Since the 1970s, U.S. businesses with international financial assets have been required to file a Report of Foreign Bank and Financial Accounts (FBAR) every year they pass a total asset threshold. While this regulation is nothing new, FBAR still frequently trips up new and growing businesses, especially those that have only recently set up international accounts or those owned by American expats.
Businesses of all ages, types, and sizes need to understand FBAR compliance requirements and meet them consistently — or else risk significant civil penalties.
Foreign Bank and Financial Account Reporting (FBAR) is a filing requirement for U.S. persons (including U.S. citizens, residents, and businesses) that have certain kinds of foreign financial holdings or signature authority over financial accounts in non-U.S. countries.
Originally established with the U.S. Bank Secrecy Act of 1970, FBAR exists to curtail tax fraud, money laundering, and other international financial transaction laws. This regulatory requirement is managed by the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department.
Organizations and individuals that have a total of more than $10,000 in foreign financial accounts are required to file an FBAR report. This is done by electronically filing FinCEN Form 114.
It’s important to understand that this $10,000 threshold applies to the aggregate value of all foreign accounts during the calendar year. In other words, businesses that never reach $10,000 in any single account are still required to file an FBAR if the sum total of all accounts crosses the threshold.
FBAR defines “United States person” to include any citizen or U.S. taxpayer, including those living abroad, along with any U.S.-based business entity (including partnerships, corporations, and LLCs). Any of these with financial interest in or signature authority over foreign accounts are under FBAR filing requirements if their foreign assets cross the $10,000 threshold.
Complying with FBAR is important both because it’s the law and due to the stiff penalties that can be levied, even for non-willful violations. Follow these guidelines to lower your risk of a compliance issue.
First, make sure you understand how the $10,000 threshold works. This threshold is not a per-account threshold; it includes all foreign accounts combined. Bank accounts, securities accounts, and mutual funds all qualify. (Individuals also need to pay attention to accounts for which the person holds signature authority.) Depending on the number of accounts and other assets a company has, even small sums well under the threshold could combine to reach $10,000.
One more important point here is when and how to measure. If the aggregate balance of all accounts exceeds $10,000 for even one day of the calendar year, filing an FBAR is required. So it’s not a rolling average or a “more days than not” scenario. Any single day over $10,000 aggregate triggers this filing obligation.
Businesses with foreign accounts are required to keep detailed records of those accounts for five years, at minimum, from the FBAR due date. According to the Internal Revenue Service (IRS), these records need to include the following data points:
FBAR regulations don’t dictate what form this information must be in. Bank statements or the foreign financial institution’s own FBAR will often contain the necessary information.
Falling behind on filings is one way businesses run into trouble with FBAR penalties. To stay on the up and up you’ll need to file on time each year — sort of.
Filing for the FBAR should be completed by April 15 to be considered on time. However, there is an “automatic extension” to October 15, giving businesses and individuals a fairly generous window to file and remain compliant.
Filing early is generally the best choice, as it helps businesses avoid the sorts of errors that tend to creep in at the last minute.
Last, make sure your FBAR report is as accurate as possible — errors in some cases lead to non-willful violations.
Here are a few common mistakes businesses make:
These and most other mistakes are avoidable. Strong recordkeeping and financial/accounting processes can eliminate many mistakes, and it’s always a good idea to double-check filings for accuracy before submission.
Civil penalties (fines) are the most notable consequence: failing to comply with FBAR can lead to significant financial penalties. Non-willful violations, such as simply forgetting to file or not realizing you needed to, are a flat fine of $12,921. That’s a sum that could throw a serious cash-flow wrench into the works for businesses.
Worse, if the IRS determines your violation was willful, your business will be fined either 50% of the account balance or $129,210, whichever is greater.
(One thing to note: These figures are tied to inflation, meaning they may be a bit higher at the time you read this.)
Fines may be the top-line risk of not complying with FBAR, but they might not even be the most severe. Other risks include these:
FBAR compliance should be a high priority for businesses with assets in foreign countries. But with plenty of other business priorities, some businesses struggle to stay consistent in this area.
Use these tactics to ensure your business never misses FBAR deadlines and remains in compliance.
First, make sure you’re tracking all foreign financial accounts, including those that don’t immediately come to mind, like commodity futures and options accounts, insurance or annuity policies that hold cash value, and shares in mutual funds.
Once you’ve collected all your foreign accounts, set up a schedule to regularly check balances in all of them. This is especially important for businesses that hover near that $10,000 threshold and may not need to file FBAR every year. (If you maintain hundreds of thousands in foreign financial holdings, then it’s a given that you’re filing, so it isn’t necessary to track for this purpose alone.)
If keeping on top of multiple accounts presents a logistical challenge, account aggregation tools can help simplify this process.
Many businesses turn to regulatory compliance tools to help them stay compliant across a range of regulations. Automation here helps businesses reduce errors and simplify the filing process.
FBAR compliance isn’t a primary use case, but some compliance software tools can help with it alongside other compliance checks.
Look for tools that help you track foreign accounts and calculate balances. Since businesses must use electronic filing for the FBAR anyway, solutions that can take care of filing for you using the BSA e-filing system are ideal.
Some tools that may meet this need include Metricstream, Conga, Vanta, and Cygnetise.
International tax compliance can be a nuanced field to navigate. Many businesses choose to work with professionals who specialize in this area. Compared to handling it all internally, bringing in outside help (such as a CPA that specializes in tax laws of the United States) provides peace of mind, lowers risk, and frees you up to focus on core business functions.
FBAR itself has been around for more than 50 years (since the Bank Secrecy Act of 1970, or BSA). But rules and details about foreign financial assets do change from time to time. So it’s a good business practice to regularly review updates to applicable regulations.
Subscribing to FinCEN or IRS updates is a great way to stay current on any rule changes affecting this area of your business.
Following these three best practices will help your business or organization gain a better understanding of what’s happening across your foreign accounts, enabling you to manage compliance more effectively.
First, most small to midsized businesses (SMBs) should maintain all compliance documentation and records in a single centralized location. This should ideally be a cloud-based document management system or a service that offers similar capabilities. Centralizing compliance documentation ensures you and other team members can easily find what you need when filing reports or during internal or external audits.
Stable’s virtual address service is a secure way to manage all mail-based documentation in a single digital interface and may be an ideal solution for some businesses. Businesses can use Stable virtual addresses for tax purposes. Stable receives all of your physical mail, including tax documents, so you can access and take action on them from anywhere in the world.
No one wants to be audited by the IRS, much less the government agency responsible for investigating financial crime! But if you do have to go through an external audit, you’ll have an infinitely easier time if your house is in order first.
Performing regular internal audits (including of your business’s foreign accounts) is one strategic way to ensure accuracy and confidence in reporting. Internal audits can draw attention to gaps in compliance or missing documentation before those problems turn into compliance violations or late filings.
Plus, businesses that conduct regular internal audits have most of the necessary information already collected in the event of an IRS or FinCEN audit.
Last, invest in software or SaaS tools that keep track of your account balances for you. Automating account tracking is a great way to save time, add peace of mind, and reduce the risk of making mistakes or overlooking details. For limited liability companies and other small businesses that aren’t assured to cross the threshold for reporting requirements, account tracking software can do the time-consuming manual work of calculating account totals every day of the year.
For smaller businesses, Sage, Xero, and Gusto are tools worth checking out.
Properly meeting FBAR requirements is vital for maintaining federal tax compliance and avoiding significant financial penalties. This starts with understanding whether your business meets the FBAR reporting threshold. Next, make sure you follow the right steps and collect the right data.
Businesses with an obligation to file an FBAR need effective methods for gathering and storing account information and tracking account totals throughout the year. They also need tools for internal communication and managing documentation.
Stable’s virtual address services are a great choice for growing businesses, especially remote, distributed, and expat-owned businesses. With Stable, you can centralize compliance-related communications and mail in your digital dashboard. You can also assign documents to team members, forward needed documents to your physical location, and have a greater degree of confidence that critical documents will be available when you need them.
Since the 1970s, U.S. businesses with international financial assets have been required to file a Report of Foreign Bank and Financial Accounts (FBAR) every year they pass a total asset threshold. While this regulation is nothing new, FBAR still frequently trips up new and growing businesses, especially those that have only recently set up international accounts or those owned by American expats.
Businesses of all ages, types, and sizes need to understand FBAR compliance requirements and meet them consistently — or else risk significant civil penalties.
Foreign Bank and Financial Account Reporting (FBAR) is a filing requirement for U.S. persons (including U.S. citizens, residents, and businesses) that have certain kinds of foreign financial holdings or signature authority over financial accounts in non-U.S. countries.
Originally established with the U.S. Bank Secrecy Act of 1970, FBAR exists to curtail tax fraud, money laundering, and other international financial transaction laws. This regulatory requirement is managed by the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department.
Organizations and individuals that have a total of more than $10,000 in foreign financial accounts are required to file an FBAR report. This is done by electronically filing FinCEN Form 114.
It’s important to understand that this $10,000 threshold applies to the aggregate value of all foreign accounts during the calendar year. In other words, businesses that never reach $10,000 in any single account are still required to file an FBAR if the sum total of all accounts crosses the threshold.
FBAR defines “United States person” to include any citizen or U.S. taxpayer, including those living abroad, along with any U.S.-based business entity (including partnerships, corporations, and LLCs). Any of these with financial interest in or signature authority over foreign accounts are under FBAR filing requirements if their foreign assets cross the $10,000 threshold.
Complying with FBAR is important both because it’s the law and due to the stiff penalties that can be levied, even for non-willful violations. Follow these guidelines to lower your risk of a compliance issue.
First, make sure you understand how the $10,000 threshold works. This threshold is not a per-account threshold; it includes all foreign accounts combined. Bank accounts, securities accounts, and mutual funds all qualify. (Individuals also need to pay attention to accounts for which the person holds signature authority.) Depending on the number of accounts and other assets a company has, even small sums well under the threshold could combine to reach $10,000.
One more important point here is when and how to measure. If the aggregate balance of all accounts exceeds $10,000 for even one day of the calendar year, filing an FBAR is required. So it’s not a rolling average or a “more days than not” scenario. Any single day over $10,000 aggregate triggers this filing obligation.
Businesses with foreign accounts are required to keep detailed records of those accounts for five years, at minimum, from the FBAR due date. According to the Internal Revenue Service (IRS), these records need to include the following data points:
FBAR regulations don’t dictate what form this information must be in. Bank statements or the foreign financial institution’s own FBAR will often contain the necessary information.
Falling behind on filings is one way businesses run into trouble with FBAR penalties. To stay on the up and up you’ll need to file on time each year — sort of.
Filing for the FBAR should be completed by April 15 to be considered on time. However, there is an “automatic extension” to October 15, giving businesses and individuals a fairly generous window to file and remain compliant.
Filing early is generally the best choice, as it helps businesses avoid the sorts of errors that tend to creep in at the last minute.
Last, make sure your FBAR report is as accurate as possible — errors in some cases lead to non-willful violations.
Here are a few common mistakes businesses make:
These and most other mistakes are avoidable. Strong recordkeeping and financial/accounting processes can eliminate many mistakes, and it’s always a good idea to double-check filings for accuracy before submission.
Civil penalties (fines) are the most notable consequence: failing to comply with FBAR can lead to significant financial penalties. Non-willful violations, such as simply forgetting to file or not realizing you needed to, are a flat fine of $12,921. That’s a sum that could throw a serious cash-flow wrench into the works for businesses.
Worse, if the IRS determines your violation was willful, your business will be fined either 50% of the account balance or $129,210, whichever is greater.
(One thing to note: These figures are tied to inflation, meaning they may be a bit higher at the time you read this.)
Fines may be the top-line risk of not complying with FBAR, but they might not even be the most severe. Other risks include these:
FBAR compliance should be a high priority for businesses with assets in foreign countries. But with plenty of other business priorities, some businesses struggle to stay consistent in this area.
Use these tactics to ensure your business never misses FBAR deadlines and remains in compliance.
First, make sure you’re tracking all foreign financial accounts, including those that don’t immediately come to mind, like commodity futures and options accounts, insurance or annuity policies that hold cash value, and shares in mutual funds.
Once you’ve collected all your foreign accounts, set up a schedule to regularly check balances in all of them. This is especially important for businesses that hover near that $10,000 threshold and may not need to file FBAR every year. (If you maintain hundreds of thousands in foreign financial holdings, then it’s a given that you’re filing, so it isn’t necessary to track for this purpose alone.)
If keeping on top of multiple accounts presents a logistical challenge, account aggregation tools can help simplify this process.
Many businesses turn to regulatory compliance tools to help them stay compliant across a range of regulations. Automation here helps businesses reduce errors and simplify the filing process.
FBAR compliance isn’t a primary use case, but some compliance software tools can help with it alongside other compliance checks.
Look for tools that help you track foreign accounts and calculate balances. Since businesses must use electronic filing for the FBAR anyway, solutions that can take care of filing for you using the BSA e-filing system are ideal.
Some tools that may meet this need include Metricstream, Conga, Vanta, and Cygnetise.
International tax compliance can be a nuanced field to navigate. Many businesses choose to work with professionals who specialize in this area. Compared to handling it all internally, bringing in outside help (such as a CPA that specializes in tax laws of the United States) provides peace of mind, lowers risk, and frees you up to focus on core business functions.
FBAR itself has been around for more than 50 years (since the Bank Secrecy Act of 1970, or BSA). But rules and details about foreign financial assets do change from time to time. So it’s a good business practice to regularly review updates to applicable regulations.
Subscribing to FinCEN or IRS updates is a great way to stay current on any rule changes affecting this area of your business.
Following these three best practices will help your business or organization gain a better understanding of what’s happening across your foreign accounts, enabling you to manage compliance more effectively.
First, most small to midsized businesses (SMBs) should maintain all compliance documentation and records in a single centralized location. This should ideally be a cloud-based document management system or a service that offers similar capabilities. Centralizing compliance documentation ensures you and other team members can easily find what you need when filing reports or during internal or external audits.
Stable’s virtual address service is a secure way to manage all mail-based documentation in a single digital interface and may be an ideal solution for some businesses. Businesses can use Stable virtual addresses for tax purposes. Stable receives all of your physical mail, including tax documents, so you can access and take action on them from anywhere in the world.
No one wants to be audited by the IRS, much less the government agency responsible for investigating financial crime! But if you do have to go through an external audit, you’ll have an infinitely easier time if your house is in order first.
Performing regular internal audits (including of your business’s foreign accounts) is one strategic way to ensure accuracy and confidence in reporting. Internal audits can draw attention to gaps in compliance or missing documentation before those problems turn into compliance violations or late filings.
Plus, businesses that conduct regular internal audits have most of the necessary information already collected in the event of an IRS or FinCEN audit.
Last, invest in software or SaaS tools that keep track of your account balances for you. Automating account tracking is a great way to save time, add peace of mind, and reduce the risk of making mistakes or overlooking details. For limited liability companies and other small businesses that aren’t assured to cross the threshold for reporting requirements, account tracking software can do the time-consuming manual work of calculating account totals every day of the year.
For smaller businesses, Sage, Xero, and Gusto are tools worth checking out.
Properly meeting FBAR requirements is vital for maintaining federal tax compliance and avoiding significant financial penalties. This starts with understanding whether your business meets the FBAR reporting threshold. Next, make sure you follow the right steps and collect the right data.
Businesses with an obligation to file an FBAR need effective methods for gathering and storing account information and tracking account totals throughout the year. They also need tools for internal communication and managing documentation.
Stable’s virtual address services are a great choice for growing businesses, especially remote, distributed, and expat-owned businesses. With Stable, you can centralize compliance-related communications and mail in your digital dashboard. You can also assign documents to team members, forward needed documents to your physical location, and have a greater degree of confidence that critical documents will be available when you need them.
