The FBAR (Foreign Bank Account Report), officially known as FinCEN Form 114, is a critical requirement for U.S. persons with foreign financial accounts exceeding $10,000 in aggregate at any time during the calendar year. However, many taxpayers inadvertently make mistakes during the filing process, potentially triggering severe financial penalties and even criminal exposure. In this guide, we’ll highlight the most common FBAR errors and provide practical strategies to avoid them for the 2025 filing season.
🚫 1. Failing to File When Required
This is the most serious mistake and occurs when individuals are unaware of the FBAR requirement or incorrectly believe it doesn’t apply to them. You must file if you meet all the following:
- You’re a U.S. person (citizen, resident, entity)
- You had a financial interest in or signature authority over foreign accounts
- The aggregate value of all accounts exceeded $10,000 at any point in the year
Penalty: Non-willful violations can result in fines up to $10,000 per account; willful violations can exceed $100,000 or 50% of the account value.
⏰ 2. Late Filing or Missing the Deadline
The FBAR deadline is April 15, 2025, with an automatic extension until October 15, 2025. Missing both deadlines without a valid reason can result in serious consequences.
Tip: Even if you haven’t filed your tax return, submit your FBAR separately on time via the BSA E-Filing System.
🔢 3. Entering Incorrect Account Numbers or Values
Mistakes in inputting account numbers, foreign bank names, or the highest balance can raise red flags during IRS review or a future audit.
- Always double-check account numbers from statements
- Use the maximum balance during the year, not the year-end balance
- Convert currency using Treasury FX rates as of December 31
🔑 4. Confusion About Signature Authority vs. Ownership
You must report accounts even if you don’t own them, as long as you have signature authority—i.e., the power to control the disposition of funds via direct communication with the financial institution.
This is common among:
- Executives at multinational corporations
- Trustees and legal representatives
- Employees with access to company foreign accounts
🧾 5. Double Reporting or Duplicate Filings
Many taxpayers who file Form 8938 under FATCA also file the FBAR, but they mistakenly duplicate entries or assume that filing one form satisfies the other.
Key Distinction: Form 8938 goes to the IRS as part of your tax return, while FBAR goes to FinCEN via its own filing system. You must file both if required and do so separately.
📝 6. Failing to Report Jointly Held Accounts Properly
When accounts are jointly held (e.g., between spouses), each U.S. person must report the account unless one spouse completes the necessary authorization for joint filing on FBAR. If both spouses have reportable accounts, separate filings may be required.
🔍 7. Not Reporting Accounts Held Through Entities or Trusts
If you control or have a financial interest in foreign accounts through corporations, partnerships, or trusts, you still may be required to file FBAR—even if you are not the named account holder.
Ownership interest of 50% or more in a foreign entity generally triggers a filing requirement for the underlying accounts.
📅 8. Forgetting About Accounts Closed Mid-Year
FBAR reporting is based on the highest balance during the year—not whether the account was open on December 31.
If an account had $15,000 in June but was closed in July, it still must be reported.
📌 Best Practices to Avoid Penalties
- Start early and gather all foreign financial statements
- Use the Treasury’s official FX rates for year-end conversions
- Maintain detailed records of calculations and account ownership
- Use the BSA E-Filing portal to submit securely and track confirmations
- If unsure, consult a tax professional with international reporting experience
✅ Summary
Filing an accurate and timely FBAR is critical to avoid harsh penalties and ensure compliance with U.S. tax law. Common errors such as late filing, incorrect values, and misunderstanding signature authority rules can lead to steep fines or criminal charges. By understanding the rules, converting currency properly, and using trusted sources like the Treasury FX rates, you can file confidently and avoid costly mistakes.
