FBAR for US Expats – A Beginner’s Guide
Expat Tax Blog | Tax Tips for US Americans Abroad
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The FBAR for US expats is a very important form that’s directly linked to your bank account. Whether you need to file an FBAR form or not depends on how much money you have each calendar year. Here at MyExpatTaxes, we decided to create a guide for you to understand more clearly what the FBAR is and what your responsibility is within it.
The Foreign Bank Account Report
Typically, when US expats move abroad, one of the first things they secure for themselves is a bank account. So, if you’re living abroad and have your own bank account, we term this as a ‘’foreign bank account’’ in this post.
The FBAR stands for Foreign Bank Account Report. It is essentially a form that you as a US American abroad may be required to fill out if you have a foreign bank account (or any other financial accounts) established overseas. This is especially so if you have a certain amount of money in these foreign accounts that exceeded a certain limit.
You won’t be taxed on your foreign bank account because of this specific form. The FBAR is not a tax calculation form, but purely informational for US authorities.
How to Determine if You Need to File an FBAR
One thing Americans abroad need to do, so long as they have a foreign bank account, is to check bank statements periodically. Usually, families check their statements weekly, or monthly, so we do encourage consistent tracking because the amount in your bank account will determine if you need to file an FBAR.
The threshold or level you as a US citizen abroad need to get to, to file for an FBAR is if you have over $10,000 combined from all your foreign bank accounts at any one time throughout the year. In order to determine you exceeded this threshold, you’ll need to periodically convert your foreign currency to US currency.
The FBAR threshold and rules are very specific. Even if you had a total of $10,010 for one day, this means you need to file for the FBAR. Yes, even with the extra $10 you had for one day.
Accounts Not Required to File
Like many things in the US taxation world, there are exemptions.
Some Americans abroad do not need to report an FBAR due to the type of foreign financial account they own. Here are three examples of such accounts:
- an account owned by the government
- international financial institution
- an account maintained by a US military account
How Filing the FBAR Works
Did you know that the FBAR for US expats is NOT managed by the IRS? It is instead operated by the Financial Crimes Enforcement Network (FinCEN), which is part of the US Department of Treasury.
In order to successfully file the FBAR, you must complete Form 114 (the Report of Foreign Bank and Financial Accounts) online here.
The FBAR can be known as a daunting form, which is why we want to make it easier for you and encourage you to sign up through our app and file electronically. Our support team can assist you every step of the way.
Some of the input from your Foreign Bank Account Report will also need to be transferred over to our federal tax return. This type of FBAR support is already included in the MyExpatTaxes flat fee of 149 Euros per year for your federal tax return.
The FBAR Deadline
FBAR is due on April 15 every year to coincide with the tax date for Americans both inland and overseas. However, if you missed out on the filing date, Americans overseas have an automatic extension to file until October 15.
Penalties of the FBAR for US expats
If you forgot or didn’t know about the FBAR, you may be liable to pay a fine. Unfortunately, it can be up to $10,000, per violation. If you tried to avoid filing and you get caught, fines can go up drastically. Think of $100,000 or 50% of the balance of your account during the time of the violation.
So, as you can imagine, as an American abroad, forgetting or avoiding a single document can be costly.
How would the IRS know you didn’t file an FBAR when required to do so?
When you sign up for a bank account as an American expat, you will need to sign additional forms because you are a US citizen. These forms specifically ask you for your social security number, and that you grant the IRS access in your account information.
This is how the US financial authorities are able to get information from your foreign bank account. They easily cross-reference your records to see if you didn’t file an FBAR when you had an obligation to do so.
A Solution to Missing Filing the FBAR
If you found out that you were suppose to file the FBAR but didn’t – there is a solution for you.
You can take advantage of the Streamlined Filing Procedure process, which can help you get back on track and become tax compliant with the IRS. This particular tax amnesty program helps Americans abroad make up for missed years of back taxes and prevent nasty penalties to accumulate. As long as you were innocently unaware of your filing requirements, of course.
We at MyExpatTaxes – with our award-winning expat tax software – help many expats every day with the FBAR and Streamlined Procedure. We do this for a reasonable price (about 600 to 700 Euros depending on your situation). If you sign up through our app we can get started right away.