If you are a US citizen, resident, or entity with financial accounts outside the United States, you may be required to file the Foreign Bank Account Report (FBAR) each year. The FBAR is a critical part of US tax compliance, ensuring that offshore financial accounts are disclosed to the government. Failing to file can lead to severe penalties. This guide will walk you through the process of filing the FBAR in 2025, including eligibility, deadlines, and step-by-step instructions.
What is an FBAR?
The Foreign Bank Account Report (FBAR) is officially known as FinCEN Form 114 and is required by the Financial Crimes Enforcement Network (FinCEN). It is not filed with your tax return but must be submitted electronically through the BSA E-Filing System.
The FBAR is designed to prevent tax evasion and improve financial transparency by requiring US persons to report their foreign financial accounts if their total balance exceeds a certain threshold.
Who needs to file an FBAR?
You must file an FBAR if:
- You are a US citizen, green card holder, resident, or entity (corporation, partnership, LLC, trust, or estate).
- You have one or more foreign financial accounts (bank accounts, brokerage accounts, mutual funds, trusts, pension accounts, life insurance with a cash value, etc.).
- The combined balance of all your foreign accounts exceeds $10,000 at any time during the calendar year.
This includes accounts you own individually or jointly, as well as those where you have signatory authority (even if you don’t own the funds).
Examples of Foreign Accounts that must be reported on FBAR
If you are unsure whether your account qualifies, here are some examples of accounts that must be included in the FBAR:
- Foreign bank accounts (checking, savings, term deposits)
- Foreign brokerage accounts (stocks, bonds, mutual funds)
- Foreign pension accounts (if accessible before retirement)
- Foreign business accounts (if you have signatory authority)
- Foreign life insurance policies with a cash value
- Foreign cryptocurrency exchanges (if held in a custodial account)
FBAR is separate from your US Tax Return
It is important to understand that FBAR filing is separate from your US tax return. The FBAR is submitted to the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN), not the IRS.
What if you have a zero-balance account?
If an account had a balance of zero for the entire year, it does not need to be reported. However, if an account had any balance over $10,000 at any point during the year and then dropped to zero, it still must be reported. Additionally, closed accounts do not need to be included unless they had a reportable balance earlier in the year.
FBAR Reporting is based on Aggregate Balance
The FBAR filing requirement is based on the total value of all foreign financial accounts combined, not on individual account balances. Even if no single account exceeds $10,000, you must file if the sum of all foreign accounts surpasses this threshold at any time during the year.
Transferring Money Between Accounts Still Requires FBAR Reporting
If you transfer money from one foreign account to another, both accounts must be reported on the FBAR. Even though it is the same money moving between accounts, each account’s maximum balance must be reported separately. The IRS is concerned with the highest balance in each account, not just the total funds you hold.
FBAR Exchange Rate for Reporting
When reporting account balances, you must convert foreign currency amounts into US dollars. Use the US Treasury’s official exchange rate as of December 31, 2024. If no official rate is available, you may use another reputable exchange rate source.
FBAR Filing Deadline for 2025
- The FBAR for 2024 must be filed by April 15, 2025.
- An automatic extension is granted until October 15, 2025, if you miss the April deadline.
- No additional form is required to request the extension.
How to report Joint Accounts on the FBAR
Filing a Joint Account with a Spouse
- If both spouses are US persons, each spouse must file a separate FBAR.
- However, if one spouse elects to file on behalf of both, they must include all joint accounts and attach Form 114a, authorizing the joint filing.
Filing a Joint Account with a Non-Resident Alien (NRA) Spouse
- If you have a joint account with a non-US spouse, only the US person is required to report the account on their FBAR.
- The NRA spouse does not have an FBAR filing obligation.
Step-by-Step Guide to Filing the FBAR
Step 1: Gather Your Account Information
To complete the FBAR, you will need:
- Name of each foreign financial institution
- Account numbers
- Type of account (checking, savings, investment, etc.)
- Maximum balance in each account during the year (converted to USD)
- Address of the financial institution
Step 2: Convert Foreign Currency to USD
If your account balances are in foreign currency, you must convert them to US dollars using the exchange rate on December 31, 2024.
Step 3: Access the BSA E-Filing System
The FBAR must be filed electronically via FinCEN’s BSA E-Filing System:
- Go to bsaefiling.fincen.treas.gov
- Select FinCEN Form 114
- Click File an Individual FBAR
Step 4: Complete FinCEN Form 114
Fill out the required sections, including:
- Filer Information (Name, SSN, address, date of birth)
- Foreign Account Details (Bank name, address, account number, balance)
- Type of Filer (Individual, corporation, trust, etc.)
Step 5: Review and Submit
Carefully review your entries before submitting the form. Once submitted, you will receive a confirmation email from FinCEN.
Does Filing the FBAR result in Taxes?
Filing the FBAR does not generate any tax liability. The FBAR is strictly a reporting requirement to disclose foreign financial accounts. However, failure to file can lead to penalties, and if the IRS discovers unreported foreign income, it may result in additional tax assessments and penalties.
Delinquent FBAR Filing: What If You Missed Previous Years?
If you have not filed FBARs for previous years, you can still become compliant through:
- Delinquent FBAR Submission Procedures: If you did not file but have reported all foreign income on your tax returns, you can file late FBARs without penalties.
- Streamlined Filing Compliance Procedures: If you failed to report foreign income and FBARs due to non-willful neglect, you can file amended tax returns and FBARs with reduced penalties.
- Voluntary Disclosure Program: For willful violations, this program allows you to disclose unreported accounts while negotiating lower penalties.
Final Tips for Filing the FBAR
- Keep detailed records of your foreign account balances.
- Plan ahead so you don’t miss the deadline.
- Use professional help if your situation is complex.
- Stay compliant every year to avoid costly penalties.
Filing the FBAR is a crucial step in maintaining compliance with US tax laws. If you need assistance with your FBAR or other expat tax obligations, Universal Tax Professionals can help ensure that you remain compliant with your reporting requirements.
