Overview

The Foreign Bank and Financial Accounts Report (FBAR) is a disclosure requirement administered by the U.S. Department of the Treasury and filed electronically with the Financial Crimes Enforcement Network (FinCEN) using FinCEN Form 114. The rule is simple in one respect — if a U.S. person’s aggregate foreign account balances exceed $10,000 at any point in the calendar year, an FBAR is required — but the practical application raises many questions about ownership, signature authority, deadlines, and penalties.

Authoritative sources: Treasury/FinCEN FBAR FAQs and filing instructions (FinCEN), and IRS guidance on foreign account reporting (IRS). See: https://www.treasury.gov/resource-center/faqs/Finance/Pages/FBAR.aspx and https://www.irs.gov/businesses/small-businesses-self-employed/foreign-bank-and-financial-accounts-reporting.

Who counts as a “U.S. person” for FBAR?

U.S. persons include:

  • U.S. citizens and U.S. residents (green card holders and those meeting the substantial presence test).
  • Domestic entities such as corporations, partnerships, LLCs, and trusts formed under U.S. law.
  • Estates of U.S. persons.

Nonresident aliens generally are not required to file an FBAR unless they meet other specific facts and circumstances. When in doubt, consult a tax professional for a residency analysis.

Which accounts trigger FBAR reporting?

Reportable accounts include, but are not limited to:

  • Foreign bank accounts (checking, savings)
  • Foreign brokerage and securities accounts
  • Foreign mutual funds or collective investment accounts
  • Foreign retirement accounts (subject to nuances)
  • Any foreign financial accounts in which you have signature authority or a financial interest

Important distinction: signature authority alone (the legal ability to control an account) can create a filing obligation even if you do not own the funds. Conversely, some foreign entities or trust arrangements may require special analysis to determine whether the underlying accounts are reportable.

How the $10,000 threshold works

The $10,000 test is aggregate and measured at any point during the calendar year. That means you add the highest balance of each foreign account during the year and, if the total exceeds $10,000, an FBAR is required for the year.

Example: if you have three foreign accounts with highest annual balances of $6,000, $4,500, and $3,000, your aggregate high‑water mark is $13,500 and you must file an FBAR for that year.

Filing mechanics and deadlines

  • Form: FinCEN Form 114 (commonly called “FBAR”).
  • Filing method: Electronically through the BSA E-Filing System administered by FinCEN (do not file Form 114 with the IRS as a paper form).
  • Deadline: April 15 of the year following the calendar year being reported. FinCEN provides an automatic extension to October 15 if you miss the April 15 date — no request required.

Always verify the current electronic filing procedures at the FinCEN/BSA site before filing.

Penalties and consequences (summary)

FBAR penalties can be severe. Civil penalties range from monetary fines for non‑willful violations to much larger penalties for willful violations, and criminal charges are possible in extreme cases. In general terms:

  • Non‑willful violations: civil penalties may be assessed (historically these have been applied up to statutory limits in many cases). Mitigating factors such as reasonable cause and prompt correction are considered.
  • Willful violations: civil penalties may be assessed up to statutory maximums (amounts tied to the account balance) and criminal prosecution is possible.

Because penalty exposure depends on the facts — willfulness, the amount at issue, and corrective actions taken — consult the Treasury/FinCEN guidance and IRS materials and consider professional help. See our in-depth guides on FBAR penalties and on willful vs. non‑willful assessments: “FBAR Penalties: Consequences of Non-Compliance” and “Willful vs. Non-Willful FBAR Penalties”.

Related internal resources: FBAR Penalties: Consequences of Non-Compliance and FBAR vs. Form 8938: What to File for Foreign Financial Accounts.

Common filing mistakes and how to avoid them

  1. Treating foreign income as the trigger. The FBAR threshold is based on account balances, not whether the accounts produced taxable income.
  2. Forgetting about accounts where you have signature authority. If you can control distributions or withdrawals, you may need to report even if you don’t own the funds.
  3. Missing joint‑account rules. For jointly held accounts, the total balance is reportable by each person who has a financial interest unless another exclusion applies.
  4. Confusing FBAR with Form 8938 (FATCA). Some taxpayers must file both; they are separate requirements with different thresholds and filing methods.

Useful reference: our comparison piece FBAR vs. Form 8938 explains when each form applies.

Practical steps to prepare and file (checklist)

  1. Inventory all foreign accounts and collect account numbers and institution names.
  2. Obtain statements or bank confirmations showing high‑water mark balances for each account during the calendar year.
  3. Determine whether you own the accounts, have signature authority, or whether the accounts are owned by a foreign entity (which may change the analysis).
  4. Add the highest balances to check whether the aggregate exceeds $10,000.
  5. File FinCEN Form 114 electronically via the BSA E‑Filing System if required. If you discover an omission from prior years, evaluate voluntary correction options (see below).
  6. Keep records supporting account balances, communication with the bank, and your filing decision for at least five years (or longer if advised by counsel).

Correcting past FBAR errors

If you missed a prior‑year FBAR, do not ignore it. Depending on whether the omission was willful or non‑willful, different remedies may apply. Options include:

  • Filing amended or late FBARs electronically through the BSA E‑Filing System.
  • Using the IRS Streamlined Filing Compliance procedures for non‑willful conduct (subject to eligibility rules).
  • Working with advisors experienced in cross‑border tax compliance if willfulness is a concern.

See our practical guide: How to Correct Foreign Bank Account Reporting (FBAR) Errors and the IRS Streamlined procedures for details.

Real-world examples and common scenarios

  • U.S. expat with multiple local bank accounts: Add the peak balances across all accounts for the aggregate test.
  • U.S. retiree receiving a foreign pension deposit: Even modest pensions deposited abroad can push the aggregate over $10,000.
  • U.S. business owner with a foreign subsidiary bank account: The domestic entity may have a filing obligation depending on ownership and structure — corporate and partnership rules can change the analysis.

In my practice, the most frequent compliance gaps I see are: failing to include an account tied to foreign brokerage assets and not recognizing signature authority over a family member’s account.

When to get professional help

Consult a CPA or international tax attorney if any of the following apply:

  • You suspect willful non‑filing or large undisclosed balances.
  • You need to correct multiple years of filings.
  • You hold complex foreign structures (trusts, foreign corporations, nominee accounts).

A practitioner can help evaluate potential penalties, eligibility for streamlined relief, and whether voluntary disclosure is appropriate.

Further reading and internal resources

Professional disclaimer

This article is educational and does not substitute for personalized tax or legal advice. FBAR rules interact with tax residency, FATCA, and other reporting requirements; outcomes depend on your facts. Consult a qualified tax professional or attorney before making filing decisions.

Author note

I have worked for over 15 years advising clients with foreign accounts. In practice, timely recordkeeping and early professional review reduce risk and simplify compliance. When clients proactively track balances and ask about signature authority, we avoid most common FBAR pitfalls.