Updated: Jul 7, 2022
For American citizens holding money in a foreign bank account April 15th is the deadline (with an extension to October 15th) for filing your Foreign Bank Account Report, or FBAR. This report, formerly called the TD F 90-22, must be filed for bank accounts, brokerage accounts, mutual funds, trusts, and any other type of foreign accounts.
However, you don’t need to file if the aggregate balance of all of your foreign accounts is less than $10,000. This $10,000 limit exempts many Americans from filing, but it’s important to make sure you’re exempt, as in recent years the authorities are coming down hard on foreign accounts, and failure to report could cause serious ramifications. The $10,000 cap is judged every day of the year, not only at the time of filing. So, if you ever go over $10,000 at any point in the year, you have to report it. Interest earnings are also included in the limit, so keep that in mind when determining whether or not you need to file an FBAR form.
If you fail to file when you should, you could face huge penalties. Non-willful violations receive a $10,000 civil penalty, while willful violations receive the greater of $100,000 or 50% of the amount in the account for each violation. Other consequences could include criminal penalties of $250,000 and five years in prison.
Many Americans prefer to keep their foreign bank account balances under $10,000 in order to avoid filing FBAR forms. If you would like to store money in Euros in excess of $10,000, another option is using a US bank account. More and more banks, including Interactive Brokers and Pershing, allow non-dollar bank deposits in the US. Keeping money in different currencies allows for greater diversification, and can also act as a shield against declines in the US dollar. Usually, if the US dollar falls, other currencies rise, and having an account of Euros can keep you ahead. Many people use their foreign currency accounts to help save for large purchases, or to make purchases abroad.
Of course, there are questions to consider before opening a foreign currency account. Account minimums, currency exchange rates, and whether or not the account is insured and negative interest rates should all be considered. There is also the risk that the Euro could fall dramatically, causing you to lose money if your account is switched back into dollars. Still, holding Euros in a US bank account is a good way to avoid going over $10,000 in a foreign account, while still diversifying.
Still not sure? Contact us and one of our qualified advisors will be more than happy to help.