Understanding FBAR

Who needs to file FBAR
Who needs to file FBAR

Understanding FBAR: What It Is, Who Needs to File, and Why It Matters

If you’re a U.S. citizen, green card holder, or U.S. tax resident living abroad—or simply someone with overseas bank accounts—you may be required to file an FBAR. Unfortunately, many people either don’t know about this obligation or misunderstand it, which can lead to hefty penalties.

In this article, we break down what FBAR is, who must file, and provide real-life examples to help you determine if you’re affected.

What Is FBAR?

FBAR stands for Foreign Bank Account Report, officially filed as FinCEN Form 114. It’s an information report, not a tax return, used to disclose foreign financial accounts to the U.S. Treasury Department.

You must file FBAR if the total value of all your foreign financial accounts exceeds $10,000 USD at any point during the year—even for one day.

Who Must File an FBAR?

You are required to file an FBAR if:

  • You are a U.S. person (includes citizens, green card holders, and tax residents)

  • You had a financial interest in or signature authority over at least one foreign account

  • The aggregate value of all such accounts exceeded $10,000 USD during the calendar year

What Counts as a Foreign Financial Account?

The term includes more than just basic checking accounts. It also covers:

  • Bank accounts (savings/checking)

  • Investment accounts

  • Brokerage accounts

  • Mutual funds

  • Certain retirement accounts (e.g., Canadian RRSPs and TFSAs)

  • Foreign pension accounts

  • Foreign life insurance with a cash value

Note: The location of the account—not the institution—is what matters. An account with a U.S. bank at a foreign branch is considered foreign.

Real-Life Examples

Let’s look at a few scenarios to bring this to life:

✅ Example 1: U.S. Citizen in Canada with an RRSP and TFSA

Sarah, a U.S. citizen living in Vancouver, holds:

  • $8,000 CAD in a Canadian checking account

  • $12,000 CAD in a TFSA

  • $15,000 CAD in an RRSP

Result: Sarah’s total foreign account value exceeds $10,000 USD, so she must file an FBAR, reporting all three accounts.

✅ Example 2: Canadian with U.S. Rental Income

Ahmed, a Canadian citizen, owns a Florida condo and opened a U.S. bank account to collect rent. He is not a U.S. person.

Result: No FBAR required—Ahmed is not a U.S. person.

✅ Example 3: Green Card Holder with a Family Account in India

Priya, a green card holder, has signature authority (but no ownership) over her parents’ account in India worth $25,000 USD.

Result: Even without a financial interest, signature authority alone requires FBAR filing.

How and When to File FBAR

  • File Online: FBAR is submitted electronically via the BSA E-Filing System.

  • Deadline: April 15 annually, with an automatic extension to October 15.

  • Separate from Tax Return: FBAR is not filed with your 1040 and is not an IRS form—it’s submitted to FinCEN, a bureau of the U.S. Treasury.


Penalties for Not Filing FBAR

FBAR non-compliance can result in severe penalties, even for unintentional omissions:

Type

Penalty

Non-willful

Up to $10,000 USD per violation

Willful

Greater of $100,000 or 50% of the account balance, per violation

These penalties apply annually, and multiple years of non-filing can lead to devastating consequences.

Common Misunderstandings

  • “I don’t owe tax, so I don’t need to file.”

    → Wrong. FBAR is about reporting, not taxation.

  • “The account is joint with my spouse or child.”

    → If you’re a U.S. person and the total across all accounts exceeds $10,000, you must report it, regardless of co-ownership.

  • “I never transferred money in or out.”

    → Activity is irrelevant. What matters is the maximum account balance.

Voluntary Disclosure Options

If you’ve missed past FBAR filings, the IRS offers voluntary disclosure programs:

  • Streamlined Filing Compliance Procedures (for non-willful cases)

  • Delinquent FBAR Submission Procedures

  • Voluntary Disclosure Program (for willful violations)

These programs help reduce or eliminate penalties if you come forward before the IRS contacts you.

Key Takeaways

  • FBAR is required for U.S. persons with foreign financial accounts exceeding $10,000 USD.

  • It must be filed annually and electronically by October 15 (with extension).

  • Non-compliance can result in major penalties, even when no tax is owed.

  • Common foreign accounts like RRSPs, TFSAs, and joint accounts may trigger reporting obligations.

  • Voluntary disclosure is possible if you’ve missed prior years.

Need Help with FBAR Compliance?

Navigating FBAR and foreign reporting rules can be daunting—especially for dual citizens, expats, and investors with international assets. At Modern Axis CPA, we help individuals stay compliant, avoid penalties, and resolve past filing issues with confidence.

Have questions about your foreign accounts?

Let’s chat—your peace of mind is worth it.