FBAR Filing: What You Need to Know

The Foreign Bank Account Report (FBAR), officially known as FinCEN Form 114, is a critical filing requirement for U.S. persons with foreign financial accounts. Understanding the rules, deadlines, and potential consequences is essential for compliance.

Who Must File an FBAR?

Any U.S. person (citizen, resident, corporation, partnership, LLC, trust, or estate) with a financial interest in or signature authority over foreign financial accounts exceeding $10,000 in aggregate at any time during the calendar year must file an FBAR.

How to File an FBAR

The FBAR must be filed electronically through the Financial Crimes Enforcement Network’s (FinCEN) BSA E-Filing System. The deadline is April 15, with an automatic extension to October 15 if needed.

Common FBAR Mistakes

Many filers make errors such as omitting accounts, entering incorrect account numbers, or misunderstanding the reporting threshold. Double-check all information before submitting your FBAR.

What if I made a mistake on my FBAR?

If you realize you made a mistake on your FBAR after filing, you should file an amended FBAR as soon as possible. The BSA E-Filing System allows you to submit corrections. Promptly correcting errors can help mitigate potential penalties.

Penalties for Failing to File or Filing Incorrectly

What happens if you fail to file an FBAR?

Failure to file an FBAR can result in significant penalties. Non-willful violations can result in penalties up to $10,000 per violation. Willful violations can lead to penalties of the greater of $100,000 or 50% of the account balance per violation, and even criminal charges in severe cases.

What is the penalty for inaccurate FBAR?

Penalties may also apply for inaccurate or incomplete FBARs, especially if the errors are deemed willful. The IRS distinguishes between non-willful and willful violations, with willful violations carrying much steeper penalties.

FBAR Audits and Enforcement

What triggers an FBAR audit?

FBAR audits may be triggered by discrepancies between your FBAR and your tax return, large or suspicious foreign account balances, or information received from foreign banks under FATCA agreements. The IRS uses data analytics and international cooperation to identify potential non-compliance.

Conclusion

FBAR compliance is crucial for anyone with foreign financial accounts. Understanding the requirements and consequences can help you avoid costly mistakes and penalties.