FBAR Reporting Explained: Requirements, Deadlines, and Penalties

FBAR Reporting Requirements: What You Need to Know

For U.S. taxpayers with foreign financial accounts, compliance with the Foreign Bank Account Report (FBAR) rules is critical. The U.S. Department of the Treasury requires certain taxpayers to disclose their foreign holdings to prevent tax evasion and ensure transparency. Failing to meet these obligations can lead to significant penalties.

What Is the FBAR?

The FBAR is formally known as FinCEN Form 114. It must be filed electronically with the Treasury’s Financial Crimes Enforcement Network (FinCEN), not with your tax return.

U.S. persons—including individuals, partnerships, corporations, trusts, and estates—must file an FBAR if they had a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year.

Covered accounts include:

• Bank accounts (savings, checking, time deposits)

• Securities or brokerage accounts

• Mutual funds or similar pooled funds

• Certain insurance policies or annuities with a cash value

Key Filing Requirements:

• Threshold: If the total value of all foreign accounts exceeds $10,000 at any point in the year, an FBAR must be filed.

• Due Date: The FBAR is due April 15, with an automatic extension to October 15.

• Where to File: Directly through FinCEN’s BSA e-filing system (not with your tax return).

• Who Must File: U.S. citizens, residents, and entities—including LLCs, corporations, and trusts—with qualifying foreign accounts.

  
  

FBAR vs. FATCA Reporting

It’s important to distinguish between FBAR and FATCA (Form 8938, Statement of Specified Foreign Financial Assets):

• FBAR is filed with FinCEN, while FATCA is part of your IRS income tax return.

• FATCA thresholds are generally higher than the FBAR’s $10,000 threshold. Some taxpayers may need to file both forms.

Penalties for Noncompliance

The IRS and FinCEN impose strict penalties for failing to file an FBAR:

Civil Penalties

• Non-willful violations: Up to $10,000 per violation, unless reasonable cause is shown.

• Willful violations: The greater of $100,000 or 50% of the account balance at the time of violation, per violation.

Criminal Penalties

In cases of willful failure to file, penalties can include:

• Up to $250,000 in fines and/or

• Up to 5 years in prison

If the violation occurs alongside certain other legal violations (like tax fraud), the penalty can increase to $500,000 and/or 10 years in prison.

Best Practices for Compliance

1. Track foreign accounts year-round – Don’t wait until tax season to gather information.

2. Work with your CPA – We can help determine whether you must file an FBAR and whether Form 8938 (FATCA) is also required.

3. File on time – Even if you no longer hold the account at year-end, if the $10,000 threshold was exceeded during the year, a filing is required.

4. Document everything – Keep account statements and records to support reported balances.

How We Can Help

At Shifflett & Philips, LLP, we guide clients through the complex rules surrounding international tax compliance. From determining whether an FBAR filing is required to preparing accurate reports and minimizing penalty risks, our team ensures you remain fully compliant.

If you have foreign bank accounts or financial assets, let’s discuss your reporting obligations before deadlines approach.