FBAR Filing Requirements for Americans Living Abroad
A Foreign Bank Account Report or FBAR is a filing requirement for Americans with overseas registered financial accounts. The FBAR filing requirement was introduced as part of the 1970 Bank Secrecy Act, and it was intended to reduce offshore tax evasion by resident Americans. Many Americans living abroad fall into the same net: even if their foreign accounts are just used for normal banking and investing, they still often have to file an FBAR.
FBAR filing requirements – who has to file?
The requirement to file an FBAR applies to all American citizens and green card holders who have over $10,000 in foreign financial accounts at any time in a year.
The $10,000 threshold applies to the individual rather than to any single account, so expats have to add all their foreign account balances together to see if they have to file.
Foreign accounts include all bank and investment accounts, including pensions.
Cryptocurrency accounts haven’t previously been included in FBAR filing, however the IRS has announced an intention to include them starting in tax year 2021.
Joint accounts, accounts an individual has signatory authority over even if not registered in their name, and business accounts all qualify, as do accounts held at overseas branches of American banks or investment firms.
General FBAR filing requirements
“Whether the account produced taxable income has no effect on whether the account is a foreign financial account for FBAR purposes.” – the IRS
Filing an FBAR means filing FinCEN Form 114 online using the BSA E-Filing System.
FBARs must be filed by each individual who qualifies, even married couples filing jointly (so both holders of a joint account would each report it, assuming both are US taxpayers).
FBARs must be filed by October 15 in the year following the tax year (the current rules state that the deadline is April 15 with an automatic 6 month extension).
FBAR filing requirements – How to file FinCEN Form 114
FinCEN Form 114 is an online form. It asks you to provide details relating to all of your foreign registered bank and investment accounts. The details you have to provide for each account are the name and address of the bank or financial institution where the account is held, the account name and number, what type of account it is, and the maximum balance during the year. Alternatively, your US expat tax preparer can file your FBAR along with your federal tax return.
What if you didn’t know that you had to file FinCEN Form 114?
Many Americans living abroad aren’t filing FBARs because they aren’t aware that they have to. However, most foreign banks are now providing the same information requested on FBARs directly to the US government, as well as the expat’s contact information. Penalties for not filing FBARs start at $10,000 a year for unintentional errors of not filing, so are much higher than for missing filing federal tax returns for most expats.
All American citizens are required to file US taxes too, even if they live abroad. Those who haven’t been filing their US tax return as well as their FBARs can usually catch up without facing penalties by using an IRS amnesty program called the Streamlined Procedure. Those who have been filing their US taxes but not their FBARs meanwhile can use another amnesty program called the Delinquent FBAR Submission Procedures.
Everyone’s situation is different, and for Americans living abroad the most beneficial way to file depends on many factors, including what country they live in, their income sources and levels, and their personal and family circumstances, so it’s always worth seeking advice from an expat tax specialist.