Common FBAR Mistakes (Foreign Bank Account Report) to Avoid

If you are a US person, including a citizen, resident, corporation, partnership, limited liability company, trust or estate, you may not be aware of your international tax reporting obligations. One form you will be required to file is an FBAR (Foreign Bank Account Report).  The FBAR, required by the Financial Crimes Enforcement Network (FinCEN), tracks the offshore assets of US person. Failing to file it correctly can result in hefty fines. To help you avoid any costly errors, here are some common FBAR mistakes and how to avoid them.

Not knowing the requirement to file

One of the most common FBAR filing mistakes is simply not realizing that you’re required to file one. US citizens, residents, and even some non-resident aliens with foreign financial accounts totaling more than $10,000 at any point during the year must file. If the highest value of each of your foreign accounts totals meet or exceed this threshold—even for just one day—you are required to file an FBAR.

Missing the filing deadline

FBARs must be filed annually by April 15. However, if you miss this deadline, you automatically receive an extension to October 15. Despite the automatic extension, many filers overlook this second deadline or forget entirely.  There are no further extensions for the FBAR.

Not Reporting all foreign accounts

It’s easy to assume that only foreign bank accounts need to be reported but this is incorrect. FBAR filing requirements include all types of foreign financial accounts including brokerage accounts, mutual funds, pension accounts, and foreign life insurance policies with a cash value.

Neglecting to File FBAR When No Tax is Due

Many taxpayers assume that if they don’t owe taxes, they don’t need to file an FBAR. This is a critical mistake. FBAR filing is entirely separate from your tax obligations. Even if no tax is due on your foreign income or accounts, you are still legally required to file if the aggregate balance of your foreign accounts exceeds $10,000.

Not knowing whether to file jointly or separately

If you’re married and if you both have ownership over the same foreign accounts, you can file a joint FBAR. However, if one spouse holds separate foreign accounts, they must file an individual FBAR.

Forgetting to Report Beneficial Ownership

If you have the power to control how the funds in a foreign account are handled, that account must be included in your FBAR filing. Even if the account is not in your name but you have signature authority or a beneficial interest, that foreign account must be reported.

Not Filing After Closing Accounts

People often mistakenly believe that once accounts are closed, they are exempt from FBAR requirements. However, you must report all accounts that were open during the calendar year, even if they are now closed.

Understanding your international tax reporting obligations can be complicated but by being proactive and taking note of some of these common FBAR mistakes, you can avoid penalties and further complications with the IRS. Our number one piece of advice, especially if you are unsure about your filing obligations, consult with a tax professional to ensure you’re fully compliant. We, at USTAXFS, understand the intricacies of international tax and would be happy to support you.

If you have an FBAR filing requirement and need assistance or are uncertain, feel free to contact us.