FinCEN Report 114 (FBAR): foreign account reporting

What the FBAR reports

The FBAR reports specified relationships with foreign financial accounts through FinCEN Form 114. The IRS describes it as a report to the Treasury Department and identifies bank accounts, brokerage accounts, and mutual funds as examples of accounts within its scope.^[1]

For a U.S. citizen, the starting point is the reporting rule for U.S. persons who have a financial interest in, or signature or other authority over, foreign accounts. The IRS states that the accounts' combined value must have exceeded $10,000 at any point during the calendar year being reported.^[1]

Who falls within the reporting rule

A U.S. citizen is among the U.S. persons covered by the IRS filing rule. The IRS list also includes residents, corporations, partnerships, limited liability companies, trusts, and estates, so the stated scope extends beyond individual account holders.^[1]

The regulation includes entities formed under the laws of the United States, a state, the District of Columbia, U.S. territories and insular possessions, or Indian Tribes. Its entity definition expressly names corporations, partnerships, trusts, and limited liability companies.^[3]

The $10,000 test applies to the aggregate value of the foreign accounts covered by the rule. The IRS also states that an account's production of taxable income does not determine whether it is a foreign financial account for FBAR purposes.^[1]

What counts as a financial account

Reportable account categories include bank accounts, securities accounts, and specified other financial accounts. The IRS generally treats an account at a financial institution outside the United States as a foreign financial account.^[1]

• Bank accounts include savings deposits, demand deposits, checking accounts, and other accounts maintained with a person engaged in banking.^[3]
• Securities accounts include accounts with a person whose business involves buying, selling, holding, or trading stocks or other securities.^[3]
• Other financial accounts include accounts with a person whose business accepts deposits as a financial agency, and insurance or annuity policies that have cash value.^[3]
• The regulation includes accounts with brokers or dealers for commodity futures or options transactions on, or subject to, an exchange's or association's rules.^[3]
• It also includes mutual funds or similar pooled funds with publicly available shares, regular net asset value determinations, and regular redemptions.^[3]

How financial interest is defined

Financial interest includes being the account's owner of record or holding its legal title, even when the account benefits someone else. For a jointly named account, each U.S. person named on the account has a financial interest under the regulation.^[3]

The definition also reaches an account held by an agent, nominee, attorney, or another person acting on behalf of the U.S. person. A U.S. citizen's name therefore need not appear as the account holder for this part of the definition to apply.^[3]

For corporate accounts, the definition includes direct or indirect ownership of more than 50 percent of voting power or total share value. For partnerships, it includes more than 50 percent of profits or capital; the regulation also specifies ownership tests for other entities, with separate provisions for the trusts described below.^[3]

How the regulation treats trusts

The regulation includes a trust account within a U.S. person's financial interest when that person is the grantor and has an ownership interest in the trust for U.S. federal tax purposes. It refers to Internal Revenue Code sections 671 through 679 and their regulations to determine that ownership interest.^[3]

A separate provision covers a trust in which the U.S. person has a present beneficial interest in more than 50 percent of the assets. It also covers a trust from which that person receives more than 50 percent of current income.^[3]

Beneficiaries covered by that separate provision are exempt from reporting the trust's foreign accounts when the trust, its trustee, or its agent is a U.S. person that files an FBAR disclosing those accounts. The exception depends on that reporting condition, so beneficiary status alone does not establish it.^[3]

Signature authority and reporting exceptions

Signature or other authority means an individual's power to direct the disposition of account assets through communication with the account provider. The definition applies whether the individual acts alone or together with another person, and whether the communication is written or takes another form.^[3]

The IRS lists exceptions for accounts held in an IRA for its owner or beneficiary and accounts held in a retirement plan for its participant or beneficiary. The regulation identifies the retirement plan and IRA provisions to which its exception applies.^[1][3]

The IRS also states that a person need not file separately when all of that person's foreign accounts appear on a consolidated FBAR. The regulation permits qualifying U.S. entities with more than a 50 percent interest in other reporting entities to submit a consolidated report for themselves and those entities.^[1][3]

Reporting timing and filing method

The FBAR is an annual report due April 15 of the year following the calendar year it covers. The IRS describes an automatic extension to October 15 that does not require an extension request.^[1]

The IRS directs electronic filing through FinCEN's BSA E-Filing System and states that the FBAR is filed separately from the federal tax return. FinCEN allows individuals filing their own reportable accounts to file electronically without registering for a BSA E-Filing account.^[1][2]

Paper filing requires an exemption requested from FinCEN's Resource Center. If FinCEN approves the request, it supplies the paper form and mailing instructions; the IRS states that a printed electronic Form 114 is not accepted as a paper filing.^[1]

Penalties for missed reports

The FBAR carries civil penalties that scale with willfulness. A non-willful failure can draw a penalty per violation, and no penalty applies when there is reasonable cause and the balance is properly reported. A willful failure can draw the greater of an inflation-adjusted amount (set at $100,000 in the statute) or 50% of the account balance at the time of the violation, and willful violations can also carry criminal exposure.^[1]

Authorization and account records

FinCEN Report 114a records authorization for another person to file an FBAR on the account holder's behalf. The IRS says this authorization is retained with the records and made available on request, without being submitted with the FBAR.^[1]

The IRS generally requires account records to be retained for five years from the FBAR due date. Bank statements or a copy of the filed FBAR can serve as records if they contain the required information.^[1]

Questions and answers

Related resources

Related glossary terms

• FBAR: FinCEN describes the FBAR filing rule for U.S. persons with foreign accounts. It covers the $10,000 aggregate threshold, account interests and exceptions.
• Signature authority over an account: The FBAR rules define signature authority by the power to direct disposition of account funds through direct communication with the financial institution.
• Financial interest in an account: FBAR rules define financial interest through account ownership or relationships to the legal title holder. A U.S. person named on an account has an interest.

Related articles and guides

• FBAR Rules for Trust Beneficiaries: A reference for U.S. citizens on the FBAR value threshold, financial interests, signature authority, and the reporting rule for certain trust beneficiaries.

Related pages

• IRS forms: All form reference pages.
• Form 1041: income tax return for estates and trusts
• Form 1116: foreign tax credit
• Form 2555: foreign earned income exclusion
• Form 3520-A: annual information return of a foreign trust
• IRS form finder: Search the forms by keyword.
• Self-directed IRAs, foreign assets and trust structures: Self-directed IRA structures that hold foreign assets: prohibited transactions, account reporting duties and where retirement account tax rules stop applying.
• Second citizenship and U.S. tax obligations: Understand how second citizenship affects a U.S. citizen's worldwide income reporting, foreign accounts, earned income exclusions and expatriation tax duties.