Understanding 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 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.
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?