Foreign Bank Account Reporting under the Bank Secrecy Act (FBARs)

If you are a US citizen or tax resident, you may have a foreign bank account reporting obligation. This often catches many immigrants to the U.S. by surprise. They may have left behind foreign accounts in their native country and sometimes find out years later about FBAR reporting obligations.

FBAR Filing Requirement

Form FinCEN 114 (formerly Treasury Department Form 90-22.1) Report of Foreign Bank and Financial Accounts (FBAR) is a reporting requirement under the Bank Secrecy Act of 1970. While most of the provisions under the Bank Secrecy Act were created as requirements for foreign banks to comply with, the FBAR is an individual filing requirement.

Under 31 CFR 1010.350 each person subject to the jurisdiction of the United States having an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000.

Who is Subject to the FBAR?

An FBAR is required to be filed by any person subject to the jurisdiction of the United States (“United States Person” or “USP”): A USP means a citizen of the U.S., a tax resident of the U.S., or an entity that was created, organized, or formed under the laws of the U.S. or its territories. A tax resident for FBAR filing purposes is someone who has met the substantial presence test, or is a permanent resident, or a U.S. citizen. A resident can also include a corporation, LLC, LLP, or other entity formed under the laws of the U.S.

What is the Threshold for Filing an FBAR?

If the aggregate value (total value) of all reportable accounts exceeds $10,000 at any point in the calendar year exceeds $10,000, all such accounts must be reported.

Example: Bob has 5 foreign bank accounts. The highest total value of all accounts was on July 1, 2016. On this date Bank A had $1,000, Bank B had $3,000, Bank C had $0, Bank D had $5,000, and Bank E had $2,000, resulting in a total value of $11,000. Therefore, Bob has an FBAR filing requirement with respect to all 5 of his foreign bank accounts.

What are the FBAR Reporting Requirements?

There are two requirements for an account to be considered a reportable account on the FBAR.

(1) There must be a financial interest, signature authority, or other authority over the financial account.

A U.S. person has a financial interest in each account for which such person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others including non-U.S. persons.  Sometimes an individual may not be the legal account holder but may have an indirect financial interest in the account. Example: Bob sends $25,000 to his brother John in Canada to open up an investment account and deposit the money for him. John opens the account in his name, but the money clearly belongs to Bob. Bob has an indirect financial interest in that account and must report it on the FBAR. Any income earned from that account must also be reported on Bob’s U.S. income tax return.

A common scenario we’ve come across is where an overseas parent opens an account in a foreign country and includes their U.S. resident son or daughter as a legal account holder. This is common practice in some Asian countries as a will substitute. Such countries might not have a reliable probate system and the only way to ensure a seamless transfer of a foreign inheritance upon death is to include the future beneficiary on the account. This creates an FBAR filing requirement for their U.S. resident son or daughter. However, any income from these accounts may not need to be reported on the child’s tax returns. Unlike for FBAR reporting, for tax purposes there is a distinction made between equitable and legal ownership.

A person is considered to have signature authority over an account if the person can control the disposition of assets in the account by direct communication with the institution with whom the account is maintained.

(2) The foreign account must be a bank, securities, or other financial account. Below is a table of the types of financial accounts that are required to be reported on the FBAR.

Financial (deposit and custodial) accounts held at foreign financial institutionsYes
Financial account held at a foreign branch of a U.S. financial institutionYes
Financial account held at a U.S. branch of a foreign financial institutionNo
Foreign financial account for which you have signature authorityYes, subject to exceptions
Foreign stock or securities held in a financial account at a foreign financial institutionThe account itself is subject to reporting, but the contents of the account do not have to be separately reported
Foreign stock or securities not held in a financial accountNo
Foreign partnership interestsNo
Indirect interests in foreign financial assets through an entityYes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail.
Foreign mutual fundsYes
Domestic mutual fund investing in foreign stocks and securitiesNo
Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantorYes, as to foreign accounts
Foreign-issued life insurance or annuity contract with a cash-valueYes
Foreign hedge funds and foreign private equity fundsNo
Foreign real estate held directlyNo
Foreign real estate held through a foreign entityNo
Foreign currency held directlyNo
Precious Metals held directlyNo
Personal property, held directly, such as art, antiques, jewelry, cars and other collectiblesNo
‘Social Security’- type program benefits provided by a foreign governmentNo

What is the FBAR Filing Deadline?

The deadline used to be June 30, however, beginning with the 2016 FBARs, the due date has been rolled back to April 15 coincide with the tax return due date. Additionally, the deadline can now be extended. If you file an extension for your tax return, your FBAR deadline will be automatically extended to October 15.

Consequences of FBAR Non-Compliance

FBAR Penalty Structure

The IRS can impose various levels of FBAR civil penalties for non-compliance.


Under 31 USC 5321(a)(6)(A), a negligence penalty up to $500 may be assessed against a business for any negligent violation of the BSA, including FBAR violations. The simple negligence penalty applies only to businesses, not individuals. If any trade or business engages in a pattern of negligent violations of any provision (including the FBAR requirements)] of the BSA, a civil penalty of not more than $50,000 may be imposed. This is in addition to the simple negligence $500 penalty. The examiner is given discretion to determine the penalty amount up to the $50,000 ceiling.

Nonwillful FBAR Violations

Under 31 USC 5321(a)(5)(B), a penalty, not to exceed $10,000 per violation, may be imposed on any person who violates or causes any violation of the FBAR filing and recordkeeping requirements. The penalty should not be imposed if the violation was due to reasonable cause, and the person files any delinquent FBARs and properly reports the previously unreported account.

Willful FBAR Violations

Under 31 USC 5321(a)(5)(C),  a penalty for a willful FBAR violation may be imposed on any person who willfully violates or causes any violation of the FBAR filing and recordkeeping requirements. The statutory ceiling is the greater of $100,000 or 50% of the balance in the account at the time of the violation. There may be both a reporting and a recordkeeping violation regarding each account. Examiners may recommend a penalty that is higher or lower than 50 percent of the highest aggregate account balance of all unreported foreign financial accounts based on the facts and circumstances. In no event will the total penalty amount exceed 100 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination.

What should non-compliant taxpayers do?

If taxpayers are non-compliant with the foreign asset and income reporting requirements, they should consider applying to one of IRS’ voluntary disclosure programs:

Why hire us?

We assist taxpayers who have undisclosed foreign financial assets. Schedule an appointment to see how we can help.


Internal Revenue Manual § 4.26.16

31 CFR 1010.350 Reports of Foreign Financial Accounts

31 USC 5321