Introduction
While many taxpayers focus on filing their income tax returns, they often overlook another crucial tax obligation—the FBAR (Foreign Bank Account Reporting), also known as FinCEN Form 114. Failing to file this form when required can result in significant IRS penalties.
This guide provides a detailed overview of who needs to file the FBAR, how to file it, and what happens if you fail to comply.
What Is the FBAR?
The FBAR (FinCEN Form 114) is a tax form that reports foreign financial accounts held by U.S. persons if the total value of their foreign accounts exceeds $10,000 at any time during the tax year.
Key points about the FBAR:
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It must be filed annually with the Financial Crimes Enforcement Network (FinCEN), separate from your tax return.
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The purpose of the form is to track offshore accounts and ensure tax compliance.
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It applies to bank accounts, brokerage accounts, retirement accounts, and certain other foreign financial assets.
Who Needs to File the FBAR?
You must file an FBAR if all of the following apply:
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You are a U.S. person (including individuals and entities).
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You own or have control over foreign financial accounts (bank accounts, brokerage accounts, etc.).
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The total combined value of these accounts exceeded $10,000 at any point in the tax year.
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You have a financial interest or signature authority over the foreign accounts.
1. Who Qualifies as a U.S. Person?
A U.S. person includes:
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U.S. citizens and residents.
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Green card holders.
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Individuals who meet the substantial presence test (lived in the U.S. for at least 183 days in the tax year).
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Businesses, trusts, and entities formed in the U.S. or its territories.
2. What Types of Foreign Accounts Are Reportable?
The following foreign financial accounts must be reported:
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Bank accounts (checking or savings).
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Investment and brokerage accounts.
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Foreign retirement accounts (depending on local tax treatment).
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Life insurance policies with cash value.
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Trusts or other accounts where you have control.
3. How the $10,000 Reporting Threshold Works
If the total balance of all your foreign accounts combined exceeds $10,000 at any time during the tax year, you must file an FBAR.
Example:
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You have $6,000 in a Canadian bank account and $5,000 in a Swiss brokerage account.
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Your combined foreign account balance is $11,000.
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You must file an FBAR.
Even if your foreign account balance only exceeded $10,000 for one day, you still need to file.
4. Do You Have Financial Interest or Signature Authority?
Even if you do not own the foreign accounts, you may still need to file if you have signature authority or a financial interest in the accounts.
Financial Interest Includes:
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Owning more than 50% of a foreign business that holds accounts.
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Being a beneficiary of a foreign trust that holds accounts.
Signature Authority Includes:
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Having control over a business account where you can authorize transactions.
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Managing a foreign trust or entity's bank accounts.
Common FBAR Filing Scenarios
Married Couples Filing Jointly
If all foreign accounts are jointly owned, only one spouse needs to file the FBAR.
Example: A husband and wife have a joint foreign bank account in the UK with a balance of $25,000. Only one of them needs to file the FBAR, listing both names.
Married Couples Filing Separately
If each spouse has separate foreign accounts, they must each file their own FBAR.
Example: One spouse has $8,000 in a foreign account, and the other has $5,000. Their combined balance is $13,000, so both must file separate FBARs.
FBAR Filing for Minors
Minors with foreign financial accounts must file an FBAR if their accounts exceed the $10,000 threshold. Parents or guardians must file on their behalf.
Example: A child has $12,000 in a foreign savings account. The parent must file an FBAR for the child.
FBAR Filing for U.S. Businesses
A U.S. business or trust must file an FBAR if it owns foreign accounts that exceed $10,000.
Example: A U.S. corporation holds $20,000 in a foreign bank account for business operations. The corporation must file an FBAR.
When Is the FBAR Deadline?
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FBAR is due April 15, 2025 (same as the tax deadline).
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Automatic extension to October 15, 2025 if you miss the April deadline.
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No additional paperwork is required to get the extension.
What Happens If You Miss the FBAR Deadline?
Failing to file an FBAR can result in severe penalties.
Penalties for Late or Missing FBAR Filings:
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Non-Willful Violation: Up to $10,000 per violation.
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Willful Violation: Up to $100,000 or 50% of the account balance per violation.
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Criminal Penalties: In extreme cases, failing to report foreign accounts can result in criminal charges.
If you missed the deadline, contact a tax professional immediately to explore amnesty programs that may help reduce penalties.
Options to Fix Late FBAR Filings
If you failed to file an FBAR in past years, there are several ways to correct it:
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Delinquent FBAR Submission – If you were unaware of the requirement but have reported all income, you may qualify for penalty relief.
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Streamlined Offshore Procedures – Available for taxpayers who did not willfully avoid filing. Can reduce penalties significantly.
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IRS Voluntary Disclosure Program – For taxpayers with willful violations, this program may help minimize criminal penalties.
Filing an amended FBAR or using one of these programs can help you get compliant and avoid severe fines.
How to File FinCEN Form 114 (FBAR)
You can file the FBAR electronically through the BSA E-Filing System on FinCEN’s website.
What You Need to File:
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Personal details (name, Social Security Number, address).
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Foreign account details (bank name, address, account numbers).
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Maximum account balances during the tax year (converted to USD).
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Joint account holder information (if applicable).
For the most accurate filing, consult a tax professional to ensure compliance.
Need Help Filing the FBAR?
FBAR filing can be complex, and errors can result in severe financial penalties. A tax professional can:
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Ensure accurate reporting of foreign accounts.
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Determine the best filing method based on your situation.
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Help correct past FBAR mistakes and avoid penalties.
If you need assistance, contact an experienced FBAR attorney to ensure proper filing and compliance with FinCEN and IRS rules.
If you have any questions or require further assistance, our team at Block3 Finance can help you.
Please contact us by email at inquiry@block3finance.com or by phone at 1-877-804-1888 to schedule a FREE initial consultation appointment.
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