Foreign Bank Accounts and the IRS: What Every U.S. Taxpayer Needs to Report

You may think your overseas savings are out of sight and out of mind. The IRS disagrees. U.S. taxpayers must report foreign bank accounts if they meet certain thresholds. Ignoring this rule could cost thousands in penalties.

Whether you’re an expat, investor, or business owner, the IRS expects full transparency on your foreign holdings. And they’re watching more closely than ever.

Table of Contents

1. What Counts as a Foreign Bank Account?

2. FBAR Filing: When and Why

3. FATCA vs. FBAR: Know the Difference

4. Penalties for Non-Compliance

5. How to Correct Mistakes

6. Common Questions

7. Work with Anu Agrawal CPA Inc.

8. FAQs

What Counts as a Foreign Bank Account?

A foreign bank account includes more than just a savings account abroad. The IRS sees these as any financial accounts located outside the U.S. This could include:

1. Checking and savings accounts

2. Mutual funds or investment accounts

3. Retirement or pension accounts

4. Certain foreign insurance policies with cash value

If the total value of all foreign accounts combined exceeds $10,000 at any point in the year, you must file an FBAR.

FBAR Filing: When and Why

The Report of Foreign Bank and Financial Accounts (FBAR) is required when the $10,000 threshold is crossed, even for just a day. Formally known as FinCEN Form 114, this form must be filed electronically.

The deadline aligns with Tax Day, typically April 15, but includes an automatic extension to October 15. You must submit it on its own, apart from your regular tax return.

This rule applies to U.S. citizens, residents, and even green card holders, no matter where they live.

FATCA vs. FBAR: Know the Difference

Both FBAR and FATCA aim to track foreign assets, but they are different in scope.

FBAR focuses on foreign account balances. FATCA, under Form 8938, includes broader foreign assets, like stocks and partnership interests held abroad.

You might need to file both. Failing to understand the difference is a common mistake. The IRS doesn’t forgive ignorance.

Penalties for Non-Compliance

This is where it gets serious. Non-compliance can trigger steep fines:

1. Up to $10,000 per violation for unintentional mistakes

2. $100,000 or 50% of the account balance for willful violations

Criminal penalties may also apply. The IRS has prosecuted cases for offshore evasion, even for relatively small accounts. Silence is costly.

How to Correct Mistakes

Mistakes happen. The IRS offers options if you missed past filings.

Streamlined Foreign Offshore Procedures allow late filers to catch up and avoid harsh penalties, if they certify non-willful conduct.

If your failure was intentional or part of a larger evasion strategy, you may need legal help. But for most taxpayers, correction is possible with proper guidance.

Work with Anu Agrawal CPA Inc.

This isn’t something to navigate alone. Foreign account reporting is confusing. It changes often. Getting it wrong can lead to serious consequences.

Anu Agrawal CPA Inc. offers foreign tax compliance expertise for individuals and businesses with cross-border financial lives. We help you identify reporting needs, file correctly, and avoid penalties. Our process is calm, clear, and focused on compliance.

We work with:

1. Expats with accounts overseas

2. Small business owners with international ties

3. U.S. residents with inherited foreign accounts

4. Green card holders unsure of reporting thresholds

Your money is too valuable to lose to a simple oversight.

FAQs

1. What happens if I forget to file an FBAR?
   You may face penalties, even for an honest mistake. Filing under the IRS’s Streamlined Program can help reduce or remove fines.
2. How does the IRS know about foreign accounts?
   Through FATCA agreements, many foreign banks report account info to the IRS. They have more data than most taxpayers realize.
3. Do joint account holders both need to file?
   Yes. Each U.S. person with a financial interest or signature authority must file an FBAR if the total across accounts exceeds $10,000.
4. Are cryptocurrency accounts included?
   Currently, crypto accounts aren’t required on FBAR. However, IRS guidance is evolving, and future reporting rules may include them.
5. Can I file FBAR myself?
   Yes, but many prefer professional help. The form is technical, and one mistake can trigger penalties.

Protect Yourself with Expert Help

IRS rules on foreign bank accounts are strict. Even small balances, if left unreported, can trigger audits and fines. That’s why it’s smart to act before they act.

Anu Agrawal CPA Inc. offers you reliable foreign tax compliance expertise and peace of mind. We help you get it right the first time or fix it fast if you’re behind.

Need to file an FBAR or review your accounts? Don’t wait. Schedule a consultation. Let us help you stay compliant, avoid penalties, and focus on what matters most—your financial future.