What Is an FBAR and Who Needs to File One?

If you have financial accounts outside the United States, you may have a reporting requirement that is separate from your federal income tax return. One of the most common is the FBAR — Report of Foreign Bank and Financial Accounts.

The FBAR is designed to report certain foreign financial accounts held by U.S. persons when the combined value of those accounts exceeds the applicable reporting threshold.

What Is an FBAR?

FBAR stands for Report of Foreign Bank and Financial Accounts.

It is filed electronically using FinCEN Form 114 with the Financial Crimes Enforcement Network rather than being filed as a standard IRS income tax form.

The FBAR provides information about qualifying financial accounts located outside the United States.

Who May Need to File an FBAR?

A U.S. person may have an FBAR filing requirement when they have a financial interest in or signature authority over qualifying foreign financial accounts and the aggregate value of those accounts exceeds the reporting threshold.

For FBAR purposes, U.S. persons can include certain:

• U.S. citizens

• U.S. residents

• Corporations

• Partnerships

• Limited liability companies

• Trusts

• Estates

Specific rules and exceptions can apply depending on the circumstances.

What Is the $10,000 FBAR Threshold?

An FBAR is generally required when the aggregate maximum value of qualifying foreign financial accounts exceeds $10,000 at any time during the calendar year.

Importantly, the threshold applies to the combined value of the accounts, not each account individually.

For example, having several foreign accounts that individually remain below $10,000 could still trigger an FBAR requirement if their combined value exceeds the threshold at any point during the year.

What Types of Accounts Can Be Reportable?

Foreign financial accounts can include more than traditional checking accounts.

Depending on the circumstances, reportable accounts may include:

• Foreign checking accounts

• Foreign savings accounts

• Foreign brokerage accounts

• Certain foreign securities accounts

• Certain foreign retirement or financial accounts

• Other qualifying financial accounts maintained outside the U.S.

The specific characteristics of the account should be reviewed when determining whether it is reportable.

What Does “Signature Authority” Mean?

You don't necessarily need to own the money in an account to have an FBAR filing requirement.

In certain situations, a person with signature or other authority over a foreign financial account may have reporting responsibilities even when the funds belong to a business, organization, or another person.

This can be particularly relevant for executives, employees, trustees, and individuals managing foreign business accounts.

Is FBAR Part of Your Tax Return?

No.

The FBAR is a separate information report and is generally filed electronically with FinCEN.

This distinction is important because taxpayers sometimes assume that reporting foreign income on Form 1040 automatically satisfies all foreign-account reporting requirements.

It does not necessarily do so.

Is FBAR the Same as FATCA?

No. FBAR and FATCA are separate reporting regimes.

FATCA can require certain taxpayers to report specified foreign financial assets using Form 8938, which is generally attached to the federal income tax return.

FBAR uses FinCEN Form 114 and has different thresholds and rules.

Some taxpayers may need to file both an FBAR and Form 8938 for the same year.

When Is the FBAR Due?

The FBAR generally follows an annual filing schedule tied to the calendar year and has an automatic extension available under current rules.

Because filing requirements and procedures can change, taxpayers with foreign accounts should verify the applicable deadline for the year being reported.

What Happens If You Don't File?

Failure to comply with FBAR requirements can potentially result in significant penalties.

The consequences can vary depending on the circumstances, including whether the failure was considered willful or non-willful.

If you discover that FBARs should have been filed for previous years, it can be important to review the situation before deciding how to correct the missing filings.

Review Your Foreign Accounts Carefully

Having money outside the United States does not automatically mean you have an FBAR requirement, but the aggregate $10,000 threshold is relatively low, and multiple accounts must be considered together.

James Ridout CPA provides FBAR assistance, foreign account reporting, FATCA guidance, foreign income reporting, expat tax preparation, and international tax services.

Have foreign bank, investment, or financial accounts? Schedule a consultation with our team to determine which U.S. reporting requirements may apply.