Are You Unknowingly Breaking U.S. Law? The Hidden Risk of Foreign Bank Accounts

Imagine waking up to a letter from the IRS, not about a tax refund, but a hefty penalty for something you didn’t even know you had to report. You’ve always followed the rules, paid your taxes, and kept your finances in check. But there’s a catch: If you have foreign financial accounts exceeding $10,000 at any point during the year and haven’t reported them, you might be in serious trouble.

This isn’t just about taxes—it’s about compliance. The U.S. government is cracking down on undisclosed foreign assets, and failing to file the Foreign Bank Account Report (FBAR) could cost you thousands, or worse, lead to legal consequences.

What Is FBAR and Who Needs to File It?

The Report of Foreign Bank and Financial Accounts (FBAR), officially known as FinCEN Form 114, is a mandatory disclosure required by the Bank Secrecy Act (BSA). It’s not about taxation but about transparency—ensuring that U.S. citizens and residents disclose their foreign accounts.

You must file an FBAR if:

• You are a U.S. person (citizen, resident, or legal entity such as a corporation, partnership, trust, or estate).
• You have one or more foreign financial accounts (bank accounts, brokerage accounts, mutual funds, or even some life insurance policies).
• The total balance across all accounts exceeded $10,000 at any time during the calendar year.

Even if you don’t owe any taxes on the money in these accounts, you’re still required to file. Failing to do so can lead to massive fines.

The Cost of Ignorance: What Happens If You Don’t File?

Many expats and business owners unknowingly skip FBAR filing, thinking, “I already pay taxes, why does this matter?” But here’s the reality:

• Non-Willful Violation: Up to $10,000 per violation (adjusted for inflation—$16,193 as of early 2025).
• Willful Violation: The greater of $100,000 (adjusted to $161,932) or 50% of the account balance per violation, plus potential criminal penalties. 
• Failure to File FBAR or Retain Required Records: Up to $250,000 or 5 years or both. If violating certain other laws too, this penalty increases to up to $500,000 or 10 years or both. 

FBAR vs. FATCA: Are You Covered?

Another common misconception is that filing under FATCA (Foreign Account Tax Compliance Act) is enough. While FATCA (Form 8938) also deals with foreign assets, it has different thresholds and reporting requirements. FBAR compliance is a separate responsibility, and filing one does not exempt you from the other.

How to Stay Compliant and Avoid Penalties

If you have foreign accounts, here’s what you need to do:

1. Check Your Accounts – Review your foreign financial accounts and confirm if your total balance ever exceeded $10,000 during the year.
2. File Electronically – The FBAR is due April 15, but you get an automatic extension to October 15. It must be filed electronically through the BSA E-Filing System.
3. Maintain Accurate Records – Keep detailed records of all foreign accounts, including account numbers, institution names, addresses, and maximum balances.
4. Seek Professional Help – If you’re unsure whether you need to file or have missed previous filings, working with a tax professional can help you avoid unnecessary penalties.

What If You Haven’t Filed? There’s Still Hope

If you’ve missed FBAR filings in past years, don’t panic. The IRS offers options to come into compliance:

• Delinquent FBAR Submission Procedures – If your failure to file was non-willful and you reported all income, you may qualify for penalty relief.
• Streamlined Filing Compliance Procedures – For taxpayers whose failure to file was non-willful, this program allows for late submissions with reduced or no penalties.

Final Thoughts: Protect Yourself Before It’s Too Late

The world is getting smaller, and financial transparency is more critical than ever. The U.S. government is aggressively pursuing individuals and businesses with unreported foreign accounts.

Don’t let a simple oversight cost you thousands of dollars or put you at risk of legal trouble.

At SR Financial & Tax Advisors, we specialize in helping U.S. citizens and businesses navigate complex compliance issues like FBAR and FATCA. Let us help you stay compliant, avoid penalties, and safeguard your finances.

🚨 Contact us today for expert guidance!