The FBAR: When (and How) to Report Money in Foreign Bank Accounts
The FBAR (Foreign Bank Account Report) is something you’ll want to get familiar with if you're a U.S. citizen with money in non-U.S. accounts. Below, our experts tell you what you need to know to avoid penalties and submit this form (FinCEN Form 114) in a snap.
As an American living abroad, it's no surprise that you may have a financial account (banking, pension, investment, etc.) located outside of the U.S. But did you know that simply having financial assets in foreign accounts might trigger special reporting requirements? It’s true, and the main reporting requirement is known as an FBAR (Report of Foreign Bank and Financial Accounts). The actual form you’d fill out come Tax Day is FinCEN Form 114.
Below we'll run through the basics of what you should know about the FBAR, including:
- What an FBAR is
- Who files
- FBAR deadlines
- Filing instructions
- Penalties for not filing
Need to submit an FBAR? H&R Block Expat Tax Services makes it simple. File your FBAR and U.S. taxes together now.
What is an FBAR?
The FBAR is formerly called the Report of Foreign Bank and Financial Accounts, and is also known as FinCEN Form 114. If you qualify, you submit it yearly.
The foreign bank account report exists to combat tax evasion, specifically by having U.S. citizens report money and assets in non-U.S. banks. Rather than filing with the IRS, you submit an FBAR to FinCEN, the U.S. Treasury Department's Financial Crimes and Enforcement Network. Failing to file means facing heavy penalties, so it’s always in your best interest to stay up to date.
Most expat tax filers will just report the balance in their foreign bank accounts, but you may also have to report:
- Foreign assets like stock that’s held by foreign financial institutions
- Assets in a foreign branch of a U.S. financial institution
- Foreign mutual funds, life insurance or annuity contract
- Foreign retirement accounts
- Accounts that you don’t own but are able to control
Who files an FBAR? When you should report money in foreign accounts
Who files an FBAR? Whether you live in the U.S. or abroad, if you are a U.S. person (U.S. citizens, Green Card holders, resident aliens) you are required to file FinCEN Form 114 (an FBAR) if the combined balance of all the foreign accounts you own or have a financial interest or signature authority is more than $10,000 at any point during the calendar year.
- Financial interest is determined based upon who is the owner of record or legal title.
- Signature authority means that you have some level of control over the disposition of assets through direct communication with the institution. For example, if you’re a signatory on an employer’s foreign bank account, you have signature authority and should report the account on your FBAR.
Foreign financial accounts include bank accounts, securities accounts, and certain foreign retirement arrangements. Accounts located outside of the 50 states, D.C., the U.S. possessions, and tribal territory are considered "foreign" accounts.
For example, suppose you are a U.S. citizen living in Brazil. You have two Deutsche Bank checking accounts and a poupança account at a Brazilian bank that all together held $15,000 during the tax year. In this case, you must file an FBAR even if each account only held $5,000.
Your foreign retirement accounts may also have to be included. For example, Canadian Registered Retirement Savings Plans (RRSP), Canadian Tax-Free Savings Accounts (TFSA), Australian Superannuation funds, and Hong Kong Mandatory Provident funds are all foreign financial accounts reportable on the FBAR.
The FBAR is an annual filing and if you want to avoid penalties, make sure to file FinCEN Form 114 by the due date.
The FBAR deadline is the same as your income tax return due date, usually April 15 (with an automatic extension to October). Check our expat tax deadline page for up to date FBAR deadlines.
Ready to file? With H&R Block, you can conveniently file an FBAR online on your own or with the help of an advisor.
FBAR filing instructions: Filing with H&R Block
Your FBAR must be filed electronically through FinCEN's BSA e-filing system or with a preparation service that offers FBAR submissions, such as H&R Block Expat Tax Services.
Married taxpayers should take note: In very few situations are you able to submit a joint FBAR. If you own accounts jointly with your spouse, and either none or only one of you own a separate account, you are able file a single report. Otherwise, each spouse must file their own. If you are filing prior year or an amended form, you must still use FinCEN's website to do so and you must file separate accounts.
Here’s how to file an FBAR online with H&R Block Expat Tax Services:
- Sign up to file your U.S. taxes and FBAR either on your own or with the help of an advisor.
- Complete your tax interview to answer questions about your tax situation and financial accounts
- We’ll file your taxes with the IRS and your FBAR with FinCEN so you can get back to your life!
FBAR penalties: What happens when you don’t file?
What happens if you don’t file an FBAR when you’re supposed to? In short, the answer here is penalties. Not filing costs you — under the current rules, if you're required to file but either you do not file on time or if you do not correctly report your foreign accounts, you can be subject to FBAR penalties of up to $10,000 per violation even if you didn’t know you had to file.
The penalties are much steeper if you knowingly fail to file. If you’re aware of your requirement and do not file accurately, or if you don't file it on time, you could get hit with a $100,000 penalty per violation or an even higher penalty, depending on your account balances at the time of the violation. In the end, it makes financial sense to stay in compliance.
What if I’ve never filed an FBAR but I should have?
If you’ve never filed an FBAR and you were supposed to, don’t panic — there’s a process called IRS Streamlined Filing Compliance Procedures that can help you get caught up on your FBAR filing without penalties.
Streamlined compliance procedures allow Americans to get caught up on past FBARs without penalties. If you can qualify for Streamlined Filing, we recommend you take advantage of the proceedings — penalties for delinquent FBARs range anywhere from a few hundred dollars up to a few hundred thousand for serious offenders. If you need to catch up on multiple years of FBAR filings, choose to file your taxes and FBAR with an advisor, and our international tax advisors can help you decide on the best course of action for your unique situation.
What else should I know about reporting foreign bank and financial accounts?
What else should you know about reporting foreign bank accounts? If you’re a U.S. expat, you may need to file more forms than just FinCEN Form 114.
Generally, U.S. citizens and resident aliens must report all worldwide income, including income from foreign trusts and foreign bank and securities accounts, such as interest income. To do this you’ll need to complete and attach Schedule B (Form 1040) to your tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and also requires U.S. citizens to report the country in which each account is located. If that describes you, you'll answer "yes."
In addition, you may also have to complete and attach FATCA Form 8938 to your return. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds.
Note that filing Form 8938 does not replace or otherwise affect your requirement to file FinCEN Form 114.
Get FBAR help from the pros at H&R Block Expat Tax Services
Have questions about filing? Ready to file FinCEN Form 114? No matter how complicated your U.S. tax return is, there's an expat tax expert ready to help.
Get started now and file your FBAR and U.S. taxes together!
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