What Is a Foreign Bank Account: FBAR Rules, Form 8938, and Penalties

If you are a US person with money in a bank, brokerage, or similar account outside the United States, foreign bank account reporting may be required on two separate forms: FinCEN Form 114 (the FBAR) when your combined foreign account values top $10,000 at any point in the year, and IRS Form 8938 when you cross higher thresholds tied to where you live and how you file. The two filings go to different agencies, and one does not substitute for the other.1Internal Revenue Service. Summary of FATCA Reporting for US Taxpayers

What Counts as a Foreign Financial Account

Federal regulations define a foreign financial account by the location of the institution holding it. Not the currency, not your citizenship, not where the institution is incorporated. A US bank’s branch in London holds foreign accounts. A foreign bank’s branch in New York does not.

Three categories are reportable:

  • Bank accounts: savings, checking, demand deposit, and any other account with a person in the business of banking.
  • Securities accounts: any account with a person in the business of buying, selling, holding, or trading stocks or other securities.
  • Other financial accounts: insurance or annuity policies with a cash value, commodity futures or options accounts on a foreign exchange, and shares in a foreign mutual fund or similar pooled investment fund available to the general public.

That third bucket catches people off guard. A whole life insurance policy from a foreign insurer counts if it has a surrender value. A foreign pension funded by a foreign employer counts. Shares in a foreign mutual fund count even if you bought them through a domestic advisor.2eCFR. 31 CFR 1010.350

What Is Not Reportable

Several categories are specifically excluded from FBAR filing:

  • Correspondent or nostro accounts used for interbank transactions
  • Accounts owned by a governmental entity or an international financial institution
  • Accounts at US military banking facilities, even overseas
  • Foreign assets held inside a US-based IRA or retirement plan where you are the owner or beneficiary — the IRA itself is domestic
  • Accounts in a trust where another US person serving as trustee already files an FBAR reporting them

The IRA point trips people up. If your US brokerage IRA happens to hold foreign stock or a foreign mutual fund, you do not separately report it on the FBAR. But a retirement plan established and maintained by a foreign employer in a foreign country is a foreign financial account.3Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)

Cryptocurrency held on a foreign exchange is not currently reportable on the FBAR if the account holds only virtual currency. FinCEN has signaled it plans to bring virtual currency accounts within FBAR reporting, but that rule has not been finalized. If a foreign exchange account holds crypto alongside other reportable assets such as foreign currency, the full account value is reported once the threshold is met.

Who Has to File an FBAR

Any US person with a financial interest in, or signature authority over, foreign financial accounts must file an FBAR if the combined value of those accounts exceeds $10,000 at any point during the calendar year. US person means US citizens, resident aliens, and domestic entities including corporations, partnerships, trusts, and estates.4Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts

You have a financial interest if you are the owner of record or hold legal title, including joint accounts where you are one of several owners. You have signature authority if you can direct disposition of money in the account by communicating directly with the foreign bank, even when the money isn’t yours. Corporate officers and controllers with access to their employer’s overseas accounts often fall into this bucket.5Financial Crimes Enforcement Network. FBAR Line Item Filing Instructions

Spouses and Children

Spouses who jointly own all their foreign accounts can file a single FBAR covering both, but only if three conditions are met: the filing spouse reports all the jointly owned accounts, the FBAR is filed electronically on time, and both spouses complete and sign FinCEN Form 114a (Record of Authorization to Electronically File FBARs) and keep it in their records. If either spouse holds any foreign account individually, both must file separately, and each must report the full value of the jointly held accounts.6Financial Crimes Enforcement Network. Filing for Spouse

Children are responsible for their own FBAR if they meet the threshold. When a child cannot file due to age, a parent or guardian must file and sign on the child’s behalf.7Internal Revenue Service. Details on Reporting Foreign Bank and Financial Accounts

How the $10,000 Threshold Works

The $10,000 test is an aggregate across every foreign account, not a per-account limit. Take the highest balance each account reached at any point during the calendar year, add those peak values together, and if the total exceeds $10,000, every account must be reported — including the small ones.8Financial Crimes Enforcement Network. Reporting Maximum Account Value

For foreign-currency accounts, convert the maximum balance into US dollars using the Treasury Department’s exchange rate for the last day of the calendar year, published on Treasury’s Fiscal Data website. When no official rate exists for a currency, another verifiable rate may be used as long as the source is documented. All amounts on the FBAR are rounded up to the next whole dollar, so a $15,265.25 balance is reported as $15,266.

When Form 8938 Also Applies

The Foreign Account Tax Compliance Act created a second, separate reporting requirement on IRS Form 8938 (Statement of Specified Foreign Financial Assets). Form 8938 goes to the IRS with your income tax return; the FBAR goes to FinCEN. Many filers owe both.

Form 8938 reaches beyond accounts. It also covers:

  • Stock or securities issued by a foreign company, if not held in a financial account
  • A partnership interest in a foreign partnership
  • Notes, bonds, or debentures issued by a foreign person
  • An interest in a foreign retirement or deferred compensation plan
  • A foreign-issued insurance contract or annuity with a cash surrender value
  • Financial derivative contracts with a foreign counterparty

The phrase to watch is “not held in a financial account.” Foreign stock sitting in a US brokerage is reported by the brokerage; foreign stock you hold directly, without a US custodian, is a specified foreign financial asset.9Internal Revenue Service. Basic Questions and Answers on Form 8938

Thresholds are higher than the FBAR’s and vary by residence and filing status.

For taxpayers living in the United States:

  • Single or married filing separately: total foreign asset value exceeds $50,000 on the last day of the tax year, or $75,000 at any time during the year
  • Married filing jointly: exceeds $100,000 on the last day, or $150,000 at any time

For taxpayers living abroad:

  • Single or married filing separately: exceeds $200,000 on the last day, or $300,000 at any time
  • Married filing jointly: exceeds $400,000 on the last day, or $600,000 at any time

The higher expat thresholds reflect that people living overseas typically keep foreign accounts for daily expenses.1Internal Revenue Service. Summary of FATCA Reporting for US Taxpayers

How and When to File

The FBAR is filed electronically through FinCEN’s BSA E-Filing System. It is not attached to your tax return. The deadline is April 15 following the calendar year being reported, with an automatic extension to October 15. No extension request is needed.3Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)

For each account you’ll need the name and address of the foreign financial institution, the account number, the type of account, and the maximum value during the year. Pull account statements and identify the highest recorded balance — that’s the figure to report.

Form 8938 is attached to your Form 1040 and follows your income tax return’s due date, including any extension you request.

Records for both filings, including statements, account numbers, maximum balances, and exchange rate documentation, must be kept for five years from the FBAR due date.

Penalties for Not Filing

The consequences of skipping either filing are heavy, which is the practical reason to treat this as a real deadline rather than optional paperwork.

FBAR Penalties

Civil FBAR penalties come in two tiers. For non-willful violations — an honest mistake or unawareness of the requirement — the statutory maximum is $10,000 per violation, adjusted annually for inflation. The 2026 inflation-adjusted cap is roughly $16,536 per account, per year. The IRS can waive the penalty entirely if the violation was due to reasonable cause and the account balance was properly reported.10Office of the Law Revision Counsel. 31 USC 5321 – Civil Penalties

Willful violations are far worse. The civil penalty is the greater of $100,000 (inflation-adjusted to roughly $165,353 in 2026) or 50% of the account balance at the time of the violation, assessed per account, per year. Criminal penalties reach a $250,000 fine and up to five years in prison. If the willful violation happens alongside another federal crime, or as part of a pattern of illegal activity involving more than $100,000 in a 12-month period, the maximum fine doubles to $500,000 and the prison term extends to ten years.11Office of the Law Revision Counsel. 31 USC 5322 – Criminal Penalties

Form 8938 Penalties

Failure to file Form 8938 draws an initial $10,000 penalty. If the form is still missing 90 days after the IRS mails a notice, an additional $10,000 accrues for every 30-day period the failure continues, up to $50,000 in additional penalties. Any tax underpayment tied to undisclosed foreign assets also gets hit with a 40% accuracy-related penalty, roughly double the normal rate for substantial understatements.12Office of the Law Revision Counsel. 26 USC 6038D – Information With Respect to Foreign Financial Assets13Internal Revenue Service. FATCA Information for Individuals

If You Are Behind on Filing

Doing nothing is the worst option. The IRS has voluntary paths that treat filers who come forward far more gently than filers it finds first.

Delinquent FBAR Submission Procedures

If you missed FBARs but reported all the income from the foreign accounts on your tax returns, you can use the Delinquent FBAR Submission Procedures. File the late FBARs electronically, choose the reason for late filing on the cover page, and include an explanation. No penalty applies as long as the income was properly reported and the IRS hasn’t already opened an examination or contacted you about delinquent returns for those years.14Internal Revenue Service. Delinquent FBAR Submission Procedures

Streamlined Filing Compliance Procedures

When there is unreported income from foreign accounts, or you need to file amended returns as well, the Streamlined Filing Compliance Procedures offer a broader fix. You must certify that your failure to report was non-willful, meaning it resulted from negligence, inadvertence, or a good-faith misunderstanding. The procedures are closed to anyone under IRS civil examination or criminal investigation.15Internal Revenue Service. Streamlined Filing Compliance Procedures

The program requires amended returns for the three most recent tax years and delinquent FBARs for the six most recent years. Taxpayers living in the United States pay a one-time penalty of 5% of the highest aggregate value of the unreported foreign assets. Those living abroad can use the Streamlined Foreign Offshore Procedures, which carry no additional penalty beyond tax and interest owed.16Internal Revenue Service. US Taxpayers Residing in the United States

Five percent stings, but set it against willful FBAR penalties that can take half an account balance per year, plus potential criminal exposure. For most people who are behind, voluntary disclosure is the cheaper answer by a wide margin.