Foreign bank account reporting is one of the many administrative pitfalls associated with having lived or living abroad as a US Taxpayer. US Taxpayers are US citizens, green card holders, or non-citizens living in the US (“resident aliens”). As we’ll explain below, the Foreign Bank Account Report (FBAR) is a form required by the Financial Crimes Enforcement Network (FinCEN) that is designed to prevent tax evasion and fraud. (1) While it is not complex to file, it does require some time and organization.
This guide will explain what the FBAR is, why it exists, how it affects US Taxpayers, and the risks associated with not filing it. By the end, you’ll understand the filing requirements and how to stay compliant.
What is the FBAR?
The Foreign Bank Account Report (FBAR), also known as FinCEN Form 114, is a mandatory annual report required by the US Department of Treasury for US persons who have foreign financial accounts exceeding $10,000.
This requirement was designed to catch offshore money laundering, the most notorious recent example occurred in a Swiss private banking scandal in 2023. (2)
Unlike traditional tax forms, the FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury, rather than the Internal Revenue Service (IRS). The usual deadline for filing the form is April 15th, but there is an automatic extension for US expats to October 15th.
Who Must File the FBAR?
US persons, which include US citizens, green card holders, and certain foreigners residing in the US (“resident aliens”), must file the FBAR if they meet the following criteria:
- They have a financial interest in or signature authority over one or more foreign financial accounts.
- The aggregate value of these accounts exceeds $10,000 at any point during the calendar year.
It’s important to note that the threshold is not per account but based on the total value of all foreign financial accounts combined.
For example
Emma Amato is a 34-year-old dual US/Italian citizen who decided to quit her corporate job, start a consulting business, and move to Italy via their new digital nomad visa. She decides to settle in Florence and selects a beautifully furnished, one-bedroom apartment for rent in the city center.
The property owner requires three months of rent upfront to be paid from a local bank account. After some difficulty, Emma managed to open a local bank account with UniCredit and transfer 15K in euros to the initial start-up expenses associated with renting and moving in. However, the same day the money enters the account, she transfers three months’ rent to the property owner, leaving 8,000 euros in the account.
When the next tax filing season rolls around, she’s not sure if she needs to file the FBAR because the money was in her account for such a short amount of time.
What do you think? Does she need to report it?
The answer is yes. If for any reason the combined total of her foreign bank accounts exceeds $10,000 on any one day, she is technically liable for FBAR filing.
Types of Accounts That Must Be Reported
The FBAR reporting requirement covers a wide range of foreign financial accounts, including:
- Bank accounts (checking, savings, or time deposits)
- Brokerage or securities accounts
- Mutual funds or other pooled investment funds
- Certain foreign retirement accounts (depending on specific circumstances)
- Accounts where you have signature authority but no financial interest*
If in doubt about whether an account qualifies, it’s advisable to consult a tax professional.
Additionally, it’s generally inadvisable to open any foreign accounts except checking or savings accounts, the reason being that many will trigger a complex and expensive filing requirement called a PFIC (IRS Form 8621). (3)
Why Does the FBAR Exist?
The FBAR was established as part of the Bank Secrecy Act of 1970 to combat tax evasion and other financial crimes. The primary goals of the FBAR are:
- Preventing Tax Evasion: The FBAR ensures transparency regarding US taxpayers’ foreign financial holdings, making it harder for individuals to hide assets offshore.
- Combating Financial Crimes: By requiring disclosures, the US government can monitor and identify potential money laundering, terrorism financing, and other illicit financial activities.
- Maintaining Global Accountability: The FBAR complements international agreements like the Foreign Account Tax Compliance Act (FATCA), further enhancing the US’s ability to track foreign accounts held by US persons.
While its intent is understandable, the FBAR has also introduced significant compliance challenges for everyday US persons.
How the FBAR Affects US Expats
For Americans living abroad, the FBAR is often a source of confusion and stress. Here’s how it impacts you:
Increased Compliance Requirements
US taxpayers must monitor their foreign financial accounts to determine if they meet the $10,000 threshold. This includes keeping accurate records of balances and understanding how foreign accounts are classified under US law. The FBAR is an additional reporting requirement beyond filing annual tax returns, which already involves unique challenges for expats.
Tip: If you’re not sure and want to reduce the administrative burden, it’s often easiest to just submit the form. It’s purely administrative and does not trigger additional tax filing liabilities in and of itself.
Complexity of Reporting Foreign Accounts
Many expats have accounts in their country of residence, such as local checking accounts for day-to-day expenses or retirement savings accounts. Determining whether these accounts are reportable can be complex, especially if local tax laws and US requirements differ. In some cases, expats may need professional guidance to ensure compliance.
As mentioned above, foreign accounts that are not checking accounts may carry additional filing requirements, even if they’re “just” foreign retirement accounts. Always speak with a US expat tax advisor before opening a non-checking foreign bank account.
FBAR Penalties
The penalties for failing to file the FBAR or filing it incorrectly are severe, even for unintentional violations. This adds another layer of stress for expats who may be unaware of their obligations.
Risks of Not Filing the FBAR
Failing to file the FBAR or filing it inaccurately can result in significant consequences. The penalties vary depending on whether the violation is deemed willful or non-willful.
Non-Willful Violations
If the failure to file is determined to be non-willful, penalties can still be substantial. As of 2025, the penalty for a non-willful violation can be up to $14,489 per violation, though the actual amount may vary based on circumstances.
Willful Violations
Willful violations are taken far more seriously. Penalties can include:
- Fines of up to $100,000 or 50% of the account balance per violation, whichever is greater.
- Criminal charges, which can lead to prison time in extreme cases.
How to File the FBAR
Filing the FBAR is a straightforward process if done correctly. (4) Here are the steps:
- Determine Your Filing Requirement: Review your foreign financial accounts to confirm whether their combined value exceeds $10,000 during the calendar year.
- Gather Account Information: Collect the following details for each account:
- Account number
- Name and address of the financial institution
- Maximum account balance during the year
- Use the BSA E-Filing System: The FBAR must be filed electronically through the BSA E-Filing System. You’ll need to create an account and submit Form 114 online.
- Submit by the Deadline: The FBAR is due April 15, with an automatic extension to October 15 if needed. There is no separate request required for the extension.
Alternatively, FBAR compliance is included in all of our tax compliance services. Schedule a call to learn more.
Wrapping Up
The Foreign Bank Account Report (FBAR) is an important compliance requirement for US expats with foreign financial accounts. While it may seem burdensome, staying compliant protects you from severe penalties and ensures peace of mind.
For personalized assistance, consult a US tax professional specializing in expat taxation. Proactive planning and compliance will save you time, money, and stress in the long run.
References
- Delinquent FBAR submission procedures | Internal Revenue Service
- What We Do | FinCEN.gov
- Swiss Private Bank Banque Pictet Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts
- About Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund
- How Do I File the FBAR? | FinCEN.gov
The FBAR is simple enough to file, however, simple requirements should not be mistaken for unimportant.
