What is FBAR?
The Foreign Bank Account Report (FBAR), also known as FinCEN Form 114 (previously TD F 90-22.1), is required by the U.S. Treasury Department.
Every U.S. person who has one or more foreign financial accounts with an aggregate balance exceeding $10,000 at any time during the year must file an FBAR annually. The filing deadline is typically April 15, with an automatic extension available until October 15.
Who Must File an FBAR?
You are required to file if:
- You are a U.S. person (citizen, resident, corporation, partnership, LLC, trust, or estate formed under U.S. law); and
- You have a financial interest in or signature authority over at least one foreign financial account; and
- The combined value of all foreign accounts exceeded $10,000 at any point during the year.
This includes accounts you own directly as well as accounts you do not own but have the authority to transact on.
Reporting Foreign Income
Income generated in foreign accounts must also be reported on your U.S. income tax return:
- Interest & Dividends → Reported on Schedule B
- Capital Gains → Reported on Schedule D
- Other Income Types → Reported according to their classification
*If you earn dividends or interest, you must also check Part III, Line 7a of Schedule B and indicate the country (or countries) where you hold accounts.
*Foreign taxes paid on that income may qualify for the Foreign Tax Credit (Form 1116).
Penalties for Non-Compliance
Failing to file FBAR can result in severe penalties:
- Non-Willful Violation: Up to $10,000 per account, per year.
- May be waived if the failure was due to reasonable cause and the account was properly reported once discovered.
- Willful Violation: The greater of $100,000 or 50% of the account balance per violation, per year.
- Each year of non-filing counts as a separate violation.
- Criminal Penalties: Up to $500,000 in fines and/or 10 years in prison if the violation occurs in conjunction with other laws (e.g., tax evasion).
Voluntary Disclosure Programs
The IRS has periodically offered Voluntary Disclosure Programs (VDPs) for taxpayers who failed to file FBARs in prior years. These programs can reduce or even eliminate penalties if you come forward before enforcement action begins.
How We Help
At Shah & Trivedi CPA, PLLC, we guide clients through every step of FBAR compliance:
- Determining filing requirements based on your accounts.
- Preparing and filing FinCEN Form 114 accurately and on time.
- Advising on how to properly report foreign income and claim available credits.
- Assisting with penalty abatement or voluntary disclosure filings if you missed prior years.