FBAR for Expats and Dual Citizens: What Americans Living Abroad Should Know

U.S. Tax Filing for Citizens Abroad

According to the IRS, the rules for filing income tax returns and paying estimated tax are generally the same for U.S. citizens and resident aliens whether they are in the United States or abroad, and worldwide income from all sources is subject to U.S. tax. A return is generally required when worldwide gross income is at least the filing threshold for the taxpayer’s filing status.

Taxpayers who, on the regular due date, live outside the United States and Puerto Rico and have their main place of business or post of duty outside the United States and Puerto Rico, or who are on military duty outside them, receive an automatic two-month extension to June 15 and attach a statement to the return explaining how they qualify. A further extension to October 15 can be requested on Form 4868 before June 15. Interest still runs on any tax not paid by April 15.

The FBAR Requirement Applies Abroad

Every U.S. citizen is a U.S. person for FBAR purposes, wherever he or she lives. An FBAR (FinCEN Form 114) is required if the person has a financial interest in or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during the calendar year. The threshold is based on the combined value of all foreign accounts, and for someone living abroad, ordinary local bank accounts count.

The FBAR is due April 15, with an automatic extension to October 15, and is filed electronically through FinCEN’s BSA E-Filing System rather than with the tax return. Records generally must be kept for five years from the FBAR due date. As the IRS notes, accounts must be reported even if they generate no taxable income, so reducing income tax to zero with the foreign earned income exclusion does not eliminate the FBAR.

Form 8938: Higher Thresholds for Taxpayers Abroad

Form 8938 is attached to the income tax return to report specified foreign financial assets; it does not replace the FBAR. A taxpayer whose tax home is in a foreign country and who meets a presence abroad test (bona fide residence abroad for an uninterrupted period that includes an entire tax year, or at least 330 full days abroad during a 12-month period ending in the tax year) files Form 8938 when those assets exceed $200,000 on the last day of the tax year or $300,000 at any time during the year ($400,000 and $600,000 for married couples filing jointly). No Form 8938 is required for a year in which no income tax return is required.

Foreign Earned Income Exclusion and Foreign Tax Credit

A U.S. citizen with a tax home in a foreign country who meets the bona fide residence test or the physical presence test (at least 330 full days abroad during any 12-month period) may elect on Form 2555 to exclude foreign earned income, up to $130,000 for 2025 and $132,900 for 2026. The exclusion covers pay for personal services, such as wages, salaries, and professional fees, but not interest, dividends, or capital gains, and it does not reduce self-employment tax. The tax on any remaining income is figured at the rates that would have applied without the exclusion.

No foreign tax credit is allowed for foreign taxes on excluded income, but a credit may be available for foreign income taxes on income that is not excluded. A taxpayer who revokes the exclusion election and wants to choose it again within five tax years needs IRS approval.

Foreign Pensions and Retirement Plans

An interest in a foreign pension or deferred compensation plan is generally reportable on Form 8938, while foreign social security-type benefits are not. The IRS also cautions that some foreign pension and retirement plans may be treated as foreign trusts, which can require Forms 3520 and 3520-A, although exceptions apply to certain plans, including Canadian RRSPs and RRIFs. The income tax treatment of a foreign plan depends on the type of plan and any applicable tax treaty.

FBAR Penalties

Civil FBAR penalties are set by 31 U.S.C. 5321. A non-willful violation carries a penalty of up to $10,000, adjusted for inflation, and no penalty applies if the violation was due to reasonable cause and the account balance was properly reported. In Bittner v. United States, 598 U.S. 85 (2023), the Supreme Court held that the non-willful penalty applies per report, not per account. For a willful violation, the maximum penalty is the greater of $100,000 (adjusted for inflation) or 50% of the account balance at the time of the violation. The government generally has six years to assess a civil FBAR penalty.

Catching Up: Streamlined Foreign Offshore Procedures

U.S. citizens and lawful permanent residents living abroad whose failure to file FBARs or report foreign income resulted from non-willful conduct may be eligible for the Streamlined Foreign Offshore Procedures. The IRS defines non-willful conduct as conduct due to negligence, inadvertence, or mistake, or conduct resulting from a good faith misunderstanding of the requirements of the law. The individual must meet a non-residency requirement (in at least one of the three most recent years for which the return due date has passed, no U.S. abode and at least 330 full days outside the United States) and cannot be under IRS civil examination or criminal investigation.

A submission includes delinquent or amended tax returns for the most recent three years, delinquent FBARs for the most recent six years, a certification of non-willful conduct on Form 14653, and payment of the tax and interest due. Eligible taxpayers are not subject to failure-to-file, failure-to-pay, accuracy-related, information return, or FBAR penalties. There is no closing agreement, and submissions may be selected for audit. Taxpayers concerned that their conduct may have been willful should consider the IRS Criminal Investigation Voluntary Disclosure Practice.

The Bottom Line

Moving abroad or holding a second citizenship does not end U.S. filing obligations. Citizens abroad generally file income tax returns on the same basis as those at home, file FBARs when foreign accounts exceed $10,000 in the aggregate, and may also need Form 8938 or Form 3520. The foreign earned income exclusion and the foreign tax credit are available only by filing a U.S. return.