Yes, US citizens can have foreign bank accounts, but you must report them to the IRS
A US citizen can open and hold a bank account in another country. There is no law that forbids it. What matters is what you do after you open it: you have to tell the US government about it, and you have to pay US income tax on any money the account earns.
The IRS treats money in a foreign account the same way it treats money in a US account. If the account earns interest, you owe tax on that interest. If you move money between countries, you may owe tax depending on where the money came from. The key difference is the reporting requirement — the US government wants to know the account exists and how much is in it.
Many US citizens abroad have foreign bank accounts because they live there, work there, or both. Others keep them for business, investment, or family reasons. The account itself is legal. The reporting is what trips people up.
Key Takeaways
- US citizens must report foreign bank accounts to the IRS if the total value exceeds $10,000 at any point during the year, using a form called the FBAR.
- You also owe US income tax on any interest, dividends, or other earnings from a foreign account, even if you never bring the money back to the US.
- Some countries have tax treaties with the US that prevent you from paying tax twice on the same income, but you still have to file and report.
- Banks in many countries now refuse to open accounts for US citizens because of the reporting burden and the risk of penalties, so opening an account may be difficult even though it is legal.
- Failing to report a foreign account can result in civil penalties of up to 50 percent of the account balance, or criminal charges in cases of intentional evasion.
The FBAR: What you must report and when
The FBAR (Foreign Bank Account Report) is the form you file with the US Treasury Department, not the IRS. You file it if you have a financial interest in or signature authority over any foreign financial account, and the total value of all those accounts exceeds $10,000 at any time during the calendar year.
The $10,000 threshold is the combined total of all your foreign accounts. If you have three accounts in three countries with $5,000, $3,000, and $2,500 in them, you have crossed the threshold and must file. If you have one account with $9,500, you do not file the FBAR that year — but if interest brings it to $10,100 by December 31, you must file.
The FBAR is due April 15 of the following year, with an automatic extension to October 15 if you request it. You file it electronically through FinCEN (Financial Crimes Enforcement Network), which is part of the Treasury Department. The form asks for the name of each bank, the account number, the type of account, and the highest balance the account held during the year.
You must file an FBAR even if the account earned no income and you made no withdrawals. The government wants to know the account exists.
Income tax on foreign account earnings
Any interest, dividends, or other income your foreign account generates is taxable to you as a US citizen. You report this income on your regular US tax return — the 1040 form — in the same way you would report income from a US bank account.
If the account is in a country that has a tax treaty with the US, you may be able to claim a foreign tax credit on your US return. This means if you paid tax on the account's earnings in the foreign country, you can reduce your US tax bill by that amount. You cannot pay less tax overall, but you avoid paying tax twice on the same money. The rules for foreign tax credits are complex and depend on the specific treaty and the type of income.
Some US citizens abroad use the Foreign Earned Income Exclusion, which allows you to exclude a certain amount of wages you earned by working in a foreign country from your US taxable income. This does not explore to investment income or interest from a bank account — only to wages you earned by working.
Why banks may refuse to open accounts for US citizens
Even though US citizens have the legal right to open foreign bank accounts, many banks outside the US will not do it. The reason is the compliance burden on the bank. Foreign banks have to verify that account holders are not US citizens, or if they are, they have to report those accounts to the US government under an agreement called FATCA (Foreign Account Tax Compliance Act).
FATCA requires foreign financial institutions to report accounts held by US citizens to the IRS. The bank has to collect tax identification numbers, verify citizenship, and file annual reports. For a small bank in a small country, the cost of compliance often exceeds the profit from the account. Many banks have straightforward decided not to accept US citizens as customers.
If you are a US citizen living abroad and need a local bank account, you may have better luck with larger international banks, banks that specialize in expat banking, or banks in countries with large US expat populations. Some countries' banks are more willing to work with US citizens than others. You will likely need to provide a US tax identification number and proof of citizenship.
Penalties for not reporting
If you have a foreign account over $10,000 and do not file an FBAR, the penalty is steep. The civil penalty is up to $10,000 per violation, or 50 percent of the account balance, whichever is larger. If the IRS determines the violation was willful — meaning you knew you were supposed to file and chose not to — the penalty can be up to $100,000 or 50 percent of the account balance.
Criminal penalties exist as well. Willfully failing to file an FBAR can result in fines up to $250,000 and up to five years in prison. These are rare, but they happen in cases where the IRS believes someone deliberately hid money from the government.
If you realize you have not filed FBARs for previous years, you can file them now. The IRS has a voluntary disclosure program that allows you to file back FBARs and pay back taxes without facing criminal prosecution, though you will still owe the taxes and interest. The sooner you file, the better your position.
Moving money between countries and currency reporting
If you move money from a foreign account to a US account, or vice versa, you do not owe additional tax on the transfer itself. You only owe tax on income the money earned while it was in the foreign account. Moving your own money is not a taxable event.
However, if you move more than $10,000 in currency (cash, checks, or money orders) across the US border in a single trip, you must file a Currency Transaction Report with US Customs. This is separate from the FBAR and is about physical currency, not bank transfers. The report itself is not a tax form — it is a disclosure to Customs — but failing to file it can result in civil and criminal penalties.
Wire transfers between your own accounts do not trigger this rule. Only physical currency does. If you are moving large sums, use a wire transfer through the banking system rather than carrying cash.
Frequently Asked Questions
Do I have to report a foreign account if I am only visiting the country?
No. You only report accounts you have a financial interest in or signature authority over. If you are visiting and have no account in your own name, there is nothing to report. If you have a joint account with a family member abroad and your name is on it, you must report your share of the balance.
What if I inherit money in a foreign bank account?
Inherited money is not taxable income to you — the person who left it to you already paid tax on it (or their estate did). However, if the inherited account earns interest after you receive it, that interest is taxable. You must report the account on your FBAR if it exceeds $10,000.
Can I use a foreign account to avoid paying US taxes?
No. The US taxes its citizens on worldwide income, regardless of where the money is earned or held. Hiding money in a foreign account does not reduce your tax bill and exposes you to serious penalties. The IRS has information-sharing agreements with most countries and can trace accounts.
Do I need a lawyer to open a foreign bank account?
You do not need a lawyer to open an account, but you may want to consult a tax professional or accountant who understands foreign accounts and FBAR reporting. They can help you understand your reporting obligations and make sure you file correctly.
What happens if I move to another country and become a citizen there?
You remain a US citizen and owe US taxes unless you formally renounce your citizenship. Becoming a citizen of another country does not end your US tax obligations. You still must file FBARs and US tax returns on your worldwide income.