Yes, you can have a foreign bank account, but the U.S. government requires you to report it

U.S. citizens and permanent residents can open and hold bank accounts outside the United States. There is no law that forbids it. However, the IRS and the Treasury Department require you to report foreign financial accounts to the federal government if they meet certain thresholds, and some banks make the process harder than it used to be because of those reporting rules.

The core requirement is this: if you have a foreign bank account with more than $10,000 in it at any point during the calendar year, you must file a report called the FBAR (Foreign Bank Account Report) with the Treasury Department's Financial Crimes Enforcement Network (FinCEN). You file this report separately from your tax return, by April 15 of the following year. If you also owe U.S. income tax on money earned abroad, you report that on your regular tax return using Form 1040 and Form 8938.

Many foreign banks now ask U.S. customers to close their accounts because the compliance burden is too high for the bank. This is legal, and it happens often. Before you open an account abroad, confirm with the bank that they accept U.S. account holders.

Key Takeaways

  • You can open a foreign bank account, but you must report it to the U.S. Treasury if it holds more than $10,000 at any time during the year.
  • The FBAR report is filed with FinCEN by April 15 and is separate from your income tax return.
  • Many foreign banks refuse to open accounts for U.S. citizens because of U.S. reporting requirements, so you may need to contact the bank directly to confirm they accept U.S. customers.
  • Failing to report a foreign account that exceeds $10,000 carries civil and criminal penalties, including fines up to $100,000 or more per violation.
  • If you earned income from the foreign account or from work abroad, you report that separately on your U.S. tax return.

The $10,000 reporting threshold and the FBAR

The FBAR threshold is $10,000 in aggregate across all your foreign financial accounts. This means if you have three accounts in three different countries and they total $10,000 or more at any point during the calendar year, you must file. The threshold is not per account—it is the combined total.

"At any point during the year" means you could dip below $10,000 for most of the year and still file if you hit that amount even once. For example, if you receive a wire transfer in November that brings your total to $12,000, and then you spend it down to $8,000 in December, you still file the FBAR for that year.

You file the FBAR online through FinCEN's BSA E-Filing System. The deadline is April 15, and you can request an automatic extension to October 15 if you need more time. The FBAR is free to file and requires no payment.

Form 8938 and income tax reporting

Form 8938 is a separate report you file with your income tax return if you meet a higher threshold. For single filers living in the United States, the threshold is $200,000 in foreign financial assets on the last day of the tax year, or $300,000 at any point during the year. For married couples filing jointly, the thresholds are $400,000 and $600,000. If you live abroad, the thresholds are higher.

Form 8938 asks for the same accounts as the FBAR but uses different thresholds. You can file both the FBAR and Form 8938 in the same year if you meet both thresholds. Many people do. The FBAR goes to FinCEN; Form 8938 goes to the IRS with your tax return.

If you earned income from the foreign account—interest, dividends, or wages—you report that income on your U.S. tax return. You may owe U.S. tax on worldwide income, even if you live abroad. You may also be able to exclude some foreign earned income using the Foreign Earned Income Exclusion, which you claim on Form 2555.

Why banks close accounts for U.S. customers

After 2010, when the Foreign Account Tax Compliance Act (FATCA) became law, many foreign banks decided that serving U.S. customers was not worth the cost. FATCA requires foreign financial institutions to report U.S. account holders to the IRS or face penalties. Compliance is expensive, and the profit from a small account does not justify it.

This is not illegal. A bank can refuse service to anyone, including U.S. citizens. You may receive a letter saying your account will be closed in 30 or 60 days. If this happens, you have time to move your money, but you should act quickly. Some banks give little notice.

Before you open a foreign account, contact the bank directly and ask whether they accept U.S. account holders. Do not assume they do. Some banks have a dedicated U.S. customer service line; others will tell you outright that they do not serve U.S. persons.

How to open a foreign bank account

The process varies by country and by bank. Most foreign banks require you to visit in person or work with a local representative. Some require proof of residency in that country. Others will work with you remotely if you have a visa or citizenship in that country.

You will need a passport, proof of address, and proof of income or source of funds. Some banks ask for a letter from your U.S. bank confirming your account history. Bring more documentation than you think you need; it is easier to have it and not need it than to make a second trip.

Ask the bank upfront what they need from you as a U.S. person. Ask whether they file FATCA reports with the IRS. Ask whether they have closed U.S. accounts in the past. These conversations take five minutes and save you from opening an account that will be closed six months later.

Penalties for not reporting a foreign account

If you have a foreign account over $10,000 and do not file the FBAR, the IRS can assess a civil penalty of $10,000 per violation. If the failure is willful—meaning you knew you were supposed to file and did not—the penalty can be up to $100,000 or 50 percent of the account balance, whichever is larger. Criminal penalties include fines and imprisonment.

The IRS has limited resources to audit foreign accounts, but they do pursue cases, especially when the amounts are large or the failure appears intentional. If you discover you missed filing an FBAR in prior years, you can file it late and may be able to avoid penalties if you can show reasonable cause. A tax professional who works with international clients can help you file back years and negotiate with the IRS.

Penalties are assessed per year and per violation. If you failed to file for five years, you could face five separate penalties. This is why it is important to file on time once you open the account.

Reporting requirements if you move abroad

If you are a U.S. citizen living abroad, you still file the FBAR and Form 8938 using the same thresholds and deadlines. You also still file a U.S. income tax return, even if you have no U.S. income. You can file electronically from anywhere in the world.

If you are abroad on April 15, you can request an automatic two-month extension to June 15. If you need more time, you can request an additional four-month extension to October 15. Extensions apply to both your tax return and your FBAR.

Some countries have tax treaties with the United States that prevent you from paying tax twice on the same income. You may be able to claim a foreign tax credit or use the Foreign Earned Income Exclusion to reduce your U.S. tax. A tax professional familiar with your country can tell you which option saves you the most money.

Frequently Asked Questions

Do I have to report a foreign account if it is under $10,000?

No. The FBAR threshold is $10,000 in aggregate across all foreign accounts. If your total is below that, you do not file the FBAR. However, if you earned income from the account, you still report that income on your U.S. tax return.

What counts as a foreign financial account?

A bank account, savings account, money market account, brokerage account, or mutual fund account held at a foreign institution counts. So do foreign retirement accounts, foreign insurance policies with a cash value, and foreign trusts. A safe deposit box does not count unless it holds financial assets inside it.

Can I use a foreign account to hide money from the IRS?

No. The IRS receives reports from foreign banks through FATCA, and the Treasury receives your FBAR filing. Hiding money in a foreign account is tax evasion and is a federal crime. The penalties are severe and include criminal prosecution.

What if my foreign account is in my spouse's name only?

If you have a financial interest in the account or authority over it, you must report it on your FBAR. "Financial interest" means you own it or have a right to the money. "Authority" means you can direct how it is used, even if you do not own it. If your spouse owns the account and you have no access to it, you do not report it.

Do I need to file the FBAR if I am not a U.S. citizen?

You file the FBAR if you are a U.S. citizen or a permanent resident (green card holder) and you have a foreign financial account over $10,000. If you are a foreign national with a visa, you do not file the FBAR, but you may owe U.S. income tax on U.S.-source income.