Are you a U.S. citizen or resident alien with foreign financial accounts? You may need to file the FBAR, also known as FinCEN Form 114. If you have a financial interest or signature authority over foreign bank accounts, understanding your requirements is essential. At 1040 Abroad, we simplify the process, helping you avoid penalties and file accurately. Let us guide you through filing the FBAR and staying compliant with U.S. expat tax laws.
What is FBAR?
FBAR, or Foreign Bank Account Report, refers to FinCEN Form 114, a required annual filing for U.S. citizens and resident aliens with foreign financial accounts. If the aggregate value of all foreign bank accounts exceeds $10,000 at any point during the calendar year, you must file an FBAR.
The FBAR is designed to ensure compliance with U.S. tax laws and to prevent tax evasion by requiring disclosure of foreign financial assets and account balances.
How to File an FBAR?
The FBAR is filed separately from your U.S. federal tax return. Instead of submitting it to the IRS, you send it to the Financial Crimes Enforcement Network (FinCEN) using FinCEN Form 114, which must be filed electronically through the BSA E-Filing System.
Related: What document do I need for filing an FBAR?
Filing Process:
- Gather Information: Collect details for all foreign financial accounts, such as account numbers, names of the foreign institutions, and the maximum value of each account during the calendar year.
- Submit Electronically: Log in to the e-filing system and enter the required details.
- Hire a Professional: If you prefer expert assistance, a qualified enrolled agent or tax preparer can file the FBAR on your behalf. To authorize them, you’ll sign FinCEN Form 114a.
At 1040 Abroad, we believe in simplicity and transparency, which is why we offer flat fees regardless of whether you have 1 account or 100 accounts. For just $100, we’ll handle your FBAR preparation and electronic filing, ensuring compliance and peace of mind. Avoid hidden fees and know exactly what you’re paying for when you file with us.
Who needs to file an FBAR?
If you’re a U.S. citizen, resident, or entity like an LLC or trust, you must file an FBAR if:
- You have a financial interest or signature authority over one or more foreign financial accounts.
- The total aggregate value of these accounts exceeds $10,000 at any point during the calendar year—even if no taxable income was earned.
It doesn’t matter if it’s just one account or several; the foreign location makes it reportable.
When Don’t You Need to File?
Not every foreign account triggers FBAR filing. You’re exempt if the accounts are:
- Nostro or Correspondent accounts.
- Owned by a government body or international financial institution.
- Held in a U.S. military banking facility.
- Part of an IRA or retirement plan you own or benefit from.
- Included in a trust, as long as another U.S. entity has filed an FBAR for those accounts.
When to file an FBAR?
The FBAR deadline is the same as the tax day for U.S. income taxes—April 15. If you miss this date, an automatic extension moves the deadline to October 15, giving you more time to file without needing a special request.
What Are the Penalties for Not Filing an FBAR?
Failing to file the FBAR comes with severe consequences. With international agreements in place, foreign institutions now share data about U.S. clients with the IRS, making it easier for the agency to detect non-compliance. Ignoring your filing obligations can lead to the following FBAR penalties:
- Non-Willful Violations: If the failure to file is deemed unintentional, you could face a fine of up to $10,000 per violation.
- Willful Violations: Knowingly failing to file the FBAR can result in fines up to 50% of the account’s balance or $100,000, whichever is greater.
- Criminal Penalties: In cases of extreme willful non-compliance, you may face criminal charges, including imprisonment.
Why Compliance Matters
With the IRS’s enhanced detection capabilities under FATCA and the potential for severe financial and criminal consequences, it’s crucial to file your FBAR accurately and on time. If you’ve missed previous filings, consider using streamlined compliance procedures or delinquent FBAR submission procedures to avoid escalating penalties.
Related: Supreme Court Limits FBAR Penalties for US Expats
What Accounts Are Reportable on FBAR?
You must report any foreign financial accounts if they meet the FBAR filing requirements. These include accounts located in a foreign country where you have a financial interest or signature authority, provided their aggregate value exceeds $10,000 during the calendar year.
Types of Reportable Accounts:
- Bank Accounts: Checking, savings, time deposits, and similar accounts held in foreign banks.
- Investment Accounts: Accounts holding stocks, securities, or mutual funds in a foreign financial institution.
- Foreign Branch Accounts: Accounts held in a branch of a U.S. institution located abroad.
- Other Financial Accounts:
- Annuity contracts or insurance policies with cash value.
- Accounts in which you have joint ownership or legal title.
- Accounts for which you have signature authority but no financial interest (e.g., as a business partner or employee).
Exempt Accounts:
Certain accounts, such as Nostro accounts, retirement plans under U.S. tax law, or accounts owned by government entities, may not require reporting.
What Is the Difference Between FATCA and FBAR Reporting?
FBAR and FATCA both involve reporting foreign financial accounts, but they differ in purpose and thresholds. FBAR, filed via FinCEN Form 114, reports foreign accounts with an aggregate value over $10,000 to FinCEN, while FATCA, reported on Form 8938, discloses foreign assets exceeding $200,000 (for expats) as part of your income tax return to the IRS. FBAR focuses on accounts, while FATCA includes broader asset types.
For a detailed breakdown of the differences between FBAR and FATCA, visit this article: FBAR and FATCA: Reporting Foreign Accounts as a US Expat
We provide free tax advice via email to help U.S. expats better understand international tax laws. Whether you’re a client or simply exploring our blog, our expert tax professionals are here to guide you. If you have questions about FBAR filing or other expat tax matters, don’t hesitate to reach out.
