What Americans With Foreign Bank Accounts Should Know About Annual Reporting Requirements

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 August of this year, 708,624 social security payments were made to beneficiaries outside of the United States. Of that amount, 64,752 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.

However, according to the IRS website, you do not need to file if the foreign financial accounts are:

  • Correspondent/Nostro accounts,
  • Owned by a governmental entity,
  • Owned by an international financial institution,
  • Maintained on a United States military banking facility,
  • Held in an individual retirement account (IRA) you own or are beneficiary of,
  • Held in a retirement plan of which you’re a participant or beneficiary, or
  • Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.

What about people with dual citizenship?

This applies to people with dual citizenship as well.

Even if you do not reside in the U.S. but you’re a U.S. citizen and you have foreign financial accounts, you could face penalties for not completing the FBAR if the value of those foreign accounts exceeded $10,000 USD at anytime during the previous calendar year.

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.

Don’t forget to keep records

You must keep records for each account you must report on an FBAR that establish:

  • Name on the account,
  • Account number,
  • Name and address of the foreign bank,
  • Type of account, and
  • Maximum value during the year.

The law doesn’t specify the type of document to keep with this information; it can be bank statements or a copy of a filed FBAR, for example, if they have all the information.

You must keep these records for five years from the due date of the FBAR.

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.

24 Comments on "What Americans With Foreign Bank Accounts Should Know About Annual Reporting Requirements"

  1. Kat Rina Katrina | September 14, 2020 at 7:51 am | Reply

    Hello from your recent Canadian Friends 🙂

    Great article! Love reading the helpful tips that you share.

  2. Good morning from Canada too. Interesting article. I just appreciated the blog, because it gave me an opportunity to think about Mexico….and hopefully more trips, soon.

    • We have some more entertaining articles in the works. Of course it’s not that difficult to come up with something more entertaining than this article…zzzzzzzzzzzzzzzz.

  3. Hello from San Diego,
    Good to know, thank you for the informational article. It got me wondering, what are some advantages of having a foreign bank account while living abroad(specifically Mexico)? I assumed, I would continue using only my U.S. bank when I make the move to Mexico.

  4. Hey Paul,

    Long time reader, fist time writer. Does this apply for bank accounts in the name of a company I am a half owner in? The other owner is not a US Citizen and they have the signatory rights.

  5. Fran Clark-Fiorentino | September 14, 2020 at 8:46 am | Reply

    Very interesting. Thanks for the good information. I do hope you and Linda are still enjoying life in Mexico and that you aren’t having to worry too much about this pandemic. Be safe!

  6. Good information, Paul! Your US readers can find more information on this and on questions related to US tax filings at the Facebook group, “US Expat Tax Questions.” The group is moderated by a US CPA. https://www.facebook.com/groups/952367774780623

  7. Hi Paul: If my U.S. bank’s agreement with a Mex. bank limits my monthly transfers to $3000 per account and we have two accounts. If we don’t spend the entire $6000 per month and it accumulates to a total savings of $10000 after several months we would be fined for saving our money? Does the Mex bank report anything over $10000 per month even if the amount is only temporary that month?

    • There are agreements between foreign banks and the U.S. government to share financial information on any account holder believed to be an American citizen. Many foreign banks will actually hand you an IRS form to complete when you open the account.

      The $10,000 mark applies to the aggregate value of all your applicable foreign financial accounts at any point during the year, even if it was only temporary.

      I’ve read several horror stories about people losing some of their hard-earned money for failure to complete a form. That’s why I do at least one FBAR article a year to educate others about this requirement.

      There is still plenty of time to do a report for the 2019 calendar year.

  8. If you report holdings over $10000, are you taxed and at what rate?

  9. Thank you very much for this information. You did all the leg work for me. Because I recently bought a new car my Mexican bank account exceeded 10,000 dollars at one point. I knew I needed to file but I did not know the specifics. I used to be a Blackjack dealer so I am familiar with FinCEN. Info is bookmarked, thanx again.

  10. Although I keep most of my assets in the US. People that move to Mexico will find it beneficial to have that Mexican account. While Mexico merchants are accepting more credit cards, you will find it is more a cash society than in the US.

  11. Thank you Paul for another helpful article. I was wondering if you have given any thought to writing about the current state of the covid 19 virus in your area? Many are trying to decide when it’s safe to travel to the Riviera Maya area. It has been reported that testing is not widespread so knowing what the positivity rate (percentage of positive tests per population tested) would help us all make better informed decisions. Thanks for your consideration. Doris from Ocala, Florida

    • The only reason that we haven’t dedicated an article to the topic of COVID in this particular area is because the data is continually changing and the article would be outdated quickly. I can tell you that new cases are on the decline and the state changed it’s COVID response status to a lower level (yellow). That will allow hotels and restaurants to have a higheroccupancy than before and other businesses that were prohibited from opening, like gyms, can now start to reopen with health protocols in place. In public, masks are mandatory and it’s common for people to take your temperature before allowing you to enter businesses.

      Our hospitals are not full. In each municipality, total hospital occupancy (not just COVID related) is around 22%. The exception is Bacalar about 3 hours south of Tulum. Their occupancy is reported at 40%.

      Testing is certainly not as widepread as it is in the States. If someone displays symptoms, they are encouraged to stay home unless they are in a high risk group or have complications. As a result, the percentage of people tested who were tested being positive seems quite high but the overall number of people tested is low based on the population.

      Tourists are definitely returning to the area. It seems like there are more every day.

  12. Hola Paul, thanks for the article.

    Question:
    I have a TransferWise account that was opened in the US, I use it to hold both USD and Pesos for when the exchange rate is right. Sometimes the amounts exceed 10k. Would I have to file this form in this case. I’m Not sure

    Thanks
    Vince

    • Hi Vince,

      That’s a good question. Someone asked the same question on the Intuit Turbo site (the makers of TurboTax) and this was the answer:

      “Your Transferwise account is a borderless account which is regulated by the Financila Conduct Authority in the UK, and as such is considered as a foreign account for US residents and citizens. Therefore, if your Transferwise had a balance (including all currencies) of more than $10,000 anytime during 2019, you have to file a FBAR report.”

      I hope that helps.

  13. I wonder if this is common knowledge to US CPA’s… ?? I’m not sure my CPA deals with foreign transaction very often.. I will Definitely send him a link to this article JUST IN CASE.. Thank you for your well researched insight.

    • We have heard from several expats over the years who said their CPA back home never mentioned this form. I can see that happening since it is filed separately from your annual tax return.

  14. Some people may also be required to file the Form 8938 with the IRS if their investments, deposits, etc. exceed a certain dollar amount throughout the year. This information is on the IRS website.

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