Mitch Levin, CPA

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The Importance of Filing an FBAR: What Every U.S. Taxpayer Needs to Know

The Importance of Filing an FBAR: What Every U.S. Taxpayer Needs to Know

If you’re a U.S. taxpayer with money held in foreign bank accounts, you may be required to file an FBAR—the Foreign Bank Account Report. Many individuals and business owners don’t realize that failing to file an FBAR can lead to some of the highest penalties in the entire U.S. tax system. Whether you’re an expat, an investor, or a business owner with international accounts, understanding the importance of filing an FBAR is essential for staying compliant and protecting your finances.

In this blog, we’ll break down what the FBAR is, who must file it, common mistakes, and why timely filing matters.

What Is an FBAR?

FBAR stands for Report of Foreign Bank and Financial Accounts, officially filed on FinCEN Form 114.
It is not filed with your tax return. Instead, it is submitted electronically through the Financial Crimes Enforcement Network (FinCEN).

The FBAR is required if:

  • You are a U.S. person (citizen, resident, corporation, partnership, LLC, or trust), and

  • You had foreign financial accounts totaling more than $10,000 at any time during the year.

This threshold is aggregate, meaning even if five small accounts together exceed $10,000, you must file.

Why Filing an FBAR Is So Important

1. It’s a Legal Requirement With Serious Penalties

The U.S. government takes foreign financial reporting very seriously. Failure to file an FBAR can trigger:

  • Non-willful penalties: Up to $10,000 per violation

  • Willful penalties: The greater of $100,000 or 50% of the account balance

  • Criminal charges in extreme cases

FBAR enforcement has increased significantly in recent years, especially for individuals with large or long-unreported accounts.

2. It Helps Prevent IRS Scrutiny and Audits

The IRS uses FBAR reports to identify unreported foreign income and offshore tax evasion. Filing your FBAR properly each year reduces your audit risk and prevents the IRS from flagging your international financial activity.

3. It Protects Your Financial Assets

Many taxpayers don't file FBARs because they assume foreign accounts are “private” or “unknown.” But foreign banks regularly report account information to the U.S. Treasury. Not filing puts your assets at risk of penalties, liens, and enforcement actions.

4. It’s Not a Tax — It’s a Reporting Obligation

An FBAR does not create a tax liability by itself.
It simply reports your foreign financial assets.

Even if you did not earn any income from the accounts, you must still file if they exceed the threshold.

5. Filing Is Simple When Done Early

Filing an FBAR is relatively straightforward when handled by a tax professional. It becomes complicated only when:

  • You haven’t filed for several years

  • You have multiple accounts overseas

  • You have business accounts or signature authority

  • You need to enter an IRS offshore relief program

Being proactive keeps your filings clean and penalty-free.

Who Must File an FBAR?

You must file if you are a U.S. person, including:

  • U.S. citizens and residents

  • Corporations, partnerships, and LLCs formed in the U.S.

  • Trusts and estates managed under U.S. law

And you have:

  • Bank accounts

  • Investment accounts

  • Retirement accounts

  • Joint accounts

  • Business accounts

  • Any account where you have signature authority

… outside the United States with an aggregate balance of over $10,000 at any time during the year.

Key Deadlines for FBAR Filing

  • Annual deadline: April 15

  • Automatic extension: October 15

No separate extension needs to be filed—the extension is automatic every year.

The Cost of Not Filing

Failing to file an FBAR can result in:

  • Severe penalties

  • Frozen or seized assets

  • IRS investigations

  • Possible criminal charges

Even accidental failures can be expensive. Willful violations can be financially devastating.

How a Professional Can Help

A tax professional experienced in international tax and FBAR filings can help you:

  • Determine whether you meet the filing threshold

  • Complete and file your FBAR accurately

  • Amend prior-year FBAR filings

  • Enter the correct offshore penalty relief program if needed

  • Avoid costly mistakes that trigger penalties

Final Thoughts

Filing an FBAR is a critical part of U.S. tax compliance for anyone with foreign accounts. It protects you legally, prevents massive penalties, and ensures your financial life remains transparent and tax-efficient. With increasing global reporting and information-sharing agreements, ignoring FBAR requirements is no longer an option.

If you’re unsure whether you need to file—or if you need help getting back into compliance—we’re here to help.

👉 Contact us today for expert guidance on FBAR filing and foreign account compliance.

Mitchell Levin