Understanding 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.

Key takeaways

  • FBAR (FinCEN Form 114) is required when a U.S. person's aggregate foreign financial accounts exceed $10,000 USD at any point during the calendar year — even for a single day.

  • Canadian RRSPs, TFSAs, RESPs, and most foreign pensions count as reportable foreign accounts, and signature authority alone — without any ownership interest — triggers the filing obligation.

  • FBAR penalties hit $10,000 USD per non-willful violation and the greater of $100,000 or 50% of the account balance per willful violation, with each unreported account counted separately each year.

  • FBAR (filed with FinCEN) and Form 8938 (filed with the IRS under FATCA) are separate obligations with different thresholds — filing one does not satisfy the other.

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 Does Signature Authority Mean for FBAR Purposes?

Signature or other authority refers to the ability of an individual to control the disposition of assets in a foreign financial account by direct communication with the bank or financial institution—this includes authority held alone or with others. Importantly, you do not need to own the funds to have an FBAR filing obligation. For example, if you are the signing officer for a foreign corporate bank account or a trustee of a foreign trust account, you may have signature authority even if you have no personal financial interest in those accounts. Similarly, if you are an accountant, controller, or company executive who can initiate or authorize wire transfers or payments from a foreign account, you are deemed to have signature authority. Even when transactions require dual signers or internal approvals, if your name is on the account and you have the legal power to direct bank transactions, you must report that authority on your FBAR if the aggregate balance across all such accounts exceeds $10,000 at any time during the 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 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.

What Is Form 8938 and How Is It Different from the FBAR?

Form 8938, Statement of Specified Foreign Financial Assets, is part of your U.S. income tax return and is required under the Foreign Account Tax Compliance Act (FATCA). It applies to U.S. citizens, residents, and certain non-residents who hold specified foreign financial assets—including bank accounts, stocks, mutual funds, and certain foreign trusts or partnerships—when their total value exceeds specific thresholds. For taxpayers living outside the United States, Form 8938 must be filed if the total value of these assets exceeds $200,000 on the last day of the year or $300,000 at any point during the year (or $400,000 and $600,000 for joint filers). This is in contrast to the FBAR (FinCEN Form 114), which has a flat $10,000 threshold for foreign financial accounts, regardless of filing status or residency. Also, Form 8938 is filed with your tax return (Form 1040), while the FBAR is submitted separately through the Financial Crimes Enforcement Network (FinCEN). Importantly, filing one form does not relieve you of the obligation to file the other—many taxpayers living abroad are required to file both if their foreign financial holdings exceed the respective thresholds.

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.

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.

Frequently asked questions

Do I have to file an FBAR if my RRSP balance is under $10,000?

The $10,000 USD threshold is aggregate, not per-account. You add the maximum value of every foreign financial account during the year — RRSP, TFSA, chequing, savings, brokerage, foreign pension — and if the total crosses $10,000 USD at any single point, every account gets reported. So a $4,000 RRSP plus a $7,500 chequing account triggers FBAR for both. Currency-convert each account at the year-end Treasury rate.

Is a TFSA reportable on FBAR?

Yes. The IRS treats a TFSA as a foreign financial account, and it's reportable on both FBAR (FinCEN Form 114) and Form 8938 if thresholds are met. The TFSA is also generally treated as a foreign trust for U.S. tax purposes, often triggering Forms 3520 and 3520-A — a separate and far more onerous filing obligation. For U.S. persons living in Canada, TFSAs are rarely worth the U.S. compliance cost.

What happens if I never knew I had to file FBAR?

The IRS Streamlined Foreign Offshore Procedures are designed for non-willful failures. You file 6 years of delinquent FBARs and 3 years of amended or original tax returns, plus a non-willful certification. For taxpayers living abroad, the program generally waives FBAR penalties entirely. Coming forward voluntarily before the IRS contacts you is the difference between $0 in penalties and tens of thousands per missed year.

Does signature authority over a corporate account trigger FBAR?

Yes. If you have legal authority to direct the disposition of funds in a foreign account — even with no ownership and even if dual signatures are required — you have a reportable signature authority interest. This catches signing officers, controllers, executives, and trustees of foreign accounts. The reporting obligation is personal: it falls on you individually, not the entity, and applies regardless of whether you ever exercised the authority.

What's the difference between FBAR and Form 8938?

FBAR (FinCEN Form 114) is filed separately with the Treasury's Financial Crimes Enforcement Network and has a flat $10,000 USD threshold for all foreign financial accounts. Form 8938 is part of your IRS Form 1040 under FATCA, with much higher thresholds — $200,000 year-end or $300,000 anytime for single filers abroad, $400,000 and $600,000 for joint filers abroad. Most expats file both. Filing one does not satisfy the other.

When is the FBAR due?

The official FBAR due date is April 15, but there's an automatic extension to October 15 — no form required. The FBAR is filed electronically through the BSA E-Filing System, not with your Form 1040. Late-filed FBARs without penalty relief through the Streamlined Procedures or Delinquent FBAR Submission Procedures are exposed to the full statutory penalty regime, so timing matters when catching up on prior years.

Alex Ataman, CPA
Founder
Modern Axis CPA