The Foreign Bank Account Report (FBAR) is filed using FinCen Form 114, though much about this US reporting requirement is misunderstood. In the following article, we dive into the essential elements of FinCEN Form 114, providing key background information, and detailing who must file and deadlines in 2024.
Ensuring adherence to these regulations is key to avoiding substantial penalties, particularly following high-profile 2023 FBAR cases that were decided by the Supreme Court.
Whether you’re filing for the first time or updating your knowledge, this article offers essential insights for compliance with the latest FBAR requirements.
What’s the FBAR deadline 2023?
There are two FBAR deadlines, and both have passed in 2023. The 2023 FBAR deadline was technically on the same day as the deadline for US federal tax returns (April 18th in 2023). For US expats, there is an automatic extension until October 15th, but because that day fell on a Sunday this year, the 2023 FBAR deadline was October 16th.
Is there an FBAR deadline 2023 extension?
If you are filing after the October deadline, you will need to refer to the FinCen website’s Late Filing page for instructions on how to late-file and justify your tardiness.
Zooming out: What is FBAR?
The FBAR filing requirement was originally introduced through the Bank Secrecy Act (BSA) of 1970. The original intent was designed to identify and deter money laundering. But, to identify the bad actors, the government has to look at the FBARs of anyone who meets the filing requirements. This includes many everyday, law-abiding US expats living abroad, and, unfortunately, significant penalties are possible for those subject to file an FBAR but don’t (sometimes even when it’s unwillful).
Who needs to file an FBAR?
Anyone with $10,000 or more in foreign-registered financial accounts at any point during the calendar year must file an FBAR. This rule applies even if the $10,000 is spread across multiple accounts.
At this point, it’s natural to wonder: “What exactly is a foreign financial account?”
A financial account is any account with a cash balance registered outside of the US and its territories. This encompasses all bank accounts and most investment accounts, often including foreign pension or retirement plans.
Beyond reporting their own personal accounts, those required to file an FBAR must also report any account they:
- Have signature authority over
- Control (direct or indirect)
- Or any other type of financial interests
This is applicable even if an account isn’t registered in someone’s name. This is often the case for business banks or investment accounts registered in a business or trust’s name (among others).
Fortunately, you can file your FBAR online, and we’ll guide you through the steps below.
How to file FBAR online
Rather than reporting to the IRS, FBARs are reported to the Financial Crimes Enforcement Network (FinCEN). You can securely file the relevant form, FinCEN Report 114, online through the BSA E-Filing System.
How do I file FBAR 2024 online?
FinCEN form 114 is among the more straightforward US tax forms to file. It requires that expats enter their personal and contact information, as well as the details for all their foreign accounts.
For each account, expats should enter the:
- Account name
- Account number
- Type of account
- Name and address of the bank or other financial institution where the account is held
- Maximum account balance during the tax year
Records of this information should be kept for at least five years after filing.
When entering phone or account numbers, expats should omit any formatting like spaces, hyphens, or parentheses, and should round maximum account balances up to the nearest dollar.
Calculating the FBAR exchange rate
To calculate the FBAR maximum account value exchange rate, convert non-dollar account balances into dollars before entering them on FinCEN Form 114. This is done using the Treasury Reporting Rates of Exchange for the last day of the relevant tax year.
Can the FBAR deadline be extended?
There are two deadlines associated with FBAR, April 15th and October 15th. For global US taxpayers living overseas, there is an automatic extension until the October deadline.
📅 Pro Tip
Deadlines are limited to business days and avoid legal holidays. For example, the 2023 FBAR deadline fell on a Sunday and was automatically extended to Monday, October 16, 2023. The FBAR 2024 deadline is October 15th.
There is no process for requesting or submitting an FBAR extension. It comes automatically to those who fail to file by the original deadline.
Additional extensions are sometimes granted in very specific scenarios, such as to those who have been impacted by a natural disaster.
Because of the existing six-month extension, though, requests for additional personal extensions are typically not accepted.
What happens if you file an FBAR late?
If you forgot to file an FBAR unintentionally, don’t panic. An amnesty program called the Delinquent FBAR Submission Procedures allows those who accidentally fall behind on their FBARs to catch up with little to no penalty.
To qualify for the Delinquent FBAR Submission Procedures, you must:2
- Have filed late unintentionally (due to confusion or not being aware of the requirements)
- Apply before the IRS reaches out to you regarding late or missing FBARs
- File your last six FBARs (if applicable) and explain why they were late
FBARs filed under the Delinquent FBAR Submission Procedures may be subject to audit, so accuracy is important. If you need to both catch up on US tax and FBAR reporting, you may be a candidate for the IRS Streamlined Filing Procedure amnesty program.
Whare are FBAR penalties for not filing?
Depending on whether or not the violation was willful, you may be subject to steep financial penalties. These start at $10,000 per missing report but can reach as high as $100,000 (or 50% of the account’s value at the time you failed to file — whichever is greater).
In some cases, global US taxpayers have been subject to criminal penalties. The 2023 Supreme Court Case, Bittner v. United States, highlights the draconian fines that are imposed even under decisions that “favor” the defendent.1
Why intent matters:
If you didn’t file an FBAR because you were unaware you were required to do so, you can capitalize on the Delinquent FBAR Submission Procedures (more on that below). If you intentionally failed to file an FBAR, however, you don’t qualify for this program.
How does the IRS learn about foreign income?
In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA). This law requires foreign financial institutions to report the account information of any US person to the US government.3
Today, global US taxpayers’ foreign bank account information is made available to the US government. As a result, identifying (and, consequently, prosecuting) non-compliance is easier than ever. This is something worth learning more about when deciding whether to open a foreign bank account.
In sum, staying on top of your FBAR and other tax/reporting obligations has arguably never been more important as a US expat.
Are foreign assets reported on an FinCen 114? FBAR vs FATCA considerations
Those living abroad with foreign financial assets in excess of $200,000 at the end of the calendar year or $300,000 at any time during the year must report them. However, these are not reported on the FBAR, but separately through FATCA Form 8938.
The reporting threshold for Form 8938 varies if you reside stateside, or file a joint tax return with your spouse.
How do I know if I need to file an FBAR?
If you’re still unsure whether you need to file an FBAR or how to do it, you might feel most reassured after speaking with an expat tax professional. Given the hefty penalties and high rate of enforcement, the stakes can feel very high.
But, that’s why we’re here! At Bright!Tax, we’re not just experts in international tax – many on our team are also expats who really get how doing taxes abroad is just one more thing that makes living outside the US a little more challenging. And as expat tax professionals, we want to do everything we can to ease this burden for you so you can get back to enjoying your life abroad.