FBAR & FATCA – Extra work For American Expatriates

Posted On 24 March 2022

Last updated on April 7th, 2024

American citizens living, working, or banking in foreign countries are a fortunate group of people! For those of us that live in another country, we have the opportunity to experience another culture. We broaden our horizons and see other ways of living and doing things. There are a lot of benefits of being an American expatriate.

Some other aspects of being an expatriate that are a hassle – Taxes and financial reporting. Not only do we have to file taxes in both the foreign country we are living in as well as the United States, we also have another task placed upon us – filing the FBAR and FATCA. First, let me talk about the FBAR.

What Is The FBAR?

FBAR is the Report of Foreign Bank and Financial Accounts. The report is overseen by the Financial Crimes Enforcement Network. Crime enforcement?? Yes! The reason for having to report our foreign accounts is so that those hiding money can be caught.

As with a lot of government programs, innocent people end up getting caught up in the middle and suffering unnecessarily. If a person meets the requirement for filing the FBAR it must be filed – whether you agree with it or not. So, what is the FBAR?

It is a fairly straightforward listing of all foreign bank and investment accounts that you have either solely or jointly. The joint account must be included in the report even if the joint account holder is not an American. Also, accounts for which you are a signatory (think secretary writing business cheques) must also be included.

Who Needs to File?

American expatriates living in a foreign country, or more correctly, Americans who have more than $10,000 (in US Dollars) in foreign bank accounts at any one time during the year. For more information on the FBAR, you can read the official info.

If your account goes above the $10K mark just once in the year, you need to file the FBAR. Also, if an account that you are a signatory on goes above that amount, you need to file! If you don’t know what the account balance is for the work account, there is a check box for “balance not known”.

When Does It Need to Be Filed?

April 15 (or the income tax date) is the deadline for the report to be filed. It can be filed online by using the BSA e-filing system. When filing online, it is nice to get an email with a notice of receipt. They also will send you a notice of acceptance the following day.

Even though the FBAR has the same filing date as income taxes, they do not both go to the same place. Before you get started filling out the report, you need to compile a list of your foreign accounts, account numbers, bank addresses, and highest account balance during the year. Then, convert the foreign currency to US dollars. Since the exchange rate changes by the second, I just use the exchange rate for the last day of the year.

Where Does It Get Filed?

After you have your account info listed out you are ready to file! To get to the FBAR, just follow this link. I like the download option, although that’s just what I use. After you have completed the form, you sign it, then there is a button on the form for you to file it. It’s really not hard.

Pro Tip #1

Check your account balances for the year on January 1^st. That way you can just search the last 12 months. It can be easier than entering a date range.

Pro Tip #2

If you have multiple accounts with the same bank such as both a chequing and savings account, include a name reference with the account number so you can easily tell the accounts apart. For example on the account number line I would list a chequing account as: 1234567 – Checking. You can name it anything you want. Say, if you have a household account, savings account, or car account. Whatever makes it easier for you.

Pro Tip #3

For subsequent years, I will pull up the previous year’s FBAR and “copy & paste” into the current year’s report. If the account info has not changed, this speeds up the report.

Pro Tip #4

If you close out an account, get the maximum balance for the year BEFORE you close the account.

Why Do We Need to File?

Americans who don’t file the File the FBAR run the risk of insane financial penalties. These penalties can start in the 10’s of thousands and go up from there. They also talk about half of the account balance as a penalty.

I file simply to stay on the good side of the IRS. Even though I feel the report is not something we should have to file, they don’t care about my opinion on the matter. I encourage anyone that has to file this report to just file it.

Don’t Forget FATCA

This is a similar idea to the FBAR, but for those with $50,000 USD or more in foreign accounts.

FATCA is form 8938 and gets filed with your US tax return. Since it is a form that goes with your tax return, it is designed for maximum obfuscation! The penalties for not completing and filing the FATCA are similar to the penalties for the FBAR. For a comparison of the two reports, you can see that here.

I encourage anyone that needs to file either of these reports to simply file them. This is just part of the price that Americans who do things outside of the United States have to pay. Because I like being an American I choose to pay this price. Filing the report(s) take some time and effort. The penalties are definitely something to avoid.