The FBAR asks for the maximum value of each foreign account during the calendar year, stated in US dollars. You find the highest balance in the account's own currency and convert it using the Treasury Reporting Rates of Exchange (opens the official US Treasury page in a new tab) for the last day of that year. The rate on the day the balance peaked is not used, and neither is an average rate.
This post is for US citizens and green card holders in the UK who prepare their own figures or want to check a preparer's. It goes further than the valuation section of our guide to FBAR and FATCA for UK residents: rounding, overdrawn accounts, money moved between accounts, other currencies, accounts opened or closed in the year, how Form 8938 differs, and the working papers to keep.
What does maximum value mean on the FBAR?
Maximum value is a reasonable approximation of the greatest value of the money and other assets in an account at any point in the calendar year. It is not the balance on 31 December and it is not an average. Periodic statements issued at least quarterly can be relied on where they fairly reflect that highest value.
That wording comes from the IRS, which administers the report for FinCEN and sets it out in its FBAR guidance (opens the official IRS page in a new tab). For a current account, the practical method is to read twelve months of statements, or a transaction download, for the highest closing balance. If you know the account held more between statement dates, for example because the proceeds of a house sale passed through it within a week, the statements do not fairly reflect the peak and the higher figure is the one to use.
For an investment platform or a stocks and shares ISA, the value is the holdings plus any cash, taken from the provider's valuations. A reasonable approximation does not mean accuracy to the penny. It does mean a figure you can trace back to a document, which is why the date and the source matter as much as the number entered on FinCEN Form 114.
- The highest balance in the account's own currency
- The date of that balance and the statement page it came from
- Whether the figure is a statement balance or a higher one you know of
- The account number, type and the institution's name and address
Which exchange rate converts the balance to dollars?
The rate is the Treasury Reporting Rate of Exchange for the last day of the calendar year being reported. One rate serves every sterling account, even when the highest balance fell in March or August. The Bureau of the Fiscal Service publishes the table quarterly, and the entry dated 31 December is the one that applies.
The table states how many units of each foreign currency equal one US dollar. A sterling balance is therefore divided by the pound rate, not multiplied by it. Multiplying is the most common arithmetic error we see on self-prepared reports. A simple check helps: for as long as a pound is worth more than a dollar, the dollar figure should come out larger than the sterling figure.
Three other rates are sometimes used by mistake. The spot rate on the day of the peak is not what the instructions ask for. Nor is the rate your bank would have given you. The IRS yearly average exchange rates (opens the official IRS page in a new tab) are for income on the tax return, as its note on foreign currency and exchange rates (opens the official IRS page in a new tab) explains, and they have no place on the FBAR. Where the Treasury publishes no rate for a currency, another verifiable rate is used and its source is recorded.
How are rounding and overdrawn accounts handled?
Each maximum value is entered in whole US dollars and rounded up to the next dollar, not to the nearest one. An account whose highest value in the year was below zero, such as an overdraft that never went into credit, is entered as zero. It is still listed on the report with its other details.
Rounding up changes little in most cases, but it matters at the margin. We round each converted figure first and then add the accounts together, so that the total tested against the threshold is the same total the report shows. A filer who lands within a few dollars of the line is better served by filing than by an argument about rounding.
A negative balance does not reduce anything else. There is no netting on the FBAR: an overdrawn current account does not lower the reported value of a savings account, and money owed to a bank does not reduce the value of an account held with it. Each account stands alone, with zero as its floor.
How does the aggregate test treat money moved between accounts?
The test is an aggregate. The FBAR is required when the combined value of all foreign accounts exceeds $10,000 at any time in the year, and the usual way to run it is to add each account's separate maximum. Those peaks need not fall on the same day, so money that moves between accounts can be counted in both.
Take a US citizen employed in Manchester with a current account, a cash ISA and a regular saver. In the spring she moves most of her savings from the current account into the ISA. She finds the highest sterling balance of each account, divides each by the pound rate for 31 December, rounds each result up, and adds the three together.
The transferred money sits inside the current account's peak and again inside the ISA's peak. Her total can exceed the threshold although she never held that much on any one day. On the cautious reading that we follow, she files and lists all three accounts through the system linked from FinCEN's page on reporting foreign accounts (opens the official FinCEN page in a new tab). Nothing is taxed on the total. It is a report of balances, and over-reporting an account carries no cost.
- A house deposit or sale proceeds passing through a current account
- A fixed-term bond that matures and is paid into a new account
- An ISA transferred from one provider to another
- A current account switch, where the old account closes and a new one opens
What about other currencies and accounts opened or closed mid-year?
Every account is valued in its own currency first and then converted at the Treasury year-end rate for that currency. An account opened or closed during the year is reported for the months it existed, at its highest value in that period, and is still converted at the 31 December rate although it held nothing on that date.
A euro account held in Dublin or Paris uses the euro rate from the same table. A multi-currency account is harder, because the provider may not give one combined balance. A workable approach is to value each currency balance at its own year-end rate and take the highest combined figure you can identify. A US dollar account held at a UK bank is still a foreign account, and needs no conversion at all.
Closed accounts are the ones most often left off. UK banks tend to withdraw online access once an account closes, so ask for the closing statement before that happens. The reporting period is the calendar year, not the UK tax year, which means the statements you need span parts of two UK tax years.
How does Form 8938 value the same accounts?
Form 8938 asks for the maximum value of each asset during the tax year, and its filing threshold also looks at the value on the last day of the year. Its instructions call for the Treasury Bureau of the Fiscal Service rate for the last day of the tax year, including for an account closed earlier.
For a calendar-year taxpayer that is the same 31 December rate, so one schedule of balances can serve both reports. What differs is the test. A person living abroad and not filing jointly files Form 8938 when assets exceed $200,000 at year end or $300,000 at any time, and joint filers at $400,000 at year end or $600,000 at any time. Because there is a year-end limb and an any-time limb, each account needs two figures: its highest value and its closing value.
The Form 8938 instructions also treat a value below zero as zero, and they allow periodic statements unless you have reason to know they understate the maximum. Where no Treasury rate exists, another publicly available rate is used and the form asks for its source. The IRS comparison of Form 8938 and FBAR requirements (opens the official IRS page in a new tab) sets the two side by side, and our article on whether to file the FBAR or Form 8938 covers which assets belong on each.
What working papers should you keep?
Keep a record of each account's name, number, institution, type and maximum value for five years from the due date of the report. The law does not prescribe the document. In practice that means a copy of the filed FBAR and a schedule showing how each dollar figure was reached.
The schedule is worth building once and reusing. It lists every account, the highest balance and its date, the year-end rate, the converted figure and the rounded figure. The same schedule then supports the FBAR, due on 15 April, extended automatically to 15 October, and Form 8938 on the tax return. We prepare it as part of our foreign income and FBAR reporting service and alongside individual tax return preparation.
Download the statements when you file, not when someone asks for them years later. The document checklist in our client portal lists what we request for each account type. For the wider rules on who files and which UK accounts count, return to the guide to FBAR and FATCA for UK residents.
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
