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Understanding the FBAR: How to File
and Report Foreign Bank and Financial Accounts

The Foreign Bank Account Report (FBAR) is an important reporting obligation for foreign financial account holder U.S. taxpayers. Within the same context, fulfilling FinCEN Form 114 establishes compliance with FBAR requirements and prevents penalties for not complying with FBAR.

Who Needs to File FBAR?

  • U.S. citizens, residents and certain entities who own foreign financial accounts.
  • FBAR Form 114 must be filed In the case of total foreign account balances exceeding $10,000 at any time during the year.

The Importance

  • Not complying with requirements can result in heavy penalties as well as legal consequences.
  • FBAR is different from FATCA reporting. It requires additional disclosures under IRS regulations.

This guide is designed to present who needs to file FBAR, how to file FBAR Form 114, the FBAR filing deadline alongside typical mistakes to prevent.

What is the FBAR (FinCEN Form 114)?

As indicated above, FBAR is mandatory for U.S. taxpayers with foreign financial accounts. If the total account balance exceeds $10,000 at any time during the year, FinCEN Form 114 must be filed electronically with the Financial Crimes Enforcement Network (FinCEN), not the IRS.

FBAR vs. FATCA

 FBAR (FinCEN Form 114)FATCA (Form 8938)
DefinitionIt reports foreign financial accounts (bank accounts, brokerage accounts, etc.).It reports foreign financial assets (including accounts, stocks and trusts).
Filing RequirementIn case total foreign account balances exceed $10,000 at any time during the year.If total foreign assets exceed IRS thresholds ($50,000+ for single filers, higher for expats).
Reporting AgencyFinancial Crimes Enforcement Network (FinCEN).Internal Revenue Service (IRS).
Threshold$10,000+ total across all foreign accounts.$50,000+ (varies based on residency and filing status).
Form UsedFinCEN Form 114.IRS Form 8938.
Penalty for Non-ComplianceFines of $10,000+ per violation.Penalties start at $10,000 and can increase.

Who Must File an FBAR?

FBAR Filing is required for U.S. persons with foreign financial accounts exceeding $10,000 at any time during the year. You must file FinCEN Form 114 if:

Individuals

  • U.S. citizens, green card holders and resident aliens.
  • Anyone with signature authority over foreign financial accounts, even if they do not own the funds.

Entities

  • Corporations, partnerships, LLCs, trusts and estates pass the $10,000 aggregate balance rule.

FBAR vs. FATCA

  • FBAR (Form 114) reports foreign bank accounts.
  • FATCA (Form 8938) reports foreign financial assets including investments.

FBAR Filing Requirements & Deadline

FinCEN Form 114 (FBAR)

It is filled electronically via the BSA E-Filing System by following the actions outlined below:

  1. Collecting account details (bank name, account number and highest balance during the year).
  2. Completing FinCEN Form 114 online using the e-filing system.
  3. Report submission in an electronic environment before the deadline.

FBAR Filing Deadline & Extension Options

  • The annual FBAR filing due date is April 15.
  • Automatic extension until October 15 (no request needed).
  • Penalties for not filing FBAR can start at $10,000 per violation and increase for willful non-compliance.

FBAR Compliance Matters

  • FBAR vs. FATCA: FBAR reports foreign accounts, while FATCA (Form 8938) includes foreign financial assets.
  • Compliance issues with FBAR reporting requirements can result in fine payments and audits.

Penalties for FBAR Non-Compliance

Civil vs. Criminal Penalties

  • Non-Willful Violations: Up to $10,000 per violation (might be waived if reasonable cause is presented).
  • Willful Violations: Fines up to $100,000 or 50% of account value per violation.
  • Criminal Charges: In extreme cases, violations may result in prison sentences under the Bank Secrecy Act.

Avoiding FBAR Penalties

  • Filing must be completed on time each year using the BSA E-Filing System.
  • IRS Voluntary Disclosure Program or Streamlined Filing Compliance Procedures might be used if prior FBAR filings are missed.

Even unintentional lapses in FBAR compliance can result in fine payments, legal consequences as well as audits. However, late filers have options in terms of IRS voluntary disclosure programs.

FBAR Filing Process

StepDetails
Determine the RequirementWhen foreign financial accounts exceed $10,000 at any time during the year, FBAR Form 114 becomes an obligation. It applies to U.S. citizens, green card holders, residents as well as business entities.
Collect Account DetailsCollect bank names, account numbers and highest balances during the year. Foreign bank accounts, investment accounts and mutual funds should be included.
Complete Online FinCEN Form 114The BSA E-Filing System must be used to fill out the Foreign Bank Account Report (FBAR). Always double-check for errors before submitting.
Submit Before the Due DateThe FBAR filing deadline is April 15. Late filings may result in penalty payments starting at $10,000 per violation.

Common FBAR Mistakes & How to Avoid Them

1. Misreporting or Underreporting

  • All qualifying foreign financial accounts should be reported including dormant or jointly owned.
  • Solution: Keep details of bank names, account numbers as well as highest annual balances.

2. Filing the Wrong Form (FBAR vs. FATCA)

  • FBAR (FinCEN Form 114): Required when foreign account balances exceed $10,000 at any point in the year.
  • FATCA (IRS Form 8938): Required if foreign financial assets exceed $50,000 for single filers ($200,000+ for expats).
  • Solution: Double check which form applies based on IRS and FinCEN guidelines.

3. Track Account Balances Wrong

  • The $10,000 FBAR threshold applies to total aggregated balances across all foreign accounts.
  • Solution: Regularly check account balances. Always use currency conversion rates if needed.

Final Thoughts

FBAR filing requirements are fundamental for establishing compliance. If you need help with FBAR, reporting foreign financial accounts or surrounding tax implications, our experts at Dimov Tax are ready to present assistance. Contact us today for professional FBAR filing support.

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Frequently Asked Questions

1. Can I file FBAR myself?

Yes, you can file FinCEN Form 114 online through the BSA E-Filing System.

2. What happens if I forget to file FBAR?

You may face penalties, but voluntary disclosure programs may help reduce them.

3. Does FBAR apply to foreign cryptocurrency accounts?

Currently, cryptocurrency holdings are not explicitly required, but future regulations may change.

4. Can businesses be required to file FBAR?

Yes, if a business holds foreign accounts exceeding $10,000, it must file.