If you are a U.S. citizen or resident with a foreign bank account, you must disclose it on your tax return. The IRS requires all taxpayers to complete Schedule B of Form 1040, which asks about foreign accounts and whether an FBAR (FinCEN Form 114) is required. Additionally, if the total value of your foreign financial assets exceeds the IRS threshold, you may also need to file Form 8938 under the Foreign Account Tax Compliance Act (FATCA).
This guide will walk you through what you need to know, including the necessary forms like Schedule B, FinCEN Form 114 (FBAR), and Form 8938, so you can learn how to report foreign bank account on tax return correctly.
Key Takeaways
- U.S. citizens and residents must report foreign financial accounts on Schedule B of Form 1040, regardless of account balance, and must file FinCEN Form 114 (FBAR) if the total value exceeds $10,000 at any time during the year.
- Failing to comply with FBAR filing requirements can lead to severe penalties.
- Both FBAR and IRS Form 8938 have distinct filing requirements; while FBAR focuses on foreign bank accounts, Form 8938 encompasses specified foreign financial assets, necessitating that some accounts be reported on both forms to ensure comprehensive compliance.
Reporting Foreign Bank Accounts on Your Tax Return
Step 1: Disclose Foreign Accounts on Schedule B
Schedule B of Form 1040 is where you must disclose your foreign bank accounts. This form is required regardless of the account balance.
- Part III of Schedule B asks if you have a financial interest in or signature authority over a foreign financial account.
- It also asks whether you are required to file FinCEN Form 114 (FBAR), linking the tax return to the Treasury Department’s foreign account reporting requirements.
Step 2: Determine if You Need to File an FBAR (FinCEN Form 114)
The Foreign Bank Account Report (FBAR), officially known as FinCEN Form 114, must be filed if the total balance of your foreign bank accounts exceeds $10,000 at any time during the calendar year. This includes bank and financial accounts held in a financial institution located outside the U.S.
- If your total foreign account balances exceed $10,000 at any point in the year, you must also file the FBAR.
Step 3: Determine if You Need to File Form 8938
In addition to the FBAR, some taxpayers must also file Form 8938 (Statement of Specified Foreign Financial Assets) under FATCA. This form is required only if your total foreign financial assets exceed certain thresholds:
- For U.S. residents: Filing is required if your total foreign financial assets exceed $50,000 (single) or $100,000 (married filing jointly) at year-end (or $75,000/$150,000 at any point during the year).
- For taxpayers living abroad: Filing is required if your total foreign financial assets exceed $200,000 (single) or $400,000 (married filing jointly) at year-end (or $300,000/$600,000 at any point during the year).
How Do You File FinCEN Form 114 (FBAR)?
The FBAR is submitted separately from your federal tax return using the BSA E-Filing System.
The FBAR deadline is April 15, with an automatic extension until October 15. If filing late, you must provide a reason for the delay. To complete the form, gather account statements, including the account number, financial institution location, and the maximum value of each foreign financial asset during the reporting period.
For jointly owned accounts, if one spouse files an FBAR and the other has no additional foreign financial accounts, the second spouse does not need to file. However, both must sign FinCEN Form 114a to authorize the joint filing. Those with signature authority over an employer’s foreign financial account may also need to file.
Do I Need to Report Foreign Bank Accounts Under $10,000?
Yes—Here’s Why. Many expats assume that if each of their foreign bank accounts holds less than $10,000, they don’t need to file an FBAR. However, that is not how the reporting threshold works.
The $10,000 threshold applies to the total, combined maximum value of all your foreign accounts at any time during the year—not the balance of each account individually.
This means that even if none of your foreign accounts individually exceeded $10,000, you must file an FBAR if their combined maximum balance reached or surpassed $10,000 at any point in the year.
Example: How the FBAR Filing Threshold Works
Let’s say you have three foreign bank accounts:
- Account A: Maximum balance during the year = $4,000
- Account B: Maximum balance during the year = $3,500
- Account C: Maximum balance during the year = $2,500
Each of these accounts individually has less than $10,000. But if you add them up:
$4,000 + $3,500 + $2,500 = $10,000
Since the combined maximum balance across all accounts reached $10,000, you are required to file an FBAR—even though none of your accounts exceeded that amount on their own.
How Do You Report Foreign Financial Accounts on Form 8938?
To report foreign financial accounts on your income tax return, you may need to file Form 8938 if the aggregate value of your foreign financial assets exceeds certain thresholds. Unlike FBAR filing, which is submitted to the Financial Crimes Enforcement Network (FinCEN), Form 8938 is filed with your federal tax return to the IRS.
You must report bank and financial accounts, brokerage accounts, mutual funds, and foreign assets held in an international financial institution or a foreign country if they meet reporting thresholds. The requirement applies to U.S. taxpayers, including expats, who hold foreign bank and financial accounts with a financial interest or signature authority.
To file, include Form 8938 with your tax form for the relevant tax year and report the maximum values of your certain foreign financial accounts. The filing spouse must file separately unless filing jointly.
What’s the Difference Between an FBAR and Form 8938?
Both the FBAR form and Form 8938 require U.S. taxpayers to report foreign financial accounts, but they differ in purpose, filing process, and penalties.
- FBAR Filing: Required if the aggregate value of foreign accounts exceeds $10,000 at any point during the calendar year. It applies to bank accounts, foreign branch accounts, and certain financial accounts held in an international financial institution. The FBAR reporting is done via the BSA E-Filing System and submitted to the Financial Crimes Enforcement Network (FinCEN), not the IRS.
- Form 8938: Required if foreign financial assets, including mutual funds, brokerage accounts, and other foreign investments, exceed the IRS threshold. It is submitted with the federal tax return and applies to a broader range of foreign assets than the FBAR filing requirements.
Related: FBAR vs FATCA: Reporting Foreign Accounts as a US Expat
Does IRS Know my Foreign Bank Account?
Yes, the IRS can know about your foreign bank account through the Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to report account details of U.S. persons. Additionally, U.S. citizens must report foreign financial accounts annually to the Treasury Department under the Bank Secrecy Act.
Need Help with FBAR or Foreign Account Reporting?
Understanding and complying with the requirements for reporting foreign financial accounts is essential to avoid severe penalties. From filing Schedule B, FinCEN Form 114 (FBAR), and Form 8938 to leveraging streamlined compliance procedures, each step ensures you stay compliant with U.S. tax laws.
If you’re unsure about your FBAR filing requirements, need help with foreign bank account reporting, or want guidance on expat taxes, our experienced tax preparers are here to help. We offer free tax consultations for U.S. expats, providing expert advice tailored to your situation. Get the clarity you need—contact us today and let our team ensure your compliance with confidence.
