Common FBAR Filing Errors to Avoid for U.S. Expats
2025-08-15 05:58:43
Learn the most common FBAR mistakes expats make and how to stay compliant with U.S. reporting rules.
If you’re a U.S. expat juggling life overseas, FBAR (Foreign Bank Account Reporting) rules might not be your favorite reading material — but overlooking them can get expensive. Every year, many well-meaning taxpayers run into issues because they miss a detail, misread a rule, or forget about certain accounts. These mistakes can lead to penalties, even if you didn’t mean to get it wrong.
In this guide, we’ll break down the most common FBAR filing errors expats make, why they happen, and how you can avoid them. You’ll also learn when FBAR applies, what counts toward the $10,000 threshold, and how to make sure no account slips through the cracks.
What Is the FBAR and Who Must File?
The FBAR — officially known as FinCEN Form 114 — is a required annual report for U.S. persons with foreign financial accounts that have a combined value of more than $10,000 at any time during the year.
“U.S. person” doesn’t just mean citizens. It also includes:
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Green card holders
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U.S. residents
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Certain business entities formed in the United States
The deadline is April 15 each year, but you automatically get until October 15 if you need more time. Filing is done electronically through the BSA E-Filing System on the FinCEN website.
1. Misunderstanding the $10,000 Threshold
One of the most frequent mistakes is thinking the $10,000 limit applies to each account separately. In reality, it’s the total value of all your foreign accounts combined at any point during the year.
Example: If you had $6,000 in a checking account and $5,000 in a savings account overseas, your total is $11,000 — meaning you must file FBAR even if neither account alone topped $10,000.
2. Missing Certain Account Types
Many expats focus only on their primary bank accounts and forget that FBAR covers more than checking and savings. Accounts that often get overlooked include:
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Foreign pensions and retirement accounts
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Investment accounts
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Certain life insurance policies with cash value
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Accounts held at a foreign branch of a U.S. bank
Even if you don’t actively use the account, it still needs to be reported if it counts toward the threshold.
3. Leaving Out Accounts in a Minor Child’s Name
If you’re a parent living abroad, you might not realize that your child’s foreign accounts can trigger FBAR filing requirements. The rule is clear: If your dependent child is a U.S. person and meets the reporting threshold, you must file an FBAR on their behalf.
4. Forgetting Inactive or Dormant Accounts
Many expats keep old accounts open for convenience or local banking requirements. Even if an account hasn’t been used for years, it still needs to be reported if its balance — combined with your other accounts — pushes you over the $10,000 mark at any point in the year.
5. Using the Wrong Exchange Rates
FBAR requires that all amounts be reported in U.S. dollars using the Treasury’s official year-end exchange rate, not your bank’s rate or an average. Using an unofficial rate is a common filing error that can throw off your reported balances.
6. Reporting Incorrect Account Numbers or Bank Details
It’s easy to mistype an account number or forget to include the full name of the bank. While these may seem like small mistakes, they can raise red flags with regulators and lead to follow-up questions. Always double-check your entries before submitting.
7. Forgetting Jointly Held or Signature Authority Accounts
If you have signature authority — meaning you can control the account even if it’s not in your name — it may still be reportable. This includes joint accounts with spouses, business partners, or employers.
Filing Process: How to Do It Right
Filing an FBAR involves:
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Gathering account information: bank name, address, account number, and maximum balance during the year.
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Converting balances to USD: using the Treasury’s year-end exchange rate.
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Submitting online: through FinCEN’s BSA E-Filing System.
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Keeping records: for at least five years in case of an IRS inquiry.
Penalties for Mistakes
FBAR penalties depend on whether the IRS sees your error as non-willful (unintentional) or willful (deliberate).
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Non-willful: up to $10,000 per violation
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Willful: the greater of $100,000 or 50% of the account balance
According to the IRS, these penalties are applied on a case-by-case basis, but they can add up quickly if you have multiple accounts.
Best Practices for Staying Compliant
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Keep a yearly checklist of all accounts, including minor children’s accounts.
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Save account statements and balances in one place.
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Use the official Treasury exchange rate for conversions.
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If you’re unsure about a specific account, include it.
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Work with a tax professional familiar with expat filings.
As expat tax consultant Laura M., CPA, says:
“FBAR compliance isn’t just about avoiding penalties — it’s about making sure you’ve covered every account, even the ones you rarely think about.”
Real-Life Example
Mark, a U.S. citizen living in Spain, thought he didn’t need to file because each of his three accounts had less than $10,000. But one summer, the combined total briefly reached $15,000 due to a temporary transfer. He didn’t file, and during a later audit, the IRS assessed non-willful penalties for each account. A simple annual filing would have avoided the issue entirely.
FAQ
Do I still need to file FBAR if my accounts are closed now?
Yes, if they existed during the year and met the threshold, you must report them for that year.
Can I be penalized for honest mistakes?
Yes, but non-willful penalties are typically lower. Correcting errors quickly can help.
Does FBAR cover cryptocurrency wallets?
Currently, only certain foreign-held crypto accounts may trigger FBAR. The rules are evolving — check the latest IRS guidance.
How far back can the IRS audit for FBAR compliance?
The statute of limitations is generally six years from the filing due date.
FBAR rules can seem overwhelming, especially for expats managing multiple accounts worldwide. But with a checklist, accurate records, and timely filing, you can avoid the most common errors and stay in good standing with the IRS.
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Infographic of “FBAR Filing Checklist for Expats”
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M.Daniyal