What the IRS means by owning or controlling a foreign account

The IRS considers you to own or control a foreign bank account if your name is on it, you have the legal right to withdraw money from it, or you have the power to direct how the money in it is used — even if someone else's name appears on the account. This includes accounts where you are a signatory, a co-owner, a trustee, or an authorized user with withdrawal rights. The key word is control: if you can move money or make decisions about it, the IRS treats it as yours for reporting purposes.

The threshold that triggers reporting is $10,000 or more in aggregate across all your foreign accounts at any point during the calendar year. This means if you have three accounts totaling $8,000 in January and $12,000 in February, you cross the line in February and must report. The $10,000 figure has not changed since 1970 and does not adjust for inflation.

Accounts held in your spouse's name alone do not count toward your total if you are filing separately and have no legal right to access them. If you file jointly, your spouse's foreign accounts count toward your household total. If you are a beneficiary of a trust that holds a foreign account but you cannot direct how the money is used, you generally do not report it — the trustee does.

Key Takeaways

  • You must report a foreign account if you own it, are a co-owner, have signing authority, or can direct how money in it is used, and the total value reaches $10,000 at any point in the year.
  • The reporting requirement applies to bank accounts, investment accounts, retirement accounts, and savings accounts held outside the United States, including those in US territories.
  • The two main reporting forms are FinCEN Form 114 (FBAR), filed with the Treasury Department, and Form 8938, filed with your tax return — different accounts trigger different forms, and some accounts trigger both.
  • Failure to report a foreign account you own or control can result in civil penalties of $10,000 per violation, or criminal penalties including fines and imprisonment if the IRS determines the failure was willful.
  • If you did not report in prior years, the IRS has programs that allow you to file late reports and reduce or eliminate penalties, but you must take action rather than wait.

Which foreign accounts must be reported and which do not

Not every foreign account triggers a reporting requirement. Accounts held in your name at a bank, credit union, or investment firm in another country must be reported if you meet the $10,000 threshold. Retirement accounts held abroad — including foreign pensions, foreign IRAs, and foreign 401(k)-equivalent plans — must also be reported if you own or control them and they exceed $10,000.

Accounts you do not control are not reportable. If you are a beneficiary of a foreign trust but the trustee manages the account and you cannot withdraw money without permission, you do not report it. If your employer holds a foreign retirement account on your behalf and you have no access to it, you do not report it. If you have a power of attorney over someone else's account but no financial interest in it, the rules depend on whether you can actually use that power — if you can, you report it; if it is purely ceremonial, you do not.

Accounts in US territories — Puerto Rico, the US Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands — are treated as foreign accounts for FBAR purposes and must be reported if you meet the threshold. However, some US territory residents may have different tax filing requirements depending on their residency status and the specific territory.

FinCEN Form 114 (FBAR) and when you file it

FinCEN Form 114, also called the Report of Foreign Bank and Financial Accounts or FBAR, is filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department. You file it electronically through the BSA E-Filing System, not with your tax return. The important date is April 15 of the year following the year you owned or controlled the account, with an automatic extension to October 15 if you request it in writing before April 15.

You must file Form 114 if you owned or controlled a foreign financial account and the aggregate value of all your foreign accounts exceeded $10,000 at any point during the calendar year. "Financial account" includes bank accounts, brokerage accounts, mutual fund accounts, and similar accounts, but not real estate, stock in a foreign corporation that you hold directly, or a foreign business you own outright (though some of these have separate reporting rules).

The form itself asks for the name and address of each financial institution, the account number, the account type, and the maximum value of the account during the year. You do not need to report the current balance, only the highest balance it reached. If you have 20 foreign accounts, you list all 20 on one Form 114.

Form 8938 and how it differs from the FBAR

Form 8938, called the Statement of Specified Foreign Financial Assets, is filed with your federal income tax return, not separately to the Treasury. It has a higher threshold than the FBAR: you file it only if the total value of your specified foreign financial assets exceeds $200,000 on the last day of the tax year (or $300,000 at any point during the year) if you are single, or $400,000 on the last day (or $600,000 at any point) if you are married filing jointly.

Form 8938 covers a narrower range of assets than the FBAR. It includes foreign bank accounts, foreign brokerage accounts, foreign mutual funds, foreign stocks and bonds, foreign retirement accounts, and foreign life insurance contracts with a cash value. It does not include foreign real estate, foreign pensions you do not control, or foreign corporations you own directly.

Many people file both forms. If you have a foreign bank account worth $50,000, you file Form 114 (FBAR) because it exceeds $10,000, but you do not file Form 8938 unless your total specified foreign assets exceed the higher threshold. If you have $250,000 in a foreign brokerage account and you are single, you file both Form 114 and Form 8938.

Penalties for not reporting a foreign account you own or control

The civil penalty for failing to file Form 114 (FBAR) is $10,000 per violation. The IRS interprets "per violation" to mean per year per account, though the exact calculation depends on whether the IRS determines your failure was willful or non-willful. If you owned three foreign accounts and did not file for two years, the IRS could assess penalties on all three accounts for both years, though in practice they often negotiate.

If the IRS determines your failure to report was willful — meaning you knew you had a reporting obligation and chose not to meet it — the penalty can be the greater of $100,000 or 50 percent of the account balance at the time of the violation. Criminal penalties for willful failure include fines up to $250,000 and imprisonment up to five years. Willfulness is a high bar: the IRS must show you knew the law and deliberately violated it, not merely that you were careless or ignorant.

Penalties for Form 8938 are separate: $10,000 for failure to file, plus $10,000 for each 30-day period you do not file after the IRS notifies you, up to $50,000 total. These penalties explore only if you were required to file Form 8938 in the first place.

How to report a foreign account if you did not report it before

If you owned or controlled a foreign account in prior years and did not report it, you have options. The IRS offers the Streamlined Filing Compliance Procedures, which allows you to file up to three years of back tax returns and six years of back FBARs without paying penalties, provided you can certify that your failure to report was not willful. You must file all the back forms at once and pay any taxes owed plus interest.

To use Streamlined procedures, you file the back returns and forms with a statement saying you did not willfully fail to report. The IRS does not investigate your intent; they accept your certification. However, if the IRS later determines you acted willfully — for example, if you had prior knowledge of the requirement or received a notice — you lose the protection and penalties explore retroactively.

If you cannot certify non-willfulness, or if you prefer a different approach, you can file the back forms and request penalty relief under the reasonable cause standard. This requires showing that you made a good-faith effort to comply, that you relied on professional information, or that you had a reasonable misunderstanding of the law. The IRS has discretion to grant or deny relief, and the process is slower and less certain than Streamlined procedures.

Do not wait for the IRS to contact you. The longer you delay, the more years of back filings accumulate, and the harder it becomes to argue non-willfulness. If you have a foreign account and have not reported it, contact a tax professional or attorney who handles international tax matters. Many offer a free initial consultation to assess your situation.

What happens if a foreign bank reports your account to the IRS

Most foreign banks and financial institutions are required to report accounts held by US citizens and residents to the IRS under the Foreign Account Tax Compliance Act (FATCA). If your foreign bank has your US tax identification number or knows you are a US person, they report the account to their government, which shares the information with the IRS. This reporting is automatic and happens whether or not you file Form 114 or Form 8938.

When the IRS receives a report from a foreign bank showing an account in your name that you did not disclose on your tax return, they will eventually contact you. The timeline varies — it can be months or years — but the IRS cross-references these reports against filed returns. If you have not reported the account, the IRS will send you a notice asking why.

At that point, you can file the back forms and request penalty relief, but you are no longer in control of the narrative. The IRS knows you had the account and did not report it, so arguing non-willfulness becomes harder. Your best position is to report before the IRS contacts you, which is why Streamlined procedures exist.

Frequently Asked Questions

Do I have to report a joint account with my spouse if only their name is on it?

If you file taxes jointly, yes — joint filers must report all foreign accounts either spouse owns or controls, regardless of whose name appears on the account. If you file separately, you report only accounts in your name or that you control. Check your filing status, as it determines whether your spouse's accounts count toward your household threshold.

What if I inherited a foreign account from a relative?

Once you inherit the account and it is transferred to your name or you gain control over it, you own it and must report it if it exceeds $10,000. The year you inherit it, you report it starting from the date the account became yours. If you are a beneficiary but the executor or trustee still controls the account, you do not report it until you take control.

Can I close a foreign account to avoid reporting it?

No. You report based on whether you owned or controlled the account at any point during the calendar year, not whether you still own it on December 31. If you opened a foreign account in March, deposited $50,000, and closed it in September, you still file Form 114 for that year because you exceeded $10,000 during the year.

What if my foreign account is in a currency other than US dollars?

You convert the account balance to US dollars using the exchange rate on the last day of the year (for Form 8938) or the exchange rate on the date you are reporting the maximum balance (for Form 114). Use the IRS's published exchange rates or the rate from a reputable financial source. The conversion itself does not create a taxable event; it is only for reporting purposes.

Do I need a lawyer or accountant to file these forms?

You can file Form 114 yourself if you understand the requirements and have organized records of your accounts. Form 8938 is filed with your tax return, so if you prepare your own return, you can file it yourself. However, if you have multiple accounts, complex ownership structures, or are filing late, a tax professional familiar with international accounts can help you avoid errors and navigate penalty relief options.