For U.S. taxpayers with foreign financial accounts, compliance with FBAR filing requirements is crucial. The Financial Crimes Enforcement Network (FinCEN) mandates that individuals and businesses with foreign financial assets exceeding a certain threshold file FinCEN Form 114, commonly known as FBAR (Foreign Bank Account Report).
Failure to report foreign accounts can result in severe IRS offshore penalties, including substantial fines and possible criminal charges. With increased IRS enforcement and evolving FinCEN FBAR rules, staying compliant in 2025 is more critical than ever.
This guide explains everything you need to know about FinCEN Form 114, including who must file, reporting thresholds, common mistakes, and how to avoid penalties when reporting foreign bank accounts.
Today, you’ll learn:
FBAR Compliance Is Mandatory – U.S. taxpayers with foreign financial accounts exceeding $10,000 at any point during the year must file FinCEN Form 114 (FBAR) to avoid penalties.
Severe Penalties for Non-Compliance – Failure to file an FBAR can lead to civil penalties of up to $10,000 per violation for non-willful errors and 50% of account balances per year for willful violations, along with potential criminal charges.
FBAR Is Separate from IRS Tax Returns – Unlike typical IRS forms, FBAR is filed electronically with FinCEN through the BSA E-Filing System and has an automatic extension to October 15 if not filed by April 15.
Foreign Crypto Accounts May Require FBAR Filing – While final regulations are pending, FinCEN plans to require reporting of foreign cryptocurrency accounts, making it critical for crypto holders to stay updated on compliance rules.
FBAR and FATCA Are Different – While FBAR (FinCEN Form 114) and FATCA (IRS Form 8938) both require reporting of foreign assets, they have different thresholds, filing locations, and penalties. Taxpayers may need to file both forms depending on their foreign holdings.
What Is FinCEN Form 114 (FBAR)?
FinCEN Form 114, commonly referred to as FBAR, is a mandatory reporting form required by the Bank Secrecy Act (BSA). It is used to report foreign financial accounts held by U.S. taxpayers, ensuring transparency and preventing offshore tax evasion.
Unlike standard IRS tax forms, FinCEN Form 114 is filed electronically with FinCEN, not the IRS. However, the IRS enforces compliance and penalizes non-filers.
Who Must File FinCEN Form 114 (FBAR)?
The Foreign Earned Income Exclusion (FEIE) allows qualifying Americans abroad to exclude a significant portion of their foreign earnings from U.S. taxation. This provision directly reduces your taxable income, making it especially valuable for those living in low-tax countries.
For 2024, the maximum exclusion amount is $126,500 per qualifying person. This limit increases annually with inflation, up substantially from $112,000 in 2022 and $120,000 in 2023.
If both you and your spouse work abroad and meet the requirements, each of you can claim the exclusion up to the full amount. A married couple could potentially exclude up to $253,000 of foreign earnings in 2024.
The FEIE only applies to earned income – wages, salaries, professional fees, or self-employment income. It does not cover unearned income like interest, dividends, capital gains, or rental income.
To qualify for the FEIE, you must meet three key requirements:
Who Is Considered a U.S. Person?
- You must have foreign-earned income from personal services performed in a foreign country.
- Your tax home must be in a foreign country during the tax year.
- You must meet either the Bona Fide Residence Test or the Physical Presence Test:
- The Bona Fide Residence Test requires that you’re a bona fide resident of a foreign country for an entire tax year.
- The Physical Presence Test requires physical presence in foreign countries for at least 330 full days during any consecutive 12-month period.
How to File FinCEN Form 114 (FBAR) in 2025
Before filing, ensure you have the following details for each foreign account:
- Name and address of the foreign financial institution
- Account number
- Maximum account balance during the tax year (converted to USD)
- Account type (bank, investment, pension, etc.)
Step 1: Convert Foreign Currency to USD
The maximum balance of each account must be converted to U.S. dollars using the official exchange rate as of December 31 of the reporting year. The IRS publishes official exchange rates annually.
Step 2: File FBAR Electronically Using BSA E-Filing System
FBAR filings must be submitted electronically through FinCEN’s BSA E-Filing System. The form cannot be filed with the IRS or included in your annual tax return.
Step 3: Retain Records for 5 Years
FBAR filers must keep account records for at least five years in case of an IRS audit. This includes bank statements, financial statements, and account opening documents.
FBAR Filing Deadline for 2025
Regular Deadline: April 15, 2025
Automatic Extension: Until October 15, 2025 (no separate request needed)
If an FBAR is not filed by April 15, FinCEN grants an automatic extension to October 15. However, failure to file by the extended deadline may result in severe IRS offshore penalties.
What Are the Penalties for Failing to File FinCEN Form 114?
Failure to comply with FBAR filing requirements can result in harsh civil and criminal penalties, depending on whether the violation is considered willful or non-willful.
1. Non-Willful FBAR Violations
If a taxpayer accidentally fails to file FBAR, the penalty can be:
- Up to $10,000 per violation (adjusted for inflation)
- Possible waiver if the taxpayer can prove reasonable cause
2. Willful FBAR Violations
If a taxpayer intentionally fails to disclose foreign accounts, penalties increase significantly:
- Greater of $100,000 or 50% of the account balance per violation
- Criminal penalties including fines up to $500,000 and up to 10 years in prison
3. IRS Offshore Voluntary Disclosure Program (OVDP)
If you missed past FBAR filings, you may be eligible to correct your mistakes through the IRS’s voluntary disclosure programs. Options include:
- Streamlined Filing Compliance Procedures – For taxpayers who failed to file due to non-willful errors.
- Offshore Voluntary Disclosure Program (OVDP) – For those with potential willful violations, allowing them to reduce penalties.
Ignoring FBAR requirements can lead to seizures, audits, and criminal investigations, so it is essential to stay compliant or resolve past non-filing issues quickly.
Common Mistakes to Avoid When Filing FBAR
- Failing to report small foreign accounts – Even if an account holds less than $10,000 individually, if the total of all accounts exceeds $10,000, FBAR filing is required.
- Misclassifying foreign retirement accounts – Some foreign retirement plans require FBAR reporting, while others may be exempt. Consult a tax professional.
- Not converting balances to U.S. dollars correctly – Always use the official IRS exchange rate for the year.
- Assuming joint accounts don’t need reporting – If you are a co-owner or have signature authority, the account must be reported.
Proper tax planning and compliance can help avoid unnecessary penalties and scrutiny.
How FinCEN FBAR Rules Impact Cryptocurrency Holders
The IRS is increasing offshore crypto reporting requirements. If you hold cryptocurrency in a foreign exchange or wallet, you may need to report it on FBAR. The FinCEN Notice 2020-2 confirmed that the agency intends to require crypto accounts to be reported under FBAR rules, but final regulations are still pending.
To avoid future penalties, taxpayers with foreign cryptocurrency holdings should monitor FinCEN and IRS guidance closely
How FinCEN FBAR Rules Impact Cryptocurrency Holders
The IRS is increasing offshore crypto reporting requirements. If you hold cryptocurrency in a foreign exchange or wallet, you may need to report it on FBAR. The FinCEN Notice 2020-2 confirmed that the agency intends to require crypto accounts to be reported under FBAR rules, but final regulations are still pending.
To avoid future penalties, taxpayers with foreign cryptocurrency holdings should monitor FinCEN and IRS guidance closely.
How FBAR Compliance Affects U.S. Expats and Businesses
Many U.S. expats, dual citizens, and foreign business owners are unaware of their FBAR filing obligations, leading to unintentional non-compliance and IRS penalties.
FBAR Requirements for U.S. Expats
U.S. citizens living abroad must report all foreign financial accounts exceeding the $10,000 threshold, even if:
Their income is earned and taxed in a foreign country.
They use foreign banks exclusively for daily expenses.
They have joint accounts with a foreign spouse.
Failing to file an FBAR can trigger IRS audits and penalties, especially for expats who also claim the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) on their U.S. tax returns.
FBAR Requirements for Businesses and Trusts
U.S.-based businesses and trusts must also comply with FBAR rules if they own, control, or have signature authority over foreign financial accounts. Entities such as LLCs, corporations, and partnerships that hold foreign accounts exceeding $10,000 must file FinCEN Form 114 annually.
If multiple individuals have signature authority over the same account (e.g., corporate bank accounts), each person may be required to file a separate FBAR report.
How FBAR Reporting Interacts with Other IRS Forms
FBAR compliance is often linked to other international tax reporting requirements. Failing to file one form properly may trigger IRS scrutiny on related filings.
FinCEN Form 114 vs. IRS Form 8938 (FATCA Reporting)
Many taxpayers confuse FBAR filing (FinCEN Form 114) with IRS Form 8938, which is required under the Foreign Account Tax Compliance Act (FATCA). While both forms involve foreign accounts, there are key differences:
| Requirement | FBAR (FinCEN Form 114) | FATCA (Form 8938) |
|---|---|---|
| Threshold | $10,000 in aggregate foreign accounts | $50,000 (single) / $100,000 (married filing jointly) |
| Where to File | With FinCEN (BSA E-Filing System) | With the IRS (as part of tax return) |
| What It Covers | Foreign bank and investment accounts | Foreign financial assets, including stocks, bonds, and partnerships |
| Penalties | Up to $10,000 for non-willful violations; severe criminal fines for willful violations | $10,000 per failure to file; additional penalties if unreported assets generate income |
Since FBAR and FATCA rules overlap, taxpayers with foreign assets must check if both filings are required.
Other Related IRS Forms
U.S. taxpayers with foreign assets or investments may also need to file:
- Form 5471 – For ownership in a foreign corporation.
- Form 3520/3520-A – For foreign trusts or inheritances from non-U.S. persons.
- Form 8865 – For U.S. taxpayers who own part of a foreign partnership.
Failing to file these forms increases audit risk and may lead to additional penalties.
Do You Need Tax Assistance?
For U.S. taxpayers with foreign accounts, FinCEN Form 114 (FBAR) is a mandatory annual filing requirement. Non-compliance can lead to severe financial penalties and potential IRS criminal charges. As IRS enforcement intensifies, it is critical to file FBAR accurately and on time.
To ensure full compliance and avoid penalties:
- Review all foreign financial accounts to determine if FBAR is required.
- File FinCEN Form 114 electronically through the BSA E-Filing System.
- Report all required information accurately to prevent IRS audits.
- Consult a tax attorney if you have past non-compliance issues.
For expert FBAR filing assistance, IRS offshore penalty defense, and tax compliance strategies, contact Silver Tax Group today. Our experienced tax attorneys can help you navigate complex foreign bank account reporting requirements and protect your financial interests.
