Do I Have to Report a Foreign Bank Account to the IRS?

Holding a bank account outside the U.S. comes with tax reporting responsibilities. The IRS and the Financial Crimes Enforcement Network (FinCEN) require individuals to disclose foreign financial accounts, even if no taxable income is generated. Failure to report can lead to significant penalties.

Understanding whether you need to report a foreign account depends on specific government criteria.

Financial Thresholds

Reporting requirements depend on the total value of all foreign financial accounts during the year. The Foreign Bank Account Report (FBAR) applies if the combined balance exceeds $10,000 at any point. Even a one-day balance above this threshold triggers the requirement.

Under the Foreign Account Tax Compliance Act (FATCA), Form 8938 may also be required. For U.S. residents filing individually, foreign assets must be reported if they exceed $50,000 at year-end or $75,000 at any time. For joint filers, these limits double to $100,000 and $150,000.

Higher thresholds apply to those living abroad. Single filers must report if their foreign assets exceed $200,000 at year-end or $300,000 at any point. For married couples filing jointly, the limits increase to $400,000 and $600,000.

Types of Foreign Accounts

Foreign financial accounts include more than checking and savings accounts. Investment accounts with foreign brokerage firms, even if inactive, require reporting.

Foreign retirement accounts, such as Canadian RRSPs or UK SIPPs, may also need disclosure depending on their structure and U.S. tax treatment.

Foreign life insurance policies with cash value, such as whole or universal life insurance, can be considered financial accounts if they allow withdrawals or loans. Accounts held at foreign institutions through business entities or trusts may require reporting, even if the individual does not directly own them but has signature authority.

Required Forms and Documents

Individuals meeting reporting criteria must file specific forms with the U.S. government.

FBAR

The Foreign Bank Account Report (FBAR), FinCEN Form 114, must be filed electronically if the total balance of all foreign financial accounts exceeds $10,000 at any time during the year. Unlike tax forms submitted to the IRS, the FBAR is filed with FinCEN.

The form requires details such as the name and address of the foreign financial institution, the account number, and the highest balance during the year. Those with signature authority over an account must report it, even if they do not own it. The deadline is April 15, with an automatic extension to October 15. Failure to file can result in penalties.

Form 8938

Form 8938, required under FATCA, is filed with the IRS as part of a tax return. It applies to U.S. taxpayers whose foreign financial assets exceed reporting thresholds based on filing status and residency.

Unlike the FBAR, which focuses on account balances, Form 8938 requires additional details, including income generated from foreign assets and whether the account was opened or closed during the year. It also covers foreign stockholdings not held in a financial account and certain foreign partnership interests.

Form 8938 is due with the taxpayer’s federal income tax return. Filing an FBAR does not eliminate the need for Form 8938 if the reporting thresholds are met.

Schedule B

Schedule B of Form 1040 reports interest and dividend income and includes a section on foreign accounts. Part III asks whether the taxpayer has a financial interest in or signature authority over a foreign account and whether they must file an FBAR.

Even if no income is earned, answering “yes” alerts the IRS to potential reporting obligations. Failing to disclose a foreign account on Schedule B while filing an FBAR or Form 8938 increases audit risk.

Schedule B is filed as part of an annual tax return and does not replace other reporting forms.

Potential Penalties for Non-Disclosure

Failure to report foreign financial accounts can result in significant penalties. The IRS and FinCEN impose separate fines, and both agencies may take enforcement action.

For non-willful violations, the penalty for not filing an FBAR can reach $10,000 per violation under 31 U.S.C. 5321(a)(5)(B). If multiple accounts are involved across multiple years, penalties add up quickly. The IRS may waive fines if the taxpayer demonstrates reasonable cause, such as reliance on incorrect advice or lack of access to records.

Willful violations carry harsher penalties. Under 31 U.S.C. 5321(a)(5)(C), willful FBAR violations result in a fine of the greater of $100,000 or 50% of the account balance at the time of the violation. Courts have upheld aggressive enforcement, such as in United States v. Collins, where a taxpayer faced millions in fines for intentionally omitting foreign accounts. Criminal charges under 31 U.S.C. 5322 may apply, leading to potential imprisonment of up to five years if fraud or tax evasion is involved.

Common Exclusions

Not all foreign financial accounts require reporting. Certain exemptions exist based on account type, ownership structure, and regulatory provisions.

Foreign accounts in U.S. military banking facilities designated by the Department of Defense are not subject to FBAR reporting. Accounts maintained at a foreign branch of a U.S. bank do not require disclosure, as they are considered domestic for reporting purposes. However, accounts at a foreign subsidiary of a U.S. financial institution must be reported if they meet filing thresholds.

Some foreign retirement accounts and tax-favored savings plans may be excluded. For instance, participants in foreign employer-sponsored retirement plans, such as Australian Superannuation Funds, may not need to report them on an FBAR, though they may still be subject to FATCA reporting on Form 8938.

Individuals with signature authority over a foreign account but no financial interest may qualify for an exemption, depending on their role and the nature of the account.