As someone who worked for the IRS for a few years and actually dealt with the whole foreign bank account fiasco, I decided to do an article on foreign bank accounts. After this I’ll write an article on worldwide income and how you must report it due to being a US citizen.

On your US tax return every year, you may need to report whether you have a foreign bank account or foreign investment accounts. This is under the Bank Secrecy Act. You must report this information on FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (FBAR).  The Foreign Bank and Financial Accounts (FBAR) is used to help the US government identify persons who may be using foreign financial accounts to do income tax evasion or embezzlement and other crimes.

As a US person if you have a financial interest in or signature authority over any financial account(s) located outside of the United States you are required to electronically file a FinCEN Report 114 – Report of Foreign Bank and Financial Accounts (FBAR), IF the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

A US person is:
-A citizen or resident of the United States or
-Any domestic legal entity such as a partnership, corporation, estate, or trust

You need to:
-E-file the completed report using the FinCEN electronic filing system available at www.fincen.gov
-E-file the FBAR for any year that begins on or after January 1, 2016, by April 15 of the year following the year being reported. Requests for an extension of time to file an FBAR are not granted.

Exceptions to the Reporting Requirement
Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
-Certain foreign financial accounts jointly owned by spouses
-United States persons included in a consolidated FBAR
-Correspondent/Nostro accounts
-Foreign financial accounts owned by a governmental entity
-Foreign financial accounts owned by an international financial institution
-Owners and beneficiaries of U.S. IRAs
-Participants in and beneficiaries of tax-qualified retirement plans
-Certain individuals with signature authority over, but no financial interest in, a foreign financial account
-Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust)
-Foreign financial accounts maintained on a United States military banking facility.
Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.

The consequences for not reporting your foreign bank account or foreign investment account are steep. The maximum civil penalty for a willful violation of the FBAR reporting and recordkeeping requirements is the greater of $100,000 or 50% of the balance in the account at the time of the violation. Non-willful violations can result in a penalty as high as $10,000 for each violation. Criminal violations of the FBAR rules can result in a fine and/or five years in prison.

For more information:
Do You Have a Foreign Financial Account? (.pdf)
Foreign Financial Accounts Reporting Requirements

*This is a quick summary on FBAR. This is not tax or financial advice. Please go to the IRS.gov website and/or consult a practicing CPA or tax lawyer for more information.