What Americans with Foreign Bank Accounts Should Know About FBAR to Avoid Being Fined

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An estimated 9 million Americans live abroad and a large percentage establish bank accounts in their new home country.

In the case of American retirees living outside the country, many even have their social security payments deposited directly into foreign accounts. Just how many people do this might surprise you.

According to statistical data provided by the U.S. Social Security Administration, just in the month of March, 684,635 payments were made to beneficiaries outside of the United States. Of that amount, 61,128 of those payments were sent to accounts in Mexico.

What many Americans living abroad don’t realize is that they are required to complete an annual report to the U.S. Government if the value of their foreign accounts exceeds $10,000 USD at any time during the calendar year (the Bank Secrecy Act of 1970). This report is entirely separate from your income tax return.

The report is called the Report of Foreign Bank and Financial Accounts (FBAR) and is submitted annually to the Financial Crimes Enforcement Network (FinCEN).

Who has to file?

A “United States person” that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.

A “United States person” is defined as United States citizens (including minor children); United States residents; entities, including but not limited to, corporations, partnerships, or limited liability.

Important: This includes people with dual citizenship.

Is this limited to my bank accounts?

No. The rule applies to all of your foreign financial accounts, which includes, but is not limited to the following:

A securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).*

* Taken directly from BSA Electronic Filing Requirements For Report of Foreign Bank and Financial Accounts (FinCEN Form 114)

How do I file?

All filing is done electronically via FinCEN’s portal: click HERE

The instructions and requirements are available in PDF form via this link: FinCEN Form 114

What is the due date to file?

The annual due date to file the FBAR is April 15th. If you fail to make the date, don’t worry — you get an automatic extension to October 15.

What are the penalties for not filing?

For violations occurring before August 1, 2016:

Non-willful violations: subject to a civil penalty of $10,000 per violation

Willful violations: subject to a civil penalty of $100,000 or 50 percent of the balance in the account, whichever is greater, at the time of the violation

You may also be subject to criminal penalties under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. section 1001.

For violations occurring on or after August 1, 2016:

Non-willful violations: subject to a civil penalty of $12,459 per violation

Willful violations: subject to a civil penalty of $124,588 or 50 percent of the balance in the account at the time of the violation, whichever is greater. The criminal penalties still apply.

Let’s Wrap This Up

In 2010, the United States enacted a piece of legislation called the Foreign Account Tax Compliance Act (FATCA) which requires foreign financial Institutions to report on the assets held by their U.S. account holders. This law has made it easier for the U.S. government to discover foreign accounts and sanction people who fail to complete their FBAR.

That basically means that if you fail to file this mandatory report, there’s a good chance that Uncle Sam will find out about it eventually and come calling.

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About the Author

Qroo Paul
Paul Kurtzweil (Q-Roo Paul) was a deputy sheriff in Florida for 25 years before retiring at the rank of lieutenant in 2015. He and his wife moved to Mexico looking to maximize their retirement income. They later started a blog called Two Expats Mexico (qroo.us) to share their experiences, as well as information about the logistical and legal aspects of retiring south of the border.

36 Comments on "What Americans with Foreign Bank Accounts Should Know About FBAR to Avoid Being Fined"

  1. LOL – it’s like Hotel California – you can check out any time you like, but you can never leave (the IRS)… 🙂

  2. Thanks Paul, excellent. Filed my first FBAR yesterday since I crossed the 10k threshold for the first time.

  3. Patti Armstrong | April 10, 2019 at 8:32 am |

    Yikes scarey stuff that’s why I’ll just keep my direct deposit SS to American bank, Good info Paul

    • Q-Roo Paul | April 10, 2019 at 8:36 am |

      We keep our direct deposit going to a U.S. bank but then move money to our Mexican bank when the exchange rate is to our advantage. Timing those bank movements can result in extra pesos that often cover all of our monthly expenses here south of the border. 🙂

  4. Charles Benfante | April 10, 2019 at 8:57 am |

    But corporations can have off shore accounts with no penalty at all – but go get the little guy

  5. Dr Louise F Montgomery | April 10, 2019 at 9:10 am |

    Paul, brokerage accounts, too, trigger the FBAR: “The FBAR form is required to be filed each year if the total balance of your foreign financial accounts exceeds $10,000 during the year. Foreign financial accounts include, but are not limited to; checking, savings, securities, brokerage, deposit, or any other account held with a financial institution.”
    https://www.greenbacktaxservices.com/blog/us-taxes-explained-the-fbar-form/

  6. Gene Black | April 10, 2019 at 9:24 am |

    Does this also include fideicomisos accounts for property “owners” ?

    • Yes, but being a property owner or having assets does not trigger the fincen. It is only bank accounts that have over $10K.

  7. Patricia Grimm | April 10, 2019 at 9:33 am |

    Great article. Since you made mention about expats receiving their social security payments directly to the bank where they are living outside the U.S., you might want to write an article about what happens if you don’t respond to the “proof of life” letter (form 7162) that is sent to those individuals who live outside the U.S. who get their social security checks directly deposited into their foreign bank account. When you do that, Social Security requires that you give them your actual address where you are living outside the U.S. They will send out the “proof of life” letter every other year to make sure you are still alive. If they don’t get a response back from you, they assume you are no longer alive and will stop your payments. This has happened to two people that I know. You better believe that when their payments stop, that gets their attention. All they need to do at that point is to contact Social Security and prove that they are still “alive”, and then their payments will start back up again but it may take about 2 to 3 months for that to happen. The easy way to avoid that problem is to watch for that letter and respond to it right away and then your payments won’t stop.

  8. The United States is the only country in the world that tries to suck taxes from money you have or earn outside the country. The only one.

  9. The $10,000 means any bank account you have your name on, so if you have your name on the Condo Association bank account for instance, that counts as well. That triggered my Fincen report this year. I have two smaller accounts, a personal one and one for our personal corporation, but the condo association drove me well over the limit.

  10. Thank you for the information. Had no idea.

  11. Ray Huntley | April 10, 2019 at 10:36 am |

    Quick question. Is the $10k threshold cumulative for the year? I’m assuming so.

    Thanks,

    Ray

  12. Gerald Andres | April 10, 2019 at 10:59 am |

    Good info. My question is, since all my Military retirement payments and SS go to the State side banks are you saying that I can not transfer more than $10,000 to my MX accts? What if I have brought cash back with me as a back up source (under the mattress savings acct)? Why is the U.S. so worried about my money being transferred to another country if I already paid the taxes on it?

  13. Proof of life” letter (IRS form 7162) sometimes don’t get delivered in the mail in time to prevent your SSA payments from being stopped. I am a prime example. My birth month is July, so IRS sent out the Proof of Life letter sometime in May. I never got it at my home in Yucatan (mail delivery almost unheard of here in Izamal) and my SSA payments were stopped in July. When I contacted them the IRS office told me it “IS” my responsibility to notify the IRS of my current mailing address so that I can receive the Proof of Life letter and respond accordingly. I fixed this by putting a reminder in my Google calendar to go into SSA website and update my address and any other info that needs it every May. live and Learn!

    • Q-Roo Paul | April 11, 2019 at 6:26 am |

      Thanks for sharing that. I’m sure it will help others avoid the same thing happening to them.

  14. Andrew Lasner | April 10, 2019 at 11:59 am |

    Great information Paul. The comments are also instructive as I plan my retirement in Mexico within the next year. Thank you, as always, for keeping us apprised of the nuances of living abroad.

  15. Happily Retired in México | April 10, 2019 at 2:24 pm |

    Several months ago, I sat at a scheduled meeting with a representative at my US bank (who I used to like very much) who I had to make a complaint to the corporate office about.

    The subject of my Mexican residency came up and she began, overbearingly, pressing me for my CURP#, for purposes of FATCA. I quietly explained that my federal law enforcement retirement is my only source of income, and I have ZERO foreign accounts. Making the statement to her a number of times. Forced my hand. She didn’t lose her job, but she was warned to tread carefully in the future.

    I’ve purposely avoided dealings with her since.

    No love at banks, it’s business as usual. They don’t care about you. Best to stay silent and thought a fool…

    I do not recommend having any accounts outside of the USA purely for simplicity’s sake.

    If you do have any accounts, then play the game well to win. No fines and no jail time for you means you’re winning.

  16. Susan Daly | April 10, 2019 at 3:39 pm |

    Couldn’t help noticing that it is one letter off from FUBAR, of which it would be if one did’t file. Ha!

  17. Paul, two points you may wish to inform your readers of:
    1. If you have ANY foreign financial accounts, regardless of amount, you must check the first two Yes boxes in 1040 Schedule B Part III, Foreign Accounts and Trusts (the unlabeled one and the 7a one). Even if the sum total of your foreign accounts were a mere $1,000 pesos, you have to check Yes boxes. If the total never exceeded US$10,000, then you get to check the No box is 7b, which asks if you’re required to file the FinCEN 114. So even those with small Mexican bank accounts are obligated to check Yes on Schedule B and report that they have a foreign financial account.

    2. In determining whether the sum total of all foreign financial accounts ever exceeded US$10,000, the FinCEN 114 instructions say to use the currency exchange rate on December 31st of the tax year as posted here:

    https://www.fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/historical.html
    For Mexico, on Dec. 31, 2018, it was 19.6540.

    • Q-Roo Paul | April 11, 2019 at 6:19 am |

      Thank you for sharing that information, Markemmer.

      • The IRS website says:
        “United States persons are required to file an FBAR if:
        1. United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
        2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.”

        We focused on the word “and”. We have a foreign bank account but never exceeded that limit. So we said “no” on the filing form.
        Hope it’s ok.

        • Q-Roo Paul | April 13, 2019 at 7:00 am |

          That’s right. If you never exceed the $10,000 threshold at any time during the calendar year, then you don’t need to file.

  18. Kim Lokuta | April 11, 2019 at 6:47 am |

    And, Paul…did I read, in a previous post, that you can only get a bank account, in Mexico, if you apply for part time citizenship?

    • Q-Roo Paul | April 11, 2019 at 6:58 am |

      Many banks will require you to have a temporary or permanent resident visa to open an account but there are exceptions. I know several expats who were able to open accounts without either of those at CiBanco. Those same folks were turned away from Bancomer for not having them.

  19. Cathy Steele | April 11, 2019 at 12:08 pm |

    Hello! It was so great to see you and Linda!! Hope you two are able to stop by more often!

  20. Great information and replies! Thank you everyone!
    I am “in process” of retiring/moving back. I am going through a “donación” since I am from QRoo, 40+ in the US. Does anyone know of a lawyer there?
    I want to find out how the “donación” from my parents will or does impact me.

    I love this blog and refer anyone who is interested or moving to Mexico.

    I hope I can be at one of the mixers in the near future Paul!

  21. Paul,

    A somewhat related topic is the issue of maintaining accounts in the USA and Mexico, or another foreign country. Some banks/brokerages are closing accounts in the USA that are owned by expats living abroad. Here’s one article from 2016: https://www.expatfocus.com/c/aid=3139/financial/tom-zachystal/charles-schwab-announces-account-closures-for-us-citizens-in-five-countries-more-expected/. This can have significant tax consequences!

    According to the article, the closures many be in part due to FACTA compliance hassles. Even if one’s foreign balance never goes over $10,000 USD, if one transfers more than $10,000 USD in aggregate over the course of the year, might that trigger a red flag for the US bank?

    As you hear from a broad cross-section of expats, I was wondering if you’d heard of anyone caught up in this conundrum, or if you might have any suggestions?

  22. Ilona Saunders | April 15, 2019 at 2:10 pm |

    I do t understand this. We have one acct. with Intercam and transferred money for renovation once. The rest of the time we just keep enough in there for the management company. How do I get an aggregate amount. Is is an average of monthly balances. Not clear at all. Don’t think the bank registered anything. Please help. Thanks

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