Who must file an FBAR?
Any U.S. person — citizen, resident, or domestic entity — with a financial interest in or signature authority over foreign financial accounts must file FinCEN Form 114 if the aggregate value of those accounts exceeded $10,000 at any time during the calendar year.
That "$10,000 at any time" is the part clients miss. It is not a year-end balance. If four accounts peaked at $3,000 each in March — $12,000 total — the filing requirement is triggered, even if the accounts were empty by December.
What counts as a "foreign financial account"?
- Bank accounts held at non-U.S. financial institutions
- Foreign brokerage and securities accounts
- Foreign mutual funds and similar pooled investments
- Foreign-issued life insurance or annuity contracts with cash value
- Accounts held at a U.S. branch of a foreign bank (generally not reportable — the key is where the account is held, not where the institution is headquartered)
What about signature authority?
If your client can direct the disposition of assets in a foreign account — even if the money is not theirs — they may have a filing obligation. This catches:
- Executives with authority over employer's foreign subsidiaries' accounts
- Board members of international nonprofits
- Adult children with power of attorney over a parent's foreign accounts
What changed for 2026
The threshold, the form, and the filing deadline are unchanged. What has changed:
1. FATCA data sharing has matured. Foreign Financial Institutions now report U.S. account holders to the IRS automatically under FATCA intergovernmental agreements. The IRS has the data to identify non-filers with more precision than ever.
2. Enforcement has shifted from penalties to compliance. Rather than pursuing maximum penalties in every case, the IRS has expanded the delinquent FBAR submission procedures — allowing taxpayers to come forward without facing the harshest outcomes when the failure was non-willful.
3. The streamlined procedures remain available for taxpayers who can certify that their failure to file was non-willful. This is a critical option for practitioners advising clients who have just discovered their obligation.
The penalties
| Violation | Penalty |
|---|---|
| Non-willful | Up to $10,000 per violation (indexed for inflation) |
| Willful | Greater of $100,000 or 50% of the account balance at the time of the violation |
| Criminal | Up to 5 years imprisonment and $250,000 fine |
The willful penalty is per account, not per form. A taxpayer with three undisclosed accounts faces three potential willful penalties.
Willfulness is the battleground
The IRS must prove willfulness — a voluntary, intentional violation of a known legal duty — to apply the willful penalty. Courts have found willfulness based on:
- Efforts to conceal the account
- Structuring transactions to avoid reporting
- Lying to the preparer about foreign accounts
- Willful blindness (conscious avoidance of knowledge)
In practice, most FBAR cases settle in the non-willful range. But the litigation risk is real, and the preparation for that risk starts with how you document the client interview.
The practitioner's checklist
When a client discloses foreign accounts, walk through this sequence:
Identify all accounts. Ask about banking apps on their phone, foreign pensions from prior employment, and accounts they opened while living abroad.
Determine the maximum value. Obtain the peak balance for each account during the calendar year. If the institution's statements don't show it in USD, use the Treasury year-end exchange rate (or a reasonable conversion method — document which one you used).
Check for signature authority. Ask separately about employer accounts, nonprofit board roles, and family member accounts.
Assess prior-year compliance. How many years have they held these accounts? Have they filed FBARs before? This drives the remediation strategy.
Document the client interview. If the IRS later questions willfulness, your contemporaneous notes about what the client told you and when are critical evidence.
Filing mechanics
- Deadline: April 15, with an automatic extension to October 15
- Filed separately from the tax return — through FinCEN's BSA E-Filing System at fincen.gov
- No extension form required — the October 15 extension is automatic
- Record retention: 5 years from the filing date
Direct filing through FinCEN is free. If you file on behalf of clients, you'll need to register as a filer on their behalf in the BSA system.
Products that go deeper
FBAR: A Professional Practitioner's Guide — Complete compliance system for practitioners handling FBAR engagements, including signature authority analysis, penalty mitigation, and voluntary disclosure procedures.
The Plain-English FBAR Prep Kit — Consumer-facing kit your clients can use to organize their foreign account information before meeting with you.
Free FBAR Eligibility Checklist — Free 10-minute checklist for determining whether the filing requirement applies.
This article is general educational information for tax professionals, not legal or tax advice for a specific client's situation.