Key Takeaways
- An FBAR is used to report foreign financial accounts to the federal government, which uses this information to ensure transparency and compliance with U.S. tax and other laws.
- A U.S. person must file an FBAR if they have a financial interest in, or signature or other authority over, one or more foreign financial accounts, and the combined value of these accounts is greater than $10,000 at any point during the year.
- FinCEN Form 114 is used to report foreign bank and financial accounts. The form generally must be filed electronically.
- An FBAR is due by April 15 of the year following the calendar year being reported. However, an automatic six-month extension to October 15 is allowed.
What is a Report of Foreign Bank and Financial Accounts (FBAR)?
If you’re a U.S. citizen living abroad, it certainly might help to have a bank account in the country where you live. But expats aren’t the only people who might want to open an account with a foreign bank or other financial institution.
For instance, if you’re from another country but live in the U.S., you might want to keep a bank account in your home country. A foreign account might also come in handy if you want to invest in foreign stocks or currencies, take advantage of higher interest rates in a different country, or seek more privacy in a country that offers greater financial confidentiality.
However, if you have a certain amount of money or assets in offshore accounts, Uncle Sam wants to know about it – regardless of your reasons for opening the accounts. If that’s the case, you’ll have to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Financial Crimes Enforcement Network (FinCen). This report helps the federal government identify people who might be using foreign financial accounts to evade taxes or engage in other illegal activities, such as money laundering or financing terrorism.
There are stiff penalties for failing to file an FBAR, so it’s important to be familiar with the eligibility and other reporting requirements if you have any foreign financial accounts. The following information will bring you up to speed on the FBAR basics, but don’t hesitate to contact a qualified tax professional if you have any additional questions (TurboTax Live Full Service will match you with a local tax expert who can help).
Who must file an FBAR?
The general rule is that a U.S. person must file an FBAR if both of the following requirements are satisfied:
- the U.S. person has a financial interest in, or signature or other authority over, one or more foreign financial accounts
- the combined value of these accounts surpasses $10,000 at any point during the year
While that might seem relatively straightforward, there’s a lot of detail to the FBAR filing requirement that needs to be unpacked. So, let’s break it down a bit and explore some of the different aspects of this rule a little closer.
What is a U.S. person?
Your first question might be about who – or what – is a U.S. person. For purposes of the FBAR requirements, a “U.S. person” includes:
- U.S. citizens
- resident aliens
- business entities – such as corporations, partnerships, and limited liability companies – created or organized in the U.S. or under U.S. laws
- trusts and estates formed under U.S. laws
TurboTax Tip:
A child can be a U.S. person who’s required to submit an FBAR. However, a child's parent, guardian, or other legally responsible person can file and sign an FBAR for the child.
What types of foreign financial accounts must be reported?
The FBAR rules only apply to foreign financial accounts. An account is considered a “foreign” account if it’s maintained by a financial institution located outside the U.S. The location of the account – not the nationality of the financial institution – determines whether an account is foreign for FBAR purposes.
For example, an account with a U.S. bank that’s maintained at a branch physically located in Canada is a foreign account under the FBAR rules. On the other hand, an account with a Canadian bank that’s maintained at a branch physically located in the U.S. isn’t a foreign account.
There’s also a wide variety of financial accounts that are covered by the FBAR rules. The list includes:
- bank accounts, such as savings and checking accounts, and certificates of deposits (CDs)
- investment accounts, such as brokerage accounts, securities derivatives accounts, or other accounts holding financial instruments
- commodity futures or options accounts
- insurance or annuity policies with a cash value (such as a whole life insurance policy)
- mutual funds or similar pooled funds
What counts as a financial interest in a foreign account?
Assuming you’re a U.S. person, you have a financial interest in a foreign account for FBAR purposes if you’re the owner of record or hold legal title to the account. This is true regardless of whether the account is opened for your benefit or for the benefit of someone else (including for someone who isn’t a U.S. person).
If you don’t own or hold title to an offshore account, you can still have a financial interest in the account if the actual owner of record or holder of legal title is:
- an agent, attorney, or other person acting on your behalf with respect to the account
- a corporation, if you own more than 50% of the voting power or the total value of the corporation’s shares of stock
- a partnership, if you own an interest in more than 50% of the partnership's profits or capital
- a trust, if you’re the grantor and have an ownership interest in the trust for federal income tax purposes, or if you have a greater than 50% present beneficial interest in the assets or income of the trust for the calendar year
- any other entity, if you own more than 50% of the voting power, total value of equity interest or assets, or interest in profits of the entity
For jointly-owned accounts, each owner who is a U.S. person generally has a financial interest in the account and must report the entire value of the account on an FBAR.
However, there’s an exception to this rule for spouses. Only one spouse has to file an FBAR if all of the following requirements are met:
- all financial accounts the non-filing spouse would otherwise have to report are jointly owned with the spouse who files the FBAR
- the filing spouse reports the jointly-owned accounts on a timely filed and appropriately signed FBAR
- both spouses complete and sign Form 114a to authorize the filing spouse to file an FBAR on the non-filing spouse’s behalf (the form should be kept with the couple’s records)
If all three requirements aren’t met, both spouses have to file separate FBARs and report the entire value of the jointly owned accounts.
What counts as a signature or other authority over a foreign account?
You have signature or other authority over a foreign financial account if you control the disposition of any assets in the account by communicating directly with the bank or other financial institution. You can hold this authority alone, or with other people.
You also don’t need to exercise the authority to trigger the FBAR filing requirement. For example, if all other requirements are met, you must file a FBAR if you have power of attorney granting signature authority over someone else’s foreign account (such as an elderly parent’s account), even if you never do anything with the account.
How is the $10,000 threshold calculated?
To see if the combined value of your foreign financial accounts surpassed the $10,000 threshold, you first need to determine the maximum value of each qualifying account during the calendar year. The maximum value can be a “reasonable approximation” of the greatest value of money and/or other assets in the account during the year. You can generally rely on account statements to come up with this figure if the statements are issued at least every three months.
If an account’s value is based on a foreign currency (such as the euro for a German account), start by using that currency to come up with the maximum value for the year. You’ll then need to convert that amount into U.S. dollars using the U.S. Treasury Department's Reporting Rate of Exchange for the last day of the calendar year. If no such rate is available, you can use another verifiable exchange rate if you provide the source of that rate.
Once you’ve calculated – and converted (if necessary) – the maximum value of each qualifying account, add them all up. A FBAR is required if the total is greater than $10,000.
Who’s exempt from the FBAR filing requirements?
Even if all the requirements described above are satisfied, you still won’t have to submit an FBAR if an exception applies. Exceptions can be based on the person or entity required to file an FBAR or on the type of foreign account involved.
For example, the following exemptions apply to U.S. persons who would otherwise be required to file an FBAR:
- IRA owners and beneficiaries – An owner or beneficiary of an individual retirement account located in the U.S. doesn’t need to report a foreign financial account held by or for the IRA.
- Retirement plan participants and beneficiaries – A participant in or beneficiary of certain employer-sponsored retirement plans doesn’t need to report a foreign financial account held by or for the retirement plan.
- Trust beneficiaries – A beneficiary of a trust who has a financial interest in the trust doesn’t need to report the trust’s foreign financial accounts if the trust, trustee, or an agent of the trust files an FBAR disclosing the trust’s foreign accounts.
- Consolidated FBAR entities – A U.S. person that’s an entity named in a consolidated FBAR (see below) filed by a greater-than-50% owner doesn't need to file a separate FBAR.
- Officers or employees with authority over foreign accounts – In certain situations, an officer or employee of a financial institution or other specified entity who has signature or other authority over, but no financial interest in, a foreign financial account doesn’t need to report the account.
In addition, an FBAR isn’t required for the following types of foreign financial accounts:
- military accounts maintained with a financial institution located on a U.S. military base, even if it’s outside the U.S.
- correspondent or “nostro” accounts, which are used for bank-to-bank transactions
- government entity-owned accounts
- international financial institution accounts, such as accounts with the World Bank or International Monetary Fund
How to file an FBAR for your foreign bank accounts (FinCEN Form 114)
If an FBAR is required, use FinCEN Form 114 to report your foreign bank and financial accounts. You generally have to file Form 114 electronically through the BSA E-Filing System (although you can request an exemption from e-filing from FinCEN).
If you’re filing an FBAR as an individual, you can submit a PDF version of FinCEN Form 114 or file using an online form. The PDF method allows users to work at their own pace, save their progress, and reuse the FBAR form. Alternatively, the online form only offers a one-time submission, so you can’t reuse the form. But it’s a good choice if you’re ready to file immediately.
Individuals can file an FBAR without registering for a BSA E-Filing account. However, attorneys, CPAs, and enrolled agents filing on behalf of clients have to register for a user ID and password and file as an institution.
If a business, trust, or estate is required to file an FBAR, and it owns more than 50% of one or more other entities required to file an FBAR, it can file a single consolidated report on behalf of itself and the other entities it owns.
In addition, the FBAR reporting requirements are modified if you have either:
- a financial interest in 25 or more foreign financial accounts
- signature authority over, but no financial interest in, 25 or more foreign financial accounts
The instructions for FinCEN Form 114 spell out the modified procedures.
When is your FBAR due?
Your FBAR is generally due on or before April 15 of the year following the calendar year being reported. If April 15 falls on a weekend or holiday, the FBAR deadline is pushed back to the next business day.
If you need more time to file, FinCEN allows an automatic six-month extension to October 15. You don’t even need to request the extension or have a good reason for needing it. Additional extensions may also be granted in cases of natural disasters or certain other extenuating circumstances, such as FBAR rule changes.
If you file an FBAR after the October 15 extended deadline, you’ll have to provide a reason for filing late on Form 114.
Do you file the FBAR with your tax return?
You don’t file Form 114 with your federal income tax return. It is only filed with FinCEN through the BSA E-Filing System.
However, you still might have to report foreign financial accounts to the IRS on Form 8938 (more on that in a minute).
FBAR recordkeeping requirements
In addition to keeping a copy of your Form 114 (and Form 114a if applicable), you need to hold on to any related bank statements or other documents for at least five years after filing your FBAR. For each reported account, the records should contain the:
- name on the account
- account number
- foreign financial institution’s name and address
- type of account
- maximum account value during the reporting period
If an officer or employee has signature authority over an employer's foreign financial account and files an FBAR to report it, they don’t need to personally keep records for the accounts. Instead, it’s the employer’s responsibility to keep those records.
Penalties for not filing an FBAR
You could be hit with a fine or even jail time for violating the FBAR rules.
For example, a U.S. citizen or resident who fails to file an FBAR might have to pay a civil fine of up to $16,117 per violation (although this penalty can be avoided if it’s determined there was “reasonable cause” for your failure and a proper FBAR is ultimately submitted). For “willful violations,” the maximum civil fine jumps to the greater of $161,166 or 50% of the balance in your foreign account at the time of the violation. (Note: These civil penalty maximums are adjusted annually for inflation. The amounts shown are for penalties assessed on or after January 25, 2024.)
Criminal penalties can also be imposed on top of any civil fines for willful violations. The standard criminal penalty for FBAR violations maxes out at a $250,000 fine and/or up to five years in prison. Those maximums are doubled to a $500,000 fine and/or up to 10 years in prison if the FBAR violation occurred either:
- while you were also violating another U.S. law
- as part of a pattern of illegal activity involving more than $100,000 in a 12-month period
Other penalties may apply.
IRS Form 8938 and Schedule B
FinCEN Form 114 might not be the only form you need to file to report foreign accounts. You may also have to file Form 8938, which is used to report specified foreign assets directly to the IRS.
The FBAR and Form 8938 have different reporting thresholds and requirements. Plus, unlike an FBAR, Form 8938 is filed with your federal personal income tax return (Form 1040). As a result, filing Form 8938 doesn’t relieve you of the requirement to file FinCEN Form 114 if you’re otherwise required to file an FBAR.
You may also have to answer some questions on Schedule B (Form 1040) if you have foreign financial accounts – even if you don’t have to file FinCEN Form 114 or Form 8938. For most people, Schedule B is only necessary if you receive more than $1,500 of taxable interest or dividends during the tax year. This form is also filed with your federal income tax return.
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