IRS Forms FBAR: Filing Requirements for FinCEN Form 114

The Report of Foreign Bank and Financial Accounts, known as the FBAR, is a reporting requirement for U.S. persons with financial accounts outside the United States. A primary point of confusion is its name; while often searched for as an “IRS Form,” the FBAR is technically FinCEN Form 114. It is filed with the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury, though the IRS is granted authority to enforce its filing requirements.

The purpose of the FBAR is to provide the U.S. government with visibility into foreign financial accounts to detect and deter illegal activities, such as money laundering or terrorist financing. This reporting is mandated under the Bank Secrecy Act (BSA). It helps close a potential gap in financial transparency, as foreign financial institutions are not subject to the same reporting rules as domestic ones.

Determining Your FBAR Filing Requirement

A filing obligation is triggered when a “U.S. person” has a financial interest in, or signature or other authority over, foreign financial accounts, and the total value of these accounts exceeds a specific threshold. This requirement is broad and applies regardless of whether the foreign accounts generate taxable income.

Who is a “U.S. Person”?

The term “U.S. person” includes U.S. citizens, even those living abroad, and resident aliens. A resident alien is someone who holds a green card or meets the “substantial presence test,” which involves being physically present in the U.S. for at least 183 days during a three-year period. The definition also extends beyond individuals to encompass domestic entities such as corporations, partnerships, limited liability companies (LLCs), trusts, and estates created or organized under U.S. laws.

What is a “Foreign Financial Account”?

A “foreign financial account” includes any account located at a financial institution outside of the United States. Common examples include bank accounts like checking and savings, securities or brokerage accounts, and commodity futures or options accounts. The definition also includes insurance or annuity policies that have a cash value, as well as foreign retirement plans and mutual funds.

The Filing Threshold

An FBAR must be filed if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. The threshold is based on the combined maximum values of all accounts. For example, if a U.S. person has one foreign account with a maximum value of $5,000 and a second with a maximum value of $6,000 during the year, their aggregate value is $11,000, and an FBAR reporting both accounts is required.

Information and Documentation to Prepare

For each foreign financial account that must be reported, you will need to provide the name of the individual or entity listed on the account, the account number, and the full name and mailing address of the foreign financial institution.

Determining Maximum Account Value

You must report the maximum value of each account during the calendar year by reviewing periodic account statements to find the highest balance. Once you identify the maximum value in the foreign currency, you must convert it to U.S. dollars. The required exchange rate is the Treasury’s Financial Management Service rate for the last day of the calendar year. If a Treasury rate is not available, you may use another verifiable exchange rate and must provide the source.

Record-Keeping Requirements

You are required to maintain records that support the information reported on the form for five years from the FBAR’s due date. These records should contain the name on the account, the account number, the name and address of the foreign bank, the type of account, and the documents used to determine the maximum value. Keeping a copy of the filed FBAR itself can serve as part of this record-keeping requirement.

Distinguishing FBAR from IRS Form 8938

Many taxpayers are confused by the overlapping requirements of the FBAR and IRS Form 8938, Statement of Specified Foreign Financial Assets. While both forms involve reporting foreign assets, they have different rules, and filing one does not relieve you of the obligation to file the other.

Governing Law and Purpose

The FBAR requirement stems from the Bank Secrecy Act, which is aimed at preventing money laundering and other financial crimes. In contrast, Form 8938 was created under the Foreign Account Tax Compliance Act (FATCA). FATCA’s purpose is to ensure U.S. tax compliance by requiring taxpayers to report their foreign financial assets to the IRS as an attachment to their annual income tax return.

Filing Thresholds

The thresholds for Form 8938 are more complex than the FBAR’s $10,000 threshold and vary based on filing status and whether the taxpayer lives in the U.S. or abroad. For a single taxpayer living in the U.S., the threshold is met if specified foreign assets exceed $50,000 on the last day of the tax year or $75,000 at any time during the year. For a married couple filing jointly and living abroad, the threshold is much higher, requiring filing only if assets exceed $400,000 on the last day of the year or $600,000 at any time during the year.

Types of Assets

Form 8938 requires the disclosure of a broader category of “specified foreign financial assets” than the FBAR. This includes not only financial accounts but also other assets like foreign stock or securities not held in an account, foreign partnership interests, and certain foreign hedge funds and private equity funds.

How to File FinCEN Form 114

The FBAR must be filed electronically using the BSA E-Filing System. Paper filing is not an option unless you specifically request and receive an exemption from FinCEN.

The annual deadline for filing the FBAR is the same as the federal income tax return due date, typically April 15. FinCEN grants an automatic six-month extension to October 15 for all filers, and you do not need to file a request to receive this extension. FinCEN has also provided a further filing extension for U.S. persons who only have signature authority over a foreign financial account but no financial interest in it; for the 2024 calendar year, this deadline is April 15, 2026.

After you submit the form, you will receive a confirmation page and subsequent emails confirming your submission. A final email will contain a unique BSA ID, which acknowledges that FinCEN has officially received your report and should be saved for your records.

Penalties for Non-Compliance

Failing to file a required FBAR can lead to significant civil and, in some cases, criminal penalties. The severity of the penalty depends on whether the violation is determined to be “non-willful” or “willful.”

Non-Willful Penalties

A non-willful violation occurs when the failure to file is due to negligence, inadvertence, or a good-faith misunderstanding of the law. For such violations, the maximum civil penalty is $16,536 per violation, a figure that is adjusted for inflation. The Supreme Court clarified in Bittner v. United States that this penalty applies per form annually, not per unreported account. The IRS may waive the penalty if there was reasonable cause for the failure to file.

Willful Penalties

A violation is considered willful if it involves an intentional disregard of a known legal duty. The civil penalty for a willful violation can be the greater of $165,353 (adjusted for inflation) or 50% of the total balance of the foreign accounts at the time of the violation. Willful violations can also lead to criminal prosecution, which may result in fines and imprisonment.

The IRS offers programs like the Streamlined Filing Compliance Procedures for taxpayers whose non-compliance was non-willful. These programs allow eligible individuals to catch up on filings with reduced or waived penalties. This involves filing several years of delinquent FBARs and tax returns and certifying that the failure to file was not intentional.