The FBAR: reporting foreign financial accounts

The FBAR covers foreign financial accounts, the reporting threshold, filing exceptions, submission and records.

What the FBAR reports

The FBAR is the Report of Foreign Bank and Financial Accounts, filed on FinCEN Form 114. It reports certain foreign financial accounts to the Treasury Department. The IRS identifies bank accounts, brokerage accounts and mutual funds as examples of accounts covered by the reporting rules.^[1]

An account generally counts as foreign when the financial institution holding it is located outside the United States. Whether the account generates taxable income does not change its classification as a foreign financial account for FBAR purposes.^[1]

Who falls within the reporting rule

U.S. citizens are included among the U.S. persons covered by the FBAR filing rule. The IRS also lists residents, corporations, partnerships, limited liability companies, trusts and estates.

The reporting test combines a relationship to an account with a value threshold. It covers a financial interest in, or signature or other authority over, at least one financial account outside the United States when the aggregate value of the foreign accounts exceeds $10,000 at any point during the reporting year.^[1]

The threshold concerns the combined value of the foreign financial accounts.

Exceptions described by the IRS

The IRS describes account exceptions and circumstances in which a separate FBAR is unnecessary. A beneficiary does not need to report accounts that are part of a trust if a U.S. person, whether the trust, its trustee or its agent, files an FBAR reporting those accounts.^[1]

A separate filing is unnecessary when all the person's foreign financial accounts appear on a consolidated FBAR. Another exception applies when all foreign financial accounts are jointly owned with a spouse, subject to authorization and filing conditions.^[1]

For the spouse exception, the person completes and signs FinCEN Form 114a authorizing the spouse to file on their behalf. The spouse reports the jointly owned accounts on a timely filed, signed FBAR. Income tax filing status does not determine eligibility for this exception.^[1]

How filing connects to a federal tax return

The FBAR is submitted separately from a federal tax return. The IRS specifies electronic filing through FinCEN's BSA E-Filing System. It describes the FBAR as an annual report and provides an automatic filing extension that does not require a request.^[1]

Paper filing requires an exemption requested through FinCEN's Resource Center. If FinCEN approves the request, it supplies a paper form for completion and mailing to the IRS at the address in the instructions.^[1]

A person can authorize someone else to file using FinCEN Report 114a. That authorization stays with the person's records instead of accompanying the FBAR, and it is made available to FinCEN or the IRS upon request.^[1]

Records associated with reported accounts

FBAR recordkeeping covers identifying details and the maximum annual value of each reportable account. The required information includes the name on the account, account number, foreign bank's name and address, account type and maximum value during the year.^[1]

The law does not prescribe a particular document format for those details. Bank statements or a copy of a filed FBAR can serve as records when they contain the required information. The general retention period is five years from the FBAR's due date.^[1]

An officer or employee reporting signature authority over an employer's foreign financial account has a recordkeeping exception. The employer keeps those account records, and the officer or employee does not have to retain them personally.^[1]

Side-by-side comparison of FBAR and Form 8938 reporting. Data table below. — FBAR and Form 8938 compared.

FBAR and Form 8938 reporting comparison
Topic	FBAR	Form 8938
Summary	The two filings overlap in subject matter but have separate tests, separate recipients and separate trust rules.
Form and recipient	FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), filed with FinCEN	Form 8938, Statement of Specified Foreign Financial Assets, attached to the annual return and filed with the IRS
Who files	A United States person with a financial interest in or signature authority over foreign financial accounts	Certain U.S. taxpayers holding financial assets outside the United States
What is counted	Foreign financial accounts	Specified foreign financial assets: accounts at foreign financial institutions, plus listed assets held for investment, such as stock or securities issued by a non-U.S. person and any interest in a foreign entity
Value test	Aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year	Generally an aggregate value above $50,000, with higher thresholds in some cases. Form 8938 is not needed when no income tax return is required
Foreign trust rule	Exception for a beneficiary whose financial interest in a trust account rests on a present beneficial interest in more than 50 percent of the trust assets or current income: no filing is needed when the trust, trustee or agent is a U.S. person and files an FBAR disclosing the trust's foreign accounts	Specified foreign financial assets held by the owned portion of a foreign trust (sections 671 through 679) are excluded when the owner timely files Form 3520 for the same tax year, ensures the trust timely files Form 3520-A or a substitute, and reports both filings on Form 8938
Other reporting	Specified foreign financial assets already reported on Form 3520 or 3520-A (filed by the trust), 5471, 8621 or 8865 need not be reported a second time on Form 8938. The asset is still identified on Form 8938, and its value counts toward the threshold.
Where the two meet	Filing Form 8938 does not relieve a person of the FBAR requirement if the person is otherwise required to file the FBAR. The IRS publishes a comparison chart of the two sets of filing requirements.
Notes	Form 8938 thresholds may be higher in some cases. The instructions for the tax year concerned govern.
Sources	FinCEN FBAR line item filing instructions (financial interest, signature authority, accounts, trust beneficiaries) · IRS Instructions for Form 8938 (specified foreign financial assets; foreign trust owners; relationship to the FBAR) · IRS FATCA information for individuals · IRS summary of FATCA reporting for U.S. taxpayers · Cassra Minai commentary on Form 8938

Questions and answers

Does an account need to produce taxable income to count?

Taxable income does not determine whether an account is foreign for FBAR purposes. The IRS generally identifies a foreign account by the financial institution's location outside the United States.^[1]

Does signature authority appear in the filing test?

Signature or other authority is expressly included in the reporting rule. The rule also requires the aggregate foreign account value to exceed $10,000 at some point during the reporting year.^[1]

Is the FBAR included with my federal tax return?

The FBAR is filed separately from the federal tax return. The specified electronic submission channel is FinCEN's BSA E-Filing System.^[1]

Can someone else submit my FBAR?

FinCEN Report 114a provides authorization for another person to file. The authorization is retained in the records and is not submitted with the FBAR.^[1]

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.
Reporting financial institution: The Common Reporting Standard classifies a financial institution as reporting when it falls within the relevant jurisdiction's rules and is not non-reporting.
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.