Schedule B Part III: Foreign Accounts, FBAR, and FATCA Disclosure

The Schedule B Part III section of your Form 1040 is a simple yes-or-no question that can trigger substantial reporting requirements. If you have foreign bank accounts or investments abroad, this section determines whether you must file an FBAR with the Financial Crimes Enforcement Network (FinCEN) and potentially additional FATCA forms — and these disclosure requirements carry steep penalties for failure.

The simple question with complex consequences

Schedule B Part III contains one of the most consequential yes-or-no questions on your tax return: “At any time during 2025, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?”

If your answer is yes, and the aggregate value of all such accounts exceeded $10,000 at any point during the year, you are required to file a Report of Foreign Bank and Financial Accounts (FBAR) — officially known as FinCEN Form 114 — by the tax deadline.

What counts as a “foreign account”

The definition is broader than most people expect. A foreign account includes:

• Bank accounts, savings accounts, and checking accounts held with foreign banks
• Investment and brokerage accounts outside the United States
• Money market funds held at foreign institutions
• Mutual funds registered abroad but held in your name
• Pension or retirement accounts maintained by a non-U.S. employer (even if you’re a U.S. citizen)
• Cryptocurrency exchanges and wallets with a foreign address

The account need not be in your sole name. If you have signature authority — the ability to direct deposits, withdrawals, or trades — over an account held by someone else (like a parent or business partner), it counts.

The $10,000 threshold and aggregation

You must file an FBAR only if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. If you have three accounts worth $5,000, $3,000, and $2,500 respectively, they aggregate to $10,500, triggering the requirement.

The threshold is checked only once per year — if accounts ever exceed $10,000 together, even for a single day, the FBAR must be filed. This applies equally to U.S. citizens and lawful permanent residents.

FBAR filing and penalties

If Schedule B Part III triggers an FBAR obligation, you must file FinCEN Form 114 electronically through the Financial Crimes Enforcement Network portal by April 15 (or October 15 if you filed an extension). The FBAR requires detailed information: the name and address of each foreign bank, the account number, the highest balance during the year, and the type of account.

The penalties for failing to file an FBAR or filing a false one are severe — up to $10,000 in civil penalties per violation, with no statute of limitations. Criminal penalties, including imprisonment, apply if willfulness is proven. Unlike many tax penalties, FBAR penalties can accumulate for each year you failed to file, not each account.

FATCA and Form 8938

Beyond the FBAR, there is a second, separate disclosure regime called FATCA (Foreign Account Tax Compliance Act). FATCA requires U.S. citizens with specified foreign financial assets above certain thresholds to file Form 8938 (Statement of Specified Foreign Financial Assets) with their 1040.

The FATCA thresholds are higher than the FBAR $10,000 threshold:

• $200,000 (single) or $400,000 (married filing jointly) on the last day of the year
• $300,000 (single) or $600,000 (married filing jointly) at any point during the year

If you cross these thresholds, Form 8938 must be filed alongside your 1040. Both FBAR and Form 8938 may be required in the same year for the same accounts — they serve different purposes and have different penalty structures.

The interplay with foreign income

Schedule B Part III is distinct from the questions about foreign earned income and foreign bank account interest. If you received interest, dividends, or other income from foreign accounts, those amounts belong on Schedule B Part I (interest income) or Schedule B Part II (dividend income), with supplemental forms as needed.

If you have foreign self-employment income, Schedule C or Form 1040-ES may also apply. The foreign account disclosure (Part III) runs parallel to these income-reporting obligations.

Dual citizens and resident aliens

Nonresident aliens and foreign nationals working in the U.S. are generally exempt from FBAR requirements on accounts held in their country of residence. However, if you are a U.S. citizen or permanent resident (green card holder), you must disclose foreign accounts regardless of where you live. Even “accidental” U.S. citizens — those who derived citizenship through a parent but never lived here — are required to file.

Voluntarily correcting unreported foreign accounts

If you failed to file an FBAR or Form 8938 in prior years and wish to come forward, the IRS offers the Streamlined Filing Compliance Procedures, which allow you to file back returns and reports with reduced penalties (8% of the highest balance in the unreported accounts for FBAR violations). Willful violations carry much higher penalties (up to 50% of the account balance in some circumstances).

If you are already under examination or the IRS has contacted you, the streamlined procedures are not available; consult a tax professional.

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