FBAR: Requirements, Deadlines, and How to File

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? Well, failing to file the FBAR can draw the attention of the IRS and lead to harsh penalties. To make sure you stay compliant (and off the IRS’s radar!), we have compiled the things you need to know about FBAR reporting.

Key Takeaways

  • FBAR or FinCen 114 needs to be filed if you had more than $10,000 in all of your combined foreign accounts, even if your total balance was less than $10,000.
  • The FBAR Applies to all US persons, not just citizens.
  • If you and your spouse only hold Joint Accounts, then you can file FinCen 114a to cover both individuals; otherwise, each spouse needs to file an FBAR.
  • The FBAR is currently on an automatic extension to October 15th
  • FBAR penalties start at $10,000 per account for non-willful failure to file and can go up to $100,000 or 50% of the account value for willful violations.
  • If you have not been filing your FBAR’s the best way to get caught up is via the Streamlined Filing Procedure.

What Is the FBAR (Foreign Bank Account Report)?

The FBAR was created as part of a US initiative to uncover tax cheats hiding money in offshore accounts. FBAR has been around for years but hasn’t been strictly enforced by the IRS until a few years ago. With this new initiative, the IRS is forcing those with money in overseas bank accounts to disclose those accounts if balances exceed the threshold.

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

If you’re an expat with foreign financial accounts, ignoring your FBAR requirements can result in expensive penalties and other 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 greater than ever before.

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

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 hit $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 are thinking 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 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 FBAR 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
The IRS tax code is 7,000 pages. Want the cliff notes version for expats? Let us help.

How to File the FBAR

Filing FBAR reports is a different process from filing your Federal Tax Return. The FBAR is filed 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 to do so.

Information to Include on the FBAR

Most FBAR 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 FBAR forms.

Good Records Are the Key to Simplified FBAR Filing

Recordkeeping is the most essential aspect of 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 important to make good record-keeping a habit.

FBAR Deadline

The FBAR must be filed by April 15th of every year. If you miss this deadline, there is an automatic extension to October 15th.

Confused about when you need to file? We can help.

When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.

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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), the fine can be $10,000 per violation.
  • If it is determined that you purposely avoided filing, the fine can be $100,000 or 50% of the balance of the account at the time of the violation, whichever is greater.

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 was 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 FBAR 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 but Should Have?

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:

Both are tax amnesty programs that let expats come into compliance 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 last 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.

Take Note

These tax amnesty options are generally only available if you initiate the process yourself. If the IRS discovers your delinquency and contacts you first, you may be ineligible for these programs and thus subject to 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 same reporting requirements as institutions in the US, but this fact also makes it harder for the US to investigate potential noncompliance 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 greatly increases the chances that the IRS will catch you if you fail to file an FBAR when required.

Need Help Filing FBAR? How to File Your FBAR with Greenback

We hope that this guide has helped you understand what the FBAR means for Americans living abroad. If you still have questions, we have the answers. In fact, we can even prepare your expat taxes on your behalf.

At Greenback Expat Tax Services, we specialize in helping expats file their US taxes accurately and on time. Our expat-expert CPAs and IRS Enrolled Agents have helped hundreds of expats successfully file their FBARs. Our reliable Foreign Bank Account Reporting service gives you peace of mind that your FBAR filing will be 100% complete and accurate.

Let us help you take care of your FBAR filing obligations hassle-free!

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