How to Report Foreign Bank Accounts to the U.S. Treasury
The Foreign Bank Account Report (FBAR) is due June 30th each year.
You may need to fill out the Report of Foreign Bank and Financial Accounts (FinCEN Form 114) every year if you own, or have an interest in, any foreign bank accounts or other types of financial accounts based outside the United States. This report is separate from your income tax return, although the two reports can be interrelated.
New for Calendar Year 2013 Reporting
- The Report of Foreign Bank and Financial Accounts was renumbered from Treasury Department Form 90-22.1 (the previous form) and is now called FinCEN Form 114.
- A blank copy of FinCEN Form 114 can be downloaded from the Financial Crimes Enforcement Network's FBAR E-Filing page and clicking on the link for FinCEN Report 114. This is a PDF download.
- The Report is filed directly with the Financial Crimes Enforcement Network (FinCEN), which is part of the US Treasury Department.
- FinCEN requires that foreign bank account reports be filed electronically through the FinCEN web site. For help with electronic filing, refer to FinCEN's instructions located at How to File the FBAR Electronically (pdf).
Reporting Foreign Bank Accounts
You must report accounts you hold in foreign banks and other financial institutions if your total balance across all your accounts is $10,000 or greater at any time during the calendar year. This is true both of accounts for which you are the owner and accounts for which you are not the owner but have authority to conduct transactions on behalf of the account owner.
Report each foreign financial account you own or have signature authority using FinCEN Form 114. This form is pretty self-explanatory. You will provide information on all your financial accounts held in foreign countries, such as the name of the bank or financial institution where the account is held, your account number, and account balance.
Be aware that the Foreign Bank Account Report is filed for each account-holder. Married couples either need to file separate reports or a single joint report. For accounts having multiple account-holders or persons with signature authority may have several persons or businesses reporting the same account on separate foreign bank account reports.
What Types of Foreign Financial Accounts are Reportable?
The following types of financial accounts would need to be reported on the Foreign Bank Account Report if you meet the filing requirement threshold:
- Bank accounts (checking and savings)
- Investment accounts
- Mutual funds
- Retirement and pension accounts
- Securities and other brokerage accounts
- Debit card and prepaid credit card accounts
- Life insurance and annuities having cash value
What types of bank accounts and financial accounts need to be reported to the Treasury is discussed in detail in 31 CFR Part 1010 and in the Treasury Department's explanation of their revisions to these regulations that were published on February 24, 2011, in the Federal Register (http://edocket.access.gpo.gov/2011/pdf/2011-4048.pdf). I refer you to that document for a very detailed analysis concerning what types of financial accounts are reportable.
When to File
FinCEN Form 114 is due June 30th of each year to report foreign bank accounts owned in the previous calendar year. The foreign bank account report must be received by June 30th. FinCEN requires that Form 114 be filed electronically.
What if you miss the filing deadline? The IRS is currently conducting an offshore voluntary disclosure initiative for people who need to file late foreign bank account reports and need to report previously undeclared foreign income.
Persons who are considering this voluntary disclosure program should consult with a tax attorney before participating in this IRS program.
Where to File
Form 114 is filed electronically through the Financial Crimes Enforcement Network, located at bsaefiling.fincen.treas.gov/main.html.
If you need an alternative to electronic filing, call the FinCEN Regulatory Helpline at 800-949-2732 (toll-free inside the United States).
From outside the United States, call 703-905-3975 (not toll-free).
Forms and Instructions
- A blank Form 114 can be downloaded from the FinCEN Web site at bsaefiling.fincen.treas.gov/NoRegFBARFiler.html. Look for the link labeled "FinCEN Report 114"
- Instructions for Completing the FBAR (pdf)
- How to File the FBAR Electronically (pdf)
- Form 114a, Record of Authorization to Electronically File FBARs (pdf, includes instructions). This document is used to authorize a professional preparer to file the FBAR electronically on your behalf.
- FBAR E-Filing FAQs (pdf)
Where to Get Technical Help with FBARs
Americans can receive help with their foreign bank account reports by calling the IRS at 866-270-0733 (toll-free inside the United States) or 313-234-6146 (not toll-free, for callers outside the U.S.). This telephone hotline is available Monday through Friday, 8 a.m. to 4:30 p.m. Eastern Time. You can also email FBAR-related questions to FBARquestions@irs.gov.
For assistance with electronic filing questions, contact BSAEFilingHelp@fincen.gov or by calling the BSA E-Filing Help Desk at 866-346-9478 (toll-free inside the United States). The E-Filing Help Desk is open Monday through Friday from 8 a.m. to 6 p.m. Eastern Time.
Coordinating FBAR with the Tax Return
While the foreign bank account report is not a tax form and is not submitted to the IRS, information relating to the foreign bank accounts may need to be coordinated with information on the tax return.
Income generated inside of these foreign financial accounts is reported on the income tax return in the year the income is earned. You'll report the foreign income based on the type of income being generated. For example interest and dividends would be reported on your Schedule B, capital gains on your Schedule D, and so forth. If you earn dividends or interest in these accounts, be sure to check the box in Part III Line 7a of Schedule B and indicate the country or countries where you have accounts.
In some cases, a person may need to file Form 8938, Statement of Foreign Financial Assets, with their tax return. This tax form is separate from the foreign bank account report, although it contains similar information. There are separate thresholds for being required to disclose foreign accounts. For Form 8938 purposes, the threshold starts at total foreign account balances of US$50,000 on the last day of the year or US$75,000 at any time during the year. There are higher reporting thresholds for married couples filing jointly and for Americans living abroad. The following chart from the IRS may be helpful: Comparison of Form 8938 and FBAR Requirements. Additionally, any foreign taxes paid on foreign income may qualify for the Foreign Tax Credit on Form 1116.
Who Must File TD F 90-22.1
Every US citizen or resident alien, partnership, corporation, estate, or trust must file TD F 90-22.1 if they have "financial interest in or signature authority, or other authority over any financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year." (From the Instructions for TD F 90-22.1)
Exceptions to Filing
You do not need to report accounts held at US military banking facilities, even if those banks are located in foreign countries. Military banks are considered domestic U.S. banks. You do not need to report accounts held at banks located in Guam, Puerto Rico, and the US Virgin Islands. You also do not need to report U.S.-based accounts held by a branch or division of a foreign bank.
Law Governing the Report of Foreign Bank Accounts
The law requiring US citizens and resident aliens to report their foreign bank accounts is found at 31 CFR Chapter X (previously 31 CFR 103).
Section 103.24 reads as follows:
Sec. 103.24 Reports of foreign financial accounts.
(a) Each person subject to the jurisdiction of the United States (except a foreign subsidiary of a U.S. person) having a financial interest in, or signature or other authority over, a bank, securities or other financial account in a foreign country shall report such relationship to the Commissioner of the Internal Revenue for each year in which such relationship exists, and shall provide such information as shall be specified in a reporting form prescribed by the Secretary to be filed by such persons. Persons having a financial interest in 25 or more foreign financial accounts need only note that fact on the form. Such persons will be required to provide detailed information concerning each account when so requested by the Secretary or his delegate. (31 CFR 103.24)
Statute of Limitations for Foreign Bank Account Reporting
There is a six years statute of limitations for the assessment of civil penalties, and five years for the assessment of criminal penalties. (Source: New York State Bar Association, citing 31 U.S.C. section 5321(b)(1) and 18 U.S.C. section 3282.)
The IRS advises that taxpayers should keep their foreign bank account report for five years. "The records must be retained for a period of 5 years from June 30th of the year following the calendar year reported and must be available for inspection as provided by law. Retaining a copy of the filed FBAR can help to satisfy the record keeping requirements." Additionally, I recommend that taxpayers should keep copies of their bank statements as well as their foreign bank account report for at least six years (which corresponds to the longest statute of limitation period).
Penalties for Not Filing
The Treasury Department may impose very stiff penalties for failing to file TD F 90-22.1.
"Civil and criminal penalties, including in certain circumstances a fine of not more than $500,000 and imprisonment of not more than five years, are provided for failure to file a report, supply information, and for filing a false or fraudulent report." (From the Privacy Act Notice on Form 90-22.1)
According to tax attorney Howard Rosen, the following penalties can be assessed:
- Failure to File Penalty – up to $250,000 and/or up to 5 years in prison for any person "willfully violating" the requirements to file. (31 CFR 5322a penalty)
- Fraud Penalty – up to $500,000 and/or up to 10 years in prison for any person "willfully violating" the requirements to file "as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period." (31 CFR 5322b penalty)
- False Information Penalty – fine or up to 5 years in prison for any person providing false, misleading, fictitious, or fraudulent statements on TD F 90-22.1; or up to 8 years in prison if the false information involves domestic or foreign terrorism. (18 CFR 1001 penalty)
Additional questions regarding these issues should be addressed to the IRS toll free tax assistance line at (800) 829-1040, which is the general hotline for the IRS. The agency has also established a special hotline specifically to address foreign bank account reporting issues at (866) 270-0733 (toll-free) or (313) 234-6146 (not toll-free). Questions can also be e-mailed to the IRS at FBARquestions@irs.gov.