Reporting Foreign Bank and Financial Accounts (FBAR) 

In our expanding global economy, it’s not uncommon for taxpayers to have financial assets across international borders. The Bank Secrecy Act (BSA) was passed to help prevent money laundering, tax fraud, and other financial crimes using foreign accounts. The BSA gives the U.S. Treasury the authority to collect information on U.S. taxpayers with financial accounts outside the country. Continue reading to understand reporting foreign bank and financial accounts and how to stay compliant.  

Am I required to report money in foreign bank accounts? 

Yes, depending on the total amount, you are expected to report the details of your foreign accounts to the Financial Crimes Enforcement Network (FinCEN) each year.  

If you’re required, you will submit a Foreign Bank and Financial Accounts Report, otherwise known as an FBAR, to document and declare money held in foreign banks or financial institutions. The FBAR is an informational report filed separately from your tax return using  Form 114. 

 Who is required to file a Foreign Bank and Financial Accounts Report (FBAR)? 

 
As a U.S. person, whether a citizen and/or resident, you are required to file a Foreign Bank and Financial Accounts Report (FBAR) if: 

  • You have financial interest or authority over at least one account located outside the United States, and 
  • The combined value of your accounts exceeds $10,000 at any time during the calendar year 

Bank and financial accounts may include money in checking and savings accounts, insurance or annuity policies with a cash value, mutual funds, or similar pooled funds and retirement accounts.  

Even if your accounts did not generate taxable income, you should still file an FBAR to report and document these accounts with the Department of the Treasury each year.  

When is my FBAR due?  

Your annual FBAR report is due to the Financial Crimes Enforcement Network (FinCEN) by April 15th. It is important to point out that although the IRS enforces the reporting and acts as the authority over Form 114, the form is reported to FinCEN, not to the IRS.  

If you cannot file your FBAR by the April 15th deadline, the report allows an automatic six-month extension without request. The extension will allow you until October 15th to submit your report.  Unfortunately, the automatic extension does not relieve you of penalties. You should still aim to file by the deadline, as filing the report past the deadline may subject you to late filing penalties. 

How to file Form 114 (FBAR) 

 The FinCEN requires FBARs to be e-filed through the BSA E-Filing System. You can access Form 114 and file it online here. You will need your personal information, the bank’s information, and details of each foreign account to complete the form.  

What are the penalties for not filing Form 114? 

There can be penalties for not filing Form 114 when required. Failing to file this form when required can result in civil penalties, which can vary depending on the circumstances and the amount of unreported foreign financial assets.  

For example, if you knowingly did not file complete and accurate information on the FBAR, you will receive a much greater fine than if an examination determines you had reasonable cause for filing a late or incomplete report.  

If you realize you should have filed an FBAR in a previous year, you can file the report late and should file it as soon as possible to minimize potential penalties. The IRS gives instructions for how to submit delinquent FBARs here.  

Do I pay taxes on money in foreign financial accounts? 

 The FBAR is an informational return, not a tax return. Filing this form will not result in a tax bill. Typically, you are not taxed on money in a foreign account. Once a transaction or transfer occurs, the funds will be reported to the IRS if they are considered taxable on Form 2555. Although this income may not be taxable, you may still have to declare these assets on your tax return using Form 8938, Statement of Specified Foreign Financial Assets.   
 See more on foreign earned income here.  

What is the difference between IRS Form 8938 and FinCEN Form 114?

You may wonder if there is a connection between Form 8938 and Form 114. Although both forms are used to report foreign financial assets, the documents are submitted to different entities.  

Form 8938, Statement of Specified Foreign Financial Assets is an informational form reported to the IRS along with your tax return.  

Form 114, Report of Foreign Bank and Financial Accounts (FBAR) is a reporting document submitted annually to the Financial Crimes Enforcement Network (FinCEN). This report is filed separately from your

You should review the filing requirements and thresholds for each form to determine if you must file one or both forms. 

 

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