A Client Had Foreign Bank Accounts but Never Filed an FBAR. What Happens Next?

He had held bank accounts abroad for more than a decade. He had never filed one.

The client's situation

The client became a U.S. citizen years ago and lives in Florida. He kept two savings accounts in his country of origin to help his parents and for future visits. Combined, the balances had exceeded $10,000 at some point in each of the last six years, peaking at around $40,000. His U.S. preparer had included the small amount of foreign interest on his returns each year, but no one had filed FBARs.

What went wrong

The FBAR (FinCEN Form 114) is filed separately from the tax return, with FinCEN rather than the IRS. Reporting the interest on the return did not satisfy the FBAR requirement.

The tax or reporting requirement

A U.S. person with a financial interest in, or signature authority over, foreign financial accounts must file an FBAR for any year in which the combined maximum value of those accounts exceeded $10,000 at any time. The FBAR is due April 15, with an automatic extension to October 15. Depending on the amounts and filing status, Form 8938 may also be required with the tax return.

The potential IRS exposure

Penalties for a non-willful failure to file can exceed $16,000 per year, adjusted for inflation; willful failures carry far higher penalties. With six years open, the potential exposure was significant on paper, even though no tax had been avoided.

How Chirino USA analyzed the situation

The key question was which correction path applied. We confirmed that:

• All income from the accounts had been reported on his U.S. returns and the tax paid.
• He was not under IRS examination or criminal investigation and had not been contacted about the missing FBARs.
• The balances were below the Form 8938 thresholds for his filing status, so no amended returns were needed for that form.
• The failure was clearly non-willful — he simply did not know.

Those facts fit the IRS Delinquent FBAR Submission Procedures, which are designed for taxpayers who reported and paid tax on all their income but did not file FBARs. If income had been unreported, the Streamlined Filing Compliance Procedures would generally have been the path to evaluate instead.

How we addressed the issue

We gathered year-end and maximum balances for each account from the foreign bank, converted them using the official exchange rates, and filed the six delinquent FBARs electronically with a statement explaining why they were late. We then added FBAR filing to his annual checklist.

The result

Under the Delinquent FBAR Submission Procedures, the IRS has said it will not impose a penalty for the late FBARs when the taxpayer qualifies and the income was properly reported. The client is now current, and each year's FBAR is filed alongside his tax return.

What other taxpayers in similar situations should know

• Reporting foreign interest on your tax return does not replace the FBAR.
• The $10,000 threshold is based on the combined maximum balance of all foreign accounts.
• If all income was reported, the Delinquent FBAR Submission Procedures may apply.
• If income was not reported, other procedures — such as Streamlined — should be evaluated before filing anything.

How Chirino USA can help

Chirino USA Accountants & Advisors specializes in U.S. international tax matters for foreign individuals, foreign-owned U.S. businesses, and Americans in the U.S. and abroad. If your situation sounds similar, we can review what was filed, identify any exposure, and help you decide on the appropriate next step. You can email us or message us on WhatsApp, in English or Spanish.

Sources and official references

• FinCEN — Report of Foreign Bank and Financial Accounts (FBAR)
• IRS — Delinquent FBAR Submission Procedures
• IRS — Streamlined Filing Compliance Procedures
• IRS — Comparison of Form 8938 and FBAR Requirements