Glossary of FBAR Terms

Foreign account reporting has a vocabulary of its own, and several of its terms mean something narrower or broader than they appear to. Definitions below are plain-English summaries, not statutory text.

• A
• B
• C
• D
• F
• G
• M
• N
• O
• P
• R
• S
• T
• U
• V
• W

A

Aggregate value

The sum of the maximum values of all of a filer’s foreign financial accounts for a calendar year, used to test the $10,000 reporting threshold. Accounts are added together; they are not tested individually. See aggregation.

Amended FBAR

A corrected report filed to replace one already submitted, marked as an amendment and referencing the original submission’s identifier. It is completed in full rather than showing only the changes. See amending a filed FBAR.

Annuity with a cash value

A foreign annuity contract that has a cash value is a reportable financial account. Contracts with no cash value are not.

Attribution

The rules that treat a person as having a financial interest in an account owned of record by someone else — for example an entity they own more than 50 per cent of, or an agent holding on their behalf. See financial interest.

B

Bank Secrecy Act (BSA)

The 1970 legislation that created the FBAR reporting authority, now found principally at 31 U.S.C. § 5311 and following. The FBAR’s operative provision is § 5314.

Bittner v. United States

The 2023 Supreme Court decision holding that the non-willful FBAR penalty accrues per annual report rather than per unreported account, substantially reducing exposure for non-willful filers with many accounts. See the decision.

BSA E-Filing System

FinCEN’s electronic filing platform and the only place the FBAR is filed. Filing is free; individuals can use it without registering an account.

BSA Identifier

The reference number assigned to an accepted submission and included in the confirmation email. It is what you quote when amending a report, and your practical proof of filing.

C

Calendar year

The FBAR reporting period is always 1 January to 31 December, irrespective of the filer’s fiscal year for income tax purposes.

Cash surrender value

The amount an insurer would pay if a policy were cashed in. For a reportable foreign insurance policy, this is generally the value reported — not the death benefit or sum assured.

Consolidated FBAR

A single report filed by a U.S. entity covering the foreign accounts of entities in which it owns, directly or indirectly, more than 50 per cent. Reported in Part V of Form 114.

Correspondent account

An account one bank maintains with another to settle transactions between them. Excepted from FBAR reporting.

D

Delinquent FBAR submission procedures

The IRS route for filers who did not file required FBARs but did properly report and pay tax on the related income, and who are not under examination. The missing reports are filed with an explanation of the delay. See the procedure.

Disregarded entity

An entity ignored for federal income tax purposes, typically a single-member LLC. It is not disregarded for FBAR purposes: if organised in the United States it is a U.S. person and files its own report.

F

FATCA

The Foreign Account Tax Compliance Act, enacted in 2010. It created Form 8938 for taxpayers and imposed reporting obligations on foreign financial institutions themselves. Separate from, and additional to, the FBAR.

FBAR

Report of Foreign Bank and Financial Accounts. The annual Treasury report filed on FinCEN Form 114 by a U.S. person whose foreign financial accounts exceeded $10,000 in aggregate at any time in the calendar year.

Financial account

Defined functionally: an account maintained with a person in the business of banking or accepting deposits, with a broker or dealer in securities or commodities, or with an entity performing services a financial institution would perform. Includes bank, securities, insurance-with-cash-value, annuity and pooled fund accounts.

Financial interest

Held where you are the owner of record or holder of legal title, or where the owner of record holds the account for your benefit under the attribution rules. See financial interest.

FinCEN

The Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury. It issues Form 114 and the FBAR regulations and operates the BSA E-Filing System. Civil enforcement is delegated to the IRS.

FinCEN Form 114

The current FBAR form, in use since electronic filing became mandatory in 2013. It replaced the paper Form TD F 90-22.1.

Form 114a

Record of Authorization to Electronically File FBARs. Documents a spouse’s or preparer’s authority to file for you. It is not submitted to FinCEN — both parties sign and retain it. See Form 114a.

Form 8938

Statement of Specified Foreign Financial Assets. An IRS form filed with the income tax return under FATCA, with higher thresholds and a wider asset definition than the FBAR. Filing one does not satisfy the other.

G

Grantor trust

A trust treated for federal tax purposes as owned by the person who created it. The grantor has a financial interest in the trust’s foreign accounts.

M

Maximum value

The highest value an account reached at any point during the calendar year, converted to U.S. dollars using the Treasury year-end rate. Not the closing balance and not an average. See maximum value.

Mitigation guidelines

Internal IRS guidance limiting the penalties examiners may assess in defined circumstances, generally graduated by the size of the aggregate balances. They constrain practice but confer no entitlement.

N

Nominee

A person holding an account in their own name for another’s benefit. The beneficial owner has a financial interest in an account held by their nominee.

Non-willful violation

A failure to file that was not a voluntary, intentional disregard of a known duty — broadly, an oversight or misunderstanding. Subject to a maximum penalty of $10,000 as adjusted for inflation, per report, and to a reasonable cause defence.

O

Owner of record

The person in whose name the institution maintains the account. An owner of record has a financial interest in it regardless of whose money it holds.

P

Pooled fund

A foreign mutual fund or similar vehicle issuing shares available to the general public, with a regular net asset value determination and regular redemptions. An account with one is reportable.

R

Reasonable cause

The statutory defence to a non-willful penalty. It requires both that the violation was due to reasonable cause and that the account balance was properly reported. See reasonable cause.

Resident alien

A non-citizen treated as a U.S. resident for federal tax purposes — typically a lawful permanent resident or a person meeting the substantial presence test. Resident aliens are U.S. persons for FBAR purposes.

S

Signature authority

The authority, alone or with another, to control the disposition of assets in an account by direct communication with the institution holding it. Reportable even with no ownership interest. See signature authority.

Specified foreign financial asset

The Form 8938 concept. Broader than the FBAR’s “financial account”, taking in directly held foreign stock, interests in foreign entities and foreign-issued instruments, but excluding signature-authority-only accounts.

Streamlined Filing Compliance Procedures

IRS procedures for taxpayers whose failure to report foreign assets and income was non-willful. Two versions exist, one for those meeting a non-residency requirement and one for those who do not, the latter carrying a 5 per cent miscellaneous offshore penalty. Both require certification of non-willfulness under penalty of perjury. See streamlined procedures.

Substantial presence test

The day-count test determining whether a non-citizen is a U.S. resident for federal tax purposes, and therefore a U.S. person for FBAR purposes.

T

Title 31

The part of the United States Code covering money and finance, where the FBAR lives. Contrast Title 26, the Internal Revenue Code, where Form 8938 lives. The distinction explains many of the FBAR’s procedural oddities.

Treasury Reporting Rates of Exchange

Exchange rates published by the Bureau of the Fiscal Service. The FBAR instructions direct filers to use the rate for the last day of the calendar year being reported.

U

United States person

For FBAR purposes: U.S. citizens wherever resident; U.S. residents including green card holders and those meeting the substantial presence test; entities created or organised in the United States or under its laws; and trusts and estates formed under U.S. law. See who counts.

V

Virtual currency

FinCEN indicated at the end of 2020 that it intended to propose amending the regulations to make virtual currency a reportable account type. Until finalised, an account holding only virtual currency has generally not been treated as reportable. Verify the current position before relying on this. See digital assets.

Voluntary disclosure practice

The IRS Criminal Investigation route for taxpayers whose conduct may have been willful, initiated on Form 14457. More demanding and more expensive than the streamlined procedures, and not to be attempted without representation.

W

Warning letter

A letter the IRS may issue instead of a penalty where the circumstances justify it — historically a common outcome in first-time, small-balance non-willful cases. It is a matter of IRS discretion, not a right.

Willful violation

A violation involving a voluntary, intentional disregard of a known legal duty. Courts have generally held that it extends to reckless disregard and willful blindness. Penalty: the greater of $100,000 as adjusted or 50 per cent of the account balance, per account, per year. See willful penalties.