US citizens can open and hold foreign bank accounts, but the IRS and FinCEN require you to report them

You are allowed to have a bank account outside the United States. There is no law that forbids it. What does matter is reporting — the federal government requires you to disclose foreign financial accounts above certain thresholds, and failure to report can result in substantial penalties even if you owe no tax.

The two main reporting requirements are the Foreign Bank Account Report (FBAR) and the Foreign Account Tax Compliance Act (FATCA) filing. These are separate from your regular tax return. You must file them even if you have no income to report and even if you are not required to file a US tax return.

The threshold for reporting is $10,000 or more in foreign financial accounts at any point during the calendar year. "Financial accounts" includes bank accounts, investment accounts, retirement accounts held abroad, and certain insurance products. It does not include real estate or physical possessions.

Key Takeaways

  • US citizens must report foreign bank accounts totaling $10,000 or more at any time during the year using Form FinCEN 114 (FBAR), filed by April 15 of the following year.
  • FATCA Form 8938 is a separate IRS filing required if your foreign accounts exceed $200,000 (or $300,000 for married couples filing jointly), and it attaches to your tax return.
  • Failure to report foreign accounts can result in civil penalties of $10,000 per violation or criminal prosecution, regardless of whether you owe taxes.
  • Many foreign banks now refuse US customers because of these reporting requirements, so opening an account may be difficult even though it is legal.
  • You must report the accounts even if you have no income from them and even if you are not required to file a US tax return.

The FBAR requirement: reporting accounts over $10,000

The Foreign Bank Account Report, also called the FBAR or FinCEN Form 114, is filed with the Financial Crimes Enforcement Network, not the IRS. You file it electronically through the BSA E-Filing System at bsaefiling.fincen.gov. The deadline is April 15 of the year following the year you held the account, with an automatic extension to October 15 if you request it.

You must file an FBAR if you had a financial interest in or signature authority over any foreign financial account and the aggregate value of all your foreign accounts was $10,000 or more at any point during the calendar year. "Signature authority" means you could move money or conduct transactions on the account, even if you never actually did. If your spouse holds an account in their name only and you have no access, you do not report it on your FBAR — but your spouse must report theirs.

The FBAR asks for the name and address of each foreign bank, the account number, the account type, and the maximum balance during the year. You do not report income or transactions — only that the account existed and how much was in it at its highest point.

FATCA Form 8938: a second IRS filing for larger accounts

If your foreign accounts exceed $200,000 (or $300,000 for married couples filing jointly) at the end of the year or at any point during the year, you must also file FATCA Form 8938 with your federal tax return. This is an IRS form, not a FinCEN form, and it attaches to your Form 1040.

FATCA has higher thresholds than the FBAR, so many people file only the FBAR. However, if you cross the FATCA threshold, you must file both. The FATCA form requires similar information — the name of the foreign financial institution, the account type, and the maximum balance — but it goes to the IRS instead of FinCEN.

The deadline for FATCA Form 8938 is the same as your tax return deadline, typically April 15, with an extension to October 15 if you file for an extension on your main return.

What counts as a foreign financial account

A foreign financial account is any account held at a bank, credit union, brokerage, or other financial institution outside the United States. This includes savings accounts, checking accounts, money market accounts, certificates of deposit, and investment accounts. It also includes retirement accounts held abroad, such as a foreign pension or a non-US IRA equivalent.

Certain insurance products with a cash value component, such as whole life insurance policies or annuities issued by a foreign company, must be reported if you have a financial interest in them. However, a simple life insurance policy with no cash value does not count.

Real estate does not count, even if you own property abroad. Physical possessions — gold, jewelry, art — do not count. A foreign credit card or debit card account does not count unless it is a savings or investment account. If you are unsure whether a specific account type must be reported, consult a tax professional who works with international clients.

Penalties for not reporting foreign accounts

The penalties for failing to file an FBAR are severe. A civil penalty for a non-willful violation (meaning you did not know about the requirement) is up to $10,000 per violation per year. A willful violation — meaning you knew or should have known about the requirement — can result in a penalty of the greater of $100,000 or 50 percent of the account balance at the time of the violation.

Criminal prosecution is also possible. Willfully failing to report a foreign account can result in fines up to $250,000 and up to five years in prison. The IRS and FinCEN have increased enforcement in recent years, and many cases have resulted in criminal convictions.

These penalties apply even if you owe no federal income tax and even if the account earned no income. The violation is the failure to report, not the failure to pay tax. This is why reporting is critical even if you think the account is too small to matter or if you have no US tax liability.

Why foreign banks are increasingly difficult to access

Although US citizens have the legal right to hold foreign bank accounts, many foreign banks now refuse to open accounts for US citizens or have closed existing accounts. This is because foreign banks must comply with FATCA, which requires them to report US account holders to the IRS. The compliance burden and regulatory risk have led many banks to simply decline US customers.

Some countries have reciprocal agreements with the United States that make it easier for US citizens to open accounts, but this varies widely. Canada, the United Kingdom, and several European countries have established processes. Other countries have no formal pathway for US citizens. Before attempting to open a foreign account, contact the bank directly to ask whether they accept US citizens and what documentation they require.

If you are a US citizen living abroad, you may have better luck with banks in your country of residence, as they are accustomed to serving expats. International banks and online banks sometimes accept US customers as well, though they typically charge higher fees.

Filing if you live abroad or have no US income

You must file an FBAR and FATCA Form 8938 even if you do not live in the United States, even if you have no US income, and even if you are not required to file a US tax return. The reporting requirement is based on citizenship, not residency or income.

If you are a US citizen living abroad and you have no US tax liability, you still file the FBAR through FinCEN's system. You do not file a Form 1040 tax return, but you do file Form 8938 if your accounts exceed the FATCA threshold — because Form 8938 is a separate disclosure, not part of the tax return itself. Some tax software and filing services do not handle this scenario well, so working with a tax professional who specializes in expat returns is often worth the cost.

How to file the FBAR and FATCA forms

To file an FBAR, go to bsaefiling.fincen.gov, create an account, and complete Form FinCEN 114 electronically. You will need the name and address of each foreign bank, the account number, the account type, and the maximum balance during the year. The system walks you through each field. There is no fee to file.

To file FATCA Form 8938, include it with your federal tax return. If you use tax software, the software will prompt you to enter foreign account information and will generate the form automatically. If you file by paper, you can download Form 8938 from the IRS website and attach it to your Form 1040.

If you have missed prior years' filings, you can file late FBARs and FATCA forms. The IRS has a voluntary disclosure practice that may reduce or eliminate penalties if you file all back returns and reports before the IRS contacts you. A tax professional can help you determine whether voluntary disclosure is the right approach for your situation.

Frequently Asked Questions

Do I have to report a foreign bank account if I have no income from it?

Yes. The FBAR and FATCA reporting requirements are based on the existence and value of the account, not on whether it earned income. You must report any foreign financial account above the threshold even if it held only cash and earned no interest.

What if my spouse has a foreign account in their name only?

Your spouse must report their own account on their FBAR if it exceeds $10,000. You do not report it on yours unless you have signature authority or a financial interest in it. If you file taxes jointly, your spouse's FATCA Form 8938 attaches to your joint return.

Can I get in trouble for opening a foreign account?

Opening a foreign account is legal. The risk comes from not reporting it. If you open an account and report it correctly on your FBAR and FATCA forms, you have no legal problem. The penalties apply only to unreported accounts.

What if I forgot to report a foreign account in a prior year?

File the missing FBAR and FATCA forms as soon as you realize the error. The IRS may assess penalties, but filing late is better than continuing not to file. A tax professional can advise you on whether to file a voluntary disclosure or simply file the late forms and explain the error.

Do I need to report a foreign retirement account or pension?

Yes, if it is a financial account held at a foreign institution and the aggregate value exceeds $10,000. Some foreign pensions and retirement plans have exemptions under FATCA, but you should consult a tax professional to determine whether your specific account qualifies for an exemption.