Not only reporting a federal tax return as a U.S. citizen or resident abroad or having foreign financial accounts is subject to adherence to U.S. tax obligations. There is a vital but at times forgotten need to submit the Foreign Bank Account Report (FBAR), which is also known as FinCEN Form 114. This handbook explains why the FBAR should be filed, who needs to file it, and how you can meet this requirement regardless of where you are on the globe.
What Is the Foreign Bank Account Report (FBAR)?
The Foreign Bank Account Report (FBAR) is an annual reporting of information by U.S. persons with a financial interest in or a signature authority over a foreign account with an aggregate amount in excess of $10,000 at any time during the calendar year. It's e-filed electronically on FinCEN Form 114 and submitted to the U.S. Department of the Treasury, specifically the Financial Crimes Enforcement Network (FinCEN).
Although the FBAR is not submitted to the IRS, the IRS imposes penalties for noncompliance.
Who is Required to File FinCEN Form 114?
You are required to file the FBAR if:
- You are a U.S. citizen, resident alien, or Green Card holder.
- You have a financial interest in or authority to sign on one or more foreign financial accounts.
- The total value of all foreign financial accounts was $10,000 or more at some point during the year.
This is true whether:
- The accounts have earned income.
- The accounts are jointly owned with a foreign individual.
- You live outside the United States and are taxed by another nation.
Types of Accounts That Are Reportable
The following foreign accounts may require an FBAR:
- Bank accounts (checking, savings, time deposits)
- Retirement or pension accounts
- Foreign mutual funds
- Brokerage or securities accounts
- Foreign business accounts over which you are in control
- Some foreign life insurance policies with cash value
- Accounts on platforms such as Revolut, Wise, or N26
Why It Is Significant to File the FBAR
- Stay Away from Major Penalties: Non-willful noncompliance can attract penalties of up to $10,000 per account. Willful noncompliance can attract more than $100,000 or 50% of the account's value.
- Remain in Compliance with U.S. Law: Not filing the FBAR can give rise to serious legal consequences even if you owe no tax.
- Support Timely and Accurate Tax Reporting: FBAR reporting assists in maintaining full transparency and accuracy in your tax reporting.
How to File the FBAR (FinCEN Form 114)
You are required to file the FBAR electronically using the BSA E-Filing System. Here's how:
Create an Account
- Go to the BSA E-Filing System website and create an account.
Gather Account Information:
- Name and address of every foreign bank or institution
- Type of account
- Account number
- Highest value of each account for the calendar year (in USD)
Fill Out FinCEN Form 114:
- Log in to the BSA E-Filing portal
- Enter the mandatory fields based on your records
Submit Electronically:
- Due date: April 15 every year
- Automatic extension: to October 15
Note: The FBAR is not filed with your federal tax return and should not be mailed to the IRS.
People Also Ask (PAA)
- Is the FBAR the same as Form 8938 (FATCA)?
No. Form 8938 is part of your federal income tax return and has different thresholds and reporting requirements. - Do I need to file the FBAR if I already pay foreign tax?
Yes. The FBAR is a separate reporting requirement from any foreign tax payments. - Can I file the FBAR with my spouse?
Only in the event of a joint account and both spouses signing FinCEN Form 114a, authorizing a joint report. - What if I didn't file an FBAR for a previous year?
You may be eligible for the IRS Streamlined Filing Compliance Procedures in the event of non-willful failure to file. - Are cryptocurrency wallets reportable on FBAR?
Currently, the FBAR does not report cryptocurrency wallets but may potentially do so in the future. - Can I submit the FBAR while outside of the United States?
Yes. You submit the FBAR electronically, and you are not affected by where you live. - What happens if I file late FBAR?
Late filing can have penalties, but if you were non-willful in your delinquency and report it on your own initiative, you could have penalties waived or mitigated. - What would have occurred if I had closed the account at the end of the year?
If the balance ever exceeded more than $10,000 in the year, though, it has to be disclosed.
Final Thoughts
As an American citizen or resident with foreign bank accounts, it is your duty to report the FBAR—regardless of where you live on Earth. An understanding of FinCEN Form 114 and a timely filing will have you out of hot water and in compliance.
In case of uncertainty, consult a tax expert that is well-versed with foreign account reporting and U.S. expat tax laws. Better safe than sorry in the avoidance of surprise penalties.
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