Every year, under the law known as the Bank Secrecy Act, if you have an FBAR filing requirement, you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You must report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114. If you fail to file an FBAR timely, the IRS can assess FBAR penalties.
Who Must File an FBAR
A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:
- a financial interest in or signature or other authority over at least one financial account located outside the United States if
- the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
Generally, an account at a financial institution located outside the United States is a foreign financial account. Whether the account produced taxable income has no effect on whether the account is a “foreign financial account” for FBAR purposes.
But, you don’t need to report foreign financial accounts that are:
- Correspondent/Nostro accounts,
- Owned by a governmental entity,
- Owned by an international financial institution,
- Maintained on a United States military banking facility,
- Held in an individual retirement account (IRA) you own or are beneficiary of,
- Held in a retirement plan of which you’re a participant or beneficiary, or
- Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.
You don’t need to file an FBAR for the calendar year if:
- All your foreign financial accounts are reported on a consolidated FBAR.
- All your foreign financial accounts are jointly-owned with your spouse and:
- You completed and signed FinCEN Form 114a authorizing your spouse to file on your behalf, and your spouse reports the jointly-owned accounts on a timely-filed, signed FBAR.
Note: Income tax filing status, such as married-filing-jointly and married-filing-separately has no effect on your qualification for this exception.
The FBAR Reference Guide PDF) and FBAR instructions PDF provide more detailed information. Moreover, the FBAR webinar explains how to calculate the aggregate value of your accounts to figure if you need to file an FBAR.
When to File an FBAR
The FBAR is an annual report, due April 15 following the calendar year reported.
You’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. Moreover, you don’t need to request an extension to file the FBAR.
If you are affected by a natural disaster, the government may further extend your FBAR due date. It’s important that you review relevant FBAR Relief Notices for complete information.
Failure to file an FBAR when required to do so may result in civil penalties, criminal penalties, or both. If the foreign financial account is properly reported on a late-filed FBAR, and IRS determines that the FBAR violation was due to reasonable cause, the IRS will not assess an FBAR penalty.
You may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. However, the assertion of penalties depends on the facts and circumstances. Civil penalty maximums must be adjusted annually for inflation. Current maximums are as follows:
|U.S. Code citation||Civil Monetary Penalty Description||Current Maximum|
|31 U.S.C. 5321(a)(5)(B)(i)||Foreign Financial Agency Transaction – Non-Willful Violation of Transaction||$12,921|
|31 U.S.C. 5321(a)(5)(C)||Foreign Financial Agency Transaction – Willful Violation of Transaction||Greater of $129,210, or 50% of the amount per 31 U.S.C.5321(a)(5)(D)|
|31 U.S.C. 5321(a)(6)(A)||Negligent Violation by Financial Institution or Non-Financial Trade or Business||$1,118|
|31 U.S.C. 5321(a)(6)(B)||Pattern of Negligent Activity by Financial Institution or Non-Financial Trade or Business||$86,976|
If the IRS has assessed an FBAR penalty against you, contact a tax attorney today to discuss how how to respond to the FBAR penalty assessment. The U.S. Tax Court generally does not have jurisdiction to hear FBAR penalty disputes, but the jurisdiction lies in the United States District Courts.