Audit Triggers Associated with FBAR: What U.S. Expats Should Know
2025-08-15 04:22:24
Learn the behaviors that can trigger FBAR audits and how to avoid them. Stay compliant and reduce your risk.
Why This Matters Right Now
For U.S. persons with foreign bank accounts, FBAR filing is more than just a box to tick — it’s a legal obligation. The Financial Crimes Enforcement Network (FinCEN) uses FBAR data to monitor offshore holdings, and the IRS takes that data seriously. Certain filing patterns, errors, or omissions can raise red flags and increase your chances of an audit. In this guide, we’ll break down the behaviors that often attract scrutiny, from abruptly stopping filings to underreporting balances, and explain how to keep your reporting clean and consistent.
What Is the FBAR?
The FBAR — officially FinCEN Form 114 — is an annual report for U.S. persons with an aggregate balance of more than $10,000 in foreign financial accounts at any point in the year. It applies not just to U.S. citizens, but also to green card holders, resident aliens, and certain entities. The filing is done online through the BSA E-Filing system, and the deadline is April 15 with an automatic extension to October 15.
Who Needs to File and When
You must file an FBAR if you are a “U.S. person” and your combined foreign account balances exceeded $10,000 at any time in the year. This includes bank accounts, investment accounts, pensions, and in some cases, cryptocurrency wallets held with foreign exchanges. Even accounts where you only have signature authority — and no personal ownership — can require reporting.
Common Audit Triggers Linked to FBAR
FBAR audits don’t happen randomly — there are specific patterns and behaviors that can make your filing stand out. Here are some of the most common:
1. Abruptly Stopping Filings
If you filed FBARs for several years and suddenly stop — even though you still appear to have foreign accounts — it can signal to the IRS that something changed without explanation. For example, an expat who moves countries but keeps overseas accounts should still file unless those accounts are closed or under the threshold.
2. Late or Amended Submissions
While the October 15 extension is automatic, repeated late filings or frequent amendments can suggest poor recordkeeping or intentional delay. IRS data shows that late FBAR submissions were part of over 30% of offshore compliance cases reviewed in 2022 (source: IRS Offshore Compliance Data, 2023).
3. Inaccurate Account Valuations
FBAR requires the highest balance during the year — not the average or end-of-year balance. Underreporting, even by mistake, can raise questions. This is especially risky if the foreign bank has reported your balance under FATCA agreements.
4. Inconsistent Reporting Across Tax Forms
Discrepancies between your FBAR and Form 8938 (Statement of Specified Foreign Financial Assets) can trigger further review. If one form lists accounts or balances the other does not, the IRS may investigate.
5. Unreported Joint Accounts or Business Accounts
Many filers forget to include accounts where they share ownership with a spouse, relative, or business partner. Leaving these out — intentionally or not — is a red flag.
How the Filing Process Works
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Gather Documentation: Bank statements showing highest balances, account numbers, institution addresses.
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Log In to BSA E-Filing: The official FinCEN portal for submitting FBAR.
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Complete FinCEN Form 114: Enter account details accurately, using the highest yearly balance in U.S. dollars.
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Submit Before Deadline: April 15 (automatic extension to October 15). Keep confirmation records.
Avoiding FBAR Mistakes
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Keep year-round records of foreign accounts.
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Double-check currency conversions using U.S. Treasury rates.
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Include dormant or low-balance accounts if total balances exceed $10,000.
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File even if accounts were closed during the year.
Penalties for FBAR Errors
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Non-willful violations: Up to $10,000 per violation.
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Willful violations: The greater of $100,000 or 50% of the account balance.
The IRS has data-sharing agreements with over 110 foreign jurisdictions, meaning they often know about accounts before contacting you.
Best Practices to Stay Off the Audit Radar
“Consistency is your best defense against an FBAR audit,” says Laura M., a tax attorney specializing in offshore compliance. “Once you meet the filing threshold, treat it as an annual habit, not an optional task.”
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File on time every year.
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Report accurately and consistently across all tax forms.
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Use professional help if you have multiple accounts or complex holdings.
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Keep copies of all submissions for at least six years.
Real-Life Example
Mark, a dual citizen living in France, filed FBARs for five years. He stopped after moving his funds into a joint account with his spouse, thinking it no longer counted. Two years later, the IRS contacted him after receiving account data from the French tax authority. The result: late filing penalties for both years.
FAQ
1. Do I need to file FBAR if my accounts were closed mid-year?
Yes — if they exceeded $10,000 before closing.
2. Can honest mistakes trigger audits?
Yes, though penalties may be reduced if you can prove no willful intent.
3. Does FBAR apply to cryptocurrency?
Currently, only if held with a foreign exchange, but this may change.
4. How far back can the IRS audit FBARs?
Generally six years from the filing due date.
Final Thoughts
FBAR audits are often triggered by patterns — not one-off errors. Staying consistent, reporting accurately, and meeting deadlines keeps you off the IRS radar. While the rules may seem technical, with preparation and attention to detail, FBAR filing can become just another simple step in your annual compliance routine.
Visual suggestions:
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Chart showing “Top 5 FBAR Audit Triggers”
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Screenshot of BSA E-Filing login page
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