FBAR for expats

Piggy bank illustration for US expat taxes
Piggy bank illustration for US expat taxes
4 min. read

As a US expat, you may or may not know that on top of having to file your federal tax return every year, you may also have to file FinCen Form 114, or the “FBAR” as well. This article gives you an overview of the basics of complying with the FBAR rules, and covers what the FBAR entails, who needs to file, what needs to be reported, when the FBAR needs to be filed, and the consequences of not filing.

What is FinCEN Form 114 (FBAR)?

Since 1970, the US requires citizens to file an informational report annually to disclose their non-US foreign financial accounts. This report is known as FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (“FBAR”). This law was introduced to identify foreign financial accounts held by US persons in order to prevent offshoring of assets and income.

Rest assured, Form 114 is only for informational purposes. No tax will be imposed, but there are strict penalties for non-compliance (see below).

What foreign financial accounts need to be reported?

The foreign financial accounts subject to FBAR include all checking, savings, and investment accounts, including most types of foreign pensions, but excluding mortgages and hedge funds.

Who needs to file a US FBAR?

If you are an expat you most likely have a foreign account for your daily banking transactions. Expats are required to file an FBAR to report their financial interest in (i.e., ownership), or signature or other authority of an account located with a foreign financial institution.

The reporting requirement is triggered if the aggregate value of those foreign financial accounts exceed $10,000 at any time during the calendar year. All bank accounts, security accounts and retirement accounts need to be reported are subject to FBAR reporting.

For example, if you have two bank accounts, each with a max balance of $5,000 during the year, then you need to disclose these accounts!

When do you need to file FBAR as an expat?

In 2017 the filing deadline for FBAR has been synchronized with the federal tax return deadline.

The regular deadline for filing your FBAR is April 15, however, for expats an automatic extension to file your federal tax return is granted to June 15th, and the FBAR deadline follows this. A further extension to file your federal tax return will also automatically be granted if you file for such an extension by June 15th as an expat.

What are the penalties for not filing FinCen Form 114 (US FBAR form)?

If you haven’t filed FBAR, you could face serious penalties or even imprisonment. The penalties for not filing your FBAR could be substantially higher than penalties for not filing your federal US tax return.

Civil law penalty

The penalty for not filing your FBAR is $10,000 for each non-willful violation. However, if the reason for not filing is found to be willful, the penalty is the greatest of $100,000 or 50% of the amount in the account for each violation. Every year you are not filing your FBAR counts as a seperate violation.

Criminal law penalty

If a criminal penalty is imposed, you can even get a fine of $250,000 and 5 years imprisonment. It can even get worse. If you violate the FBAR requirement while violating another law (most of the times tax law) the penalties can even increase to $500,000 in fines and/or 10 years of imprisonment. Please be noted that in practice these FBAR violations are punished more mildly, but this is what the law provisions tell us.

Where can I file my FBAR?

You can e-file your FBAR directly through the FinCen’s online filing system. Although anybody can file themself, Expatfile believes that this process can be more efficient and quicker if you have the right guidance. We will support this soon (not first June 2020 release). In the meantime, we can send you an email with very easy-to-follow instructions to complete FBAR through BSA Filing.