,000 penalty per violation or an even higher penalty, depending on your account balances at the time of the violation.

Previously, the IRS wasn’t clear on whether these FBAR penalties were per-form or per account. Per-form means that a single penalty would apply for each FBAR form that wasn’t filed per year. For example, let’s say John Expat failed to disclose his six foreign accounts for three required years because he didn’t know it was required. If the penalty were levied on a per-form basis, then John would be fined the non-willful penalty of $10,000 for each of those years. That comes to a total of $30,000 (3 x $10,000 = $30,000).

However, court rulings have now made it clear that the IRS is applying penalties on a per-account basis. That means that violators are fined separately for each account they fail to report. In the example above, John Expat would now be facing a fine of $180,000 (6 x $10,000 x 3 = $180,000).

As you can see, penalties can add up quickly if you are years behind in your FBAR filing!

And with the introduction of the FATCA legislation in 2010, the chances of getting caught have increased, as foreign financial institutions are now required to notify the IRS of their foreign accounts. Basically, the IRS will assume you were hiding the foreign account(s), and you will be at their mercy. No one wants that!

What Should I Do If I Haven’t Filed an FBAR?

First off, don’t panic! Millions of Americans have FBAR forms that are past due, and the IRS has created two amnesty programs to help you get caught up:

• The Streamlined Compliance Procedures
• The Delinquent FBAR Submission Procedures

Both tax amnesty programs let expats comply with US tax law without paying any penalties. Let’s take a closer look at each.

Streamlined Compliance Procedures

The Streamlined Compliance Procedures are meant for US expats who have failed to file an annual income tax return as well as any required FBARs. To use the Streamlined Compliance Procedures, all you have to do is:

• Self-certify that your failure to file was accidental, not willful
• File your last three delinquent income tax returns and pay any taxes you owed on those returns
• File FBARs for the previous six years

Delinquent FBAR Submission Procedures

If you’re only behind on filing FBARs while being up to date on your annual tax returns, you can use the Delinquent FBAR Submission Procedures instead. To do this, you must simply:

• Self-certify that your failure to file was not willful
• File all delinquent FBARs

In most cases, this should be sufficient to bring you into compliance with IRS standards.

Common Misconceptions While Filing for FBAR 

• It’s a common misconception that an overseas account with less than $10,000 doesn’t need to be reported. However, if the combined highest value of all foreign accounts on any day in the tax year exceeds $10,000, then all accounts must be reported on the FBAR. 
• Another mistake is assuming that a nominee doesn’t need to report an account on the FBAR. Even if the account belongs to another person, the nominee must still file the FBAR if it meets the dollar threshold. 
• It’s also important to understand what needs to be disclosed on the FBAR. Foreign mutual funds and foreign life insurance/annuity policies with a cash surrender value must be reported. 
• Lastly, filing an extension for your US income tax return does not extend the FBAR filing deadline. The FBAR is a separate requirement with a different due date, so it’s crucial to file it on time to avoid penalties. 

Other Foreign Financial Reporting Requirements for Expats

Years ago, some expats got comfortable evading the FBAR because it was hard for the IRS to track down violators. The FBAR is required for US citizens because foreign banks don’t have the exact reporting requirements as institutions in the US, making it harder for the US to investigate potential non-compliance cases.

The Foreign Account Tax Compliance Act (FATCA) changed all of that. FATCA requires individuals or businesses with foreign accounts meeting the reporting threshold of $50,000 to file Form 8938 with the IRS.

FATCA is different from FBAR on multiple levels:

1. FATCA is filed with the IRS as part of your tax return
2. FATCA reporting thresholds are higher
3. Most importantly, FATCA requires foreign financial institutions to report directly to the IRS on financial accounts held by US taxpayers.

This last point is critical. Because foreign financial institutions report directly to the IRS, the government can easily find out about your unreported foreign assets. This dramatically increases the chances that the IRS will catch you if you fail to file an FBAR when required.

Filing FBAR Doesn’t Have to be Complicated 

We hope this guide has helped you understand what the FBAR means for Americans living abroad. For general questions on expat taxes or working with Greenback, contact our Customer Champions.

If you’re ready to be matched with a Greenback accountant, click the get started button below.