Common FBAR (Foreign Bank Account Report) mistakes to avoid

One common FBAR filing mistake is not realising that a filing is required. US citizens, residents, and some non-resident aliens with foreign (non-US) financial accounts totalling more than USD 10,000 at any point during the year must file. If the combined highest value of your foreign accounts’ totals meets or exceeds 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, currently you automatically receive an extension to October 15. 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, however 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 a FBAR when no tax is due

Many taxpayers assume that if they do not owe taxes, they don’t need to file an FBAR. The 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 USD 10,000.

Not knowing whether to file jointly or separately

If your client is married and both spouses only have ownership over the same foreign accounts, they can file a joint FBAR. However, if one spouse holds at least one separate foreign account, both must file an individual FBAR, and both must include the joint accounts.

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

It is often mistakenly believed that once accounts are closed, filers are exempt from FBAR requirements. However, all accounts that were open during the calendar year must be reported, even if they are now closed.

Understanding international tax reporting obligations can be complicated but taking note of some common FBAR mistakes can help avoid penalties. If you are unsure about your filing obligations, consult with a tax professional.

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Hannah Nelson has been practising US tax since 2015. She joined the USTAXFS Zurich office in 2021 from the diversified tax group at EY in Frankfurt and, previously, in the US. As a result, Hannah is experienced in three different tax subsections. Hannah is European Regional Chair of GGI's Young International Taxation Practice Group (YITPG).