What are the Top 5 FBAR Reporting Mistakes to Avoid?

What are the Top 5 FBAR Reporting Mistakes to Avoid?

The Top 5 FBAR Mistakes to Avoid in 2025  

The FBAR (FinCEN Form 114) is an international information reporting form that some US taxpayers are required to file each year to report their foreign accounts, assets, and investments to the US Government. The form itself is not overly complicated, but there are many nuances to the reporting requirements that can make the filing more difficult than it needs to be. Oftentimes, when taxpayers make a mistake on the FBAR, it is due to a misunderstanding of what accounts are reported on the FBAR — and not necessarily because of the complexity of the form. Taxpayers should also be aware that FBAR filings do not have to be perfect; as long as the taxpayer does a reasonable and diligent search of the account information and puts their best foot forward, usually this will be sufficient to ‘substantially comply’ with the reporting requirements. Let’s look at the 5 top mistakes that people make when it comes to FBAR filing.

Only Citizens and Permanent Residents File FBAR

Individual taxpayers who are categorized as US persons for tax purposes and meet the threshold filing requirements may be required to file the FBAR, but it includes more than just US citizens and lawful permanent residents. One common misconception about FBAR filing is that only US citizens and lawful permanent residents are required to file the FBAR — but that is incorrect. While the term U.S. person includes U.S. citizens and lawful permanent residents, it also includes foreign nationals who meet the substantial presence test. Common examples of foreign nationals who have to file the FBAR are taxpayers on U.S. visas such as an L-1 visa, H-1B visa, B1/B2 visa, or E-2/E-3 visa.

Only Account Owners File the FBAR

Another common misconception about FBAR filing is that taxpayers only have to file the FBAR to report foreign money that belongs to them. However, unlike other international reporting forms, when it comes to the FBAR, taxpayers may be required to file the form even if the foreign money does not belong to them. This is common in situations in which the taxpayer was placed on the account by a relative or family member to have signature authority in case of an emergency; if the owner of the account may want to gift the taxpayer the funds at a future date (but currently the US person only has signature authority on the account), and when a taxpayer is employed at a company which provides that taxpayer with signature authority over the account.

The Foreign Account Was Opened Before Becoming a US Person

When a taxpayer files the FBAR, it is designed for the taxpayer to report the foreign accounts, assets, and investments they own in the compliance period. For example, in 2025, the taxpayer will file an FBAR if they meet the threshold requirements for account values in 2024. And, even if the account was opened before the taxpayer became a US person, they must still include it in their reporting.

The Foreign Account Does Not Generate Income

There is no requirement that the account must generate income for it to be included on the FBAR. Therefore, even if an account does not generate income, it is still reportable for FBAR. FBAR filers should be sure to include all the accounts they either own or have authority over when preparing and submitting the FBAR.

Foreign Pension is Not Reportable

Unfortunately, a few years back, the IRS had published information that led some taxpayers to believe that foreign pension plans were not reportable, but this is inaccurate. If a taxpayer has a foreign pension plan such as a Canadian RRSP, Singaporean CPF, or an Australian superannuation, the pension is reportable for FBAR purposes.

*The prior IRS article referred to the specific situation in which the filer has a US retirement account, such as a 401K or an IRA, and within that account, there are some foreign investments. In that situation, typically, the FBAR is not required in that specific situation.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.