Step-by-step instructions to file FinCEN Form 114 correctly and avoid the penalty that catches retirees off guard
You're sitting with a Portuguese bank account holding €87,000, a Mexican investment account with 250,000 pesos, and a small savings account at a Spanish bank. You think: "It's under $100,000 total, so I probably don't need to file anything with the IRS."
Two years later, an IRS letter arrives. You owe a $10,000 penalty for failing to file FinCEN Form 114 (the FBAR—Report of Foreign Bank and Financial Accounts). The IRS is now asking for amended returns and threatening an audit.
This scenario plays out repeatedly among American retirees in Portugal and Mexico who misunderstand the FBAR filing requirement. The penalty is not small, and it's not forgiving.
The FBAR rule is not intuitive. It applies based on aggregate account balances at any time during the calendar year—not on your citizenship status, income level, or whether you pay taxes in the foreign country.
If you are a U.S. citizen or resident alien and you hold foreign financial accounts with an aggregate balance exceeding $10,000 at any point during the calendar year, you must file FinCEN Form 114 (FBAR) by April 15 of the following year, or the extended deadline of October 15 (with an extension).
"Aggregate" is the key word. All your foreign bank accounts, investment accounts, mutual funds, retirement accounts held overseas, and brokerage accounts count toward the $10,000 threshold. You add them together. Even if each individual account is small, they collectively might exceed the threshold.
Multiple expats in r/PortugalExpats and r/ExpatFinance report that the non-willful penalty is what they encountered after an audit triggered by late FBAR filings.
You must file FBAR if all three conditions are true:
Add up all account balances: Count every bank account, savings account, money market account, brokerage account, mutual fund account, investment account, and retirement account held outside the U.S. Include accounts in Portugal, Mexico, Spain, or any other country.
Use the peak balance: If your Portuguese account held €50,000 in March and €30,000 in December, use €50,000 (the peak) when calculating the aggregate.
Contact your banks and investment firms in Portugal and Mexico and request the following for each account you hold:
Pro tip: Keep statements from December 31 and from the month in which each account reached its peak balance during the year. These are your proof if audited.
The FBAR is filed electronically via the Financial Crimes Enforcement Network (FinCEN) filing system. You do not mail a paper form to the IRS.
Access the FBAR filing system: Go to https://www.fincen.gov and navigate to the FBAR e-filing system (typically labeled "BSA E-Filing System" or "FinCEN E-Filing"). Create a username and password if this is your first filing.
Complete each section:
If you need guidance on currency conversion: Use the average exchange rate for the calendar year (published by the IRS) or the OANDA currency converter for the date you're calculating. Document which method you used.
The filing deadline is April 15 of the year following the reporting period. For example, FBAR for 2025 is due April 15, 2026.
You can file for an extension: If you need more time, you can request an automatic extension until October 15 by filing before April 15 and noting in the system that you're requesting an extension.
If you're filing an FBAR for prior years (you missed the deadline), you can file it late. However, you expose yourself to penalties. See Step 5 for the remedial filing process.
If you didn't file FBAR for prior years, file immediately. Don't wait. The IRS can assess penalties for multiple years, and the longer you wait, the worse the damage.
You have two options:
If you can claim reasonable cause (you genuinely didn't know, or you relied on a professional who gave bad advice), you may qualify for the Streamlined Filing Compliance Procedures. This allows you to:
Work with a CPA specializing in expat taxation. The Streamlined process is complex and requires careful documentation. A FATCA-specialized CPA typically charges $300–$600 for this filing to ensure it's done correctly.
Greenback Tax Services [PR] specializes in helping American expats file FBAR and use the Streamlined Filing Compliance Procedures. They handle the entire filing electronically and can communicate directly with FinCEN if needed.
If you don't qualify for Streamlined (or you missed the deadline to file under Streamlined), you file late FBAR forms and request a reasonable cause waiver from the IRS. This may reduce or eliminate penalties, but it's less reliable than the Streamlined process.
After filing: The FinCEN system will provide a confirmation number. Save this. Write it down. Print the confirmation page.
Keep copies of:
Store these documents for at least 7 years (the IRS statute of limitations is 6 years, but 7 is safer).
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| Aspect | Portugal | Mexico |
|---|---|---|
| Account Types That Trigger FBAR | Portuguese bank accounts, investment accounts (including accounts with Portuguese investment firms), retirement accounts (PPR accounts). Excluded: property, insurance policies not held at a financial institution. | Mexican bank accounts (opening an account at Santander, BBVA, Inbursa, etc. triggers FBAR), investment accounts, Mexican retirement accounts (Afores if held in a brokerage account). Excluded: property, insurance. |
| Reporting Currency | Convert EUR to USD using the IRS average annual exchange rate for the reporting year. Document the rate used. | Convert MXN to USD using the IRS average annual exchange rate. Mexican bank statements may show rates; verify against IRS rates for accuracy. |
| Deadline Extensions | Same as all U.S. citizens: April 15, extended to October 15 with request. Some U.S. embassies may provide additional extension letters; consult https://pt.usembassy.gov. | Same as all U.S. citizens: April 15, extended to October 15. Consult https://mx.usembassy.gov if filing from Mexico raises questions. |
| Additional Reporting (FATCA Form 8938) | If your foreign assets exceed $200,000 (single) or $400,000 (married, filing jointly), you must also file Form 8938 with your U.S. tax return. https://www.irs.gov provides Form 8938 instructions. | Same threshold as Portugal. File Form 8938 with your U.S. tax return if assets exceed the threshold. |
| Local Tax Implications | Portugal's NHR tax regime does not exempt FBAR filing; you must file even under NHR status. https://www.portaldasfinancas.gov.pt may ask for FBAR documentation in certain audits. | Mexico's tax authority (SAT) may cross-check FBAR data with Mexican financial institutions. If you're a tax resident in Mexico, you must also file Mexican tax returns (Form RFC). |
Wrong: Your Portuguese account held €80,000 in June but only €20,000 by December 31. You report €20,000.
Correct: Use the peak balance of €80,000. FBAR uses peak balance, not year-end balance.
Wrong: You have a €5,000 account you opened late in the year and think it's immaterial.
Correct: Add it to the aggregate. If your other accounts total €8,000, this €5,000 account pushes you over the $10,000 threshold. You must file.
Wrong: You use today's exchange rate to convert your 2025 account balance for FBAR filing in April 2026.
Correct: Use the IRS average annual exchange rate for the calendar year being reported (2025 in this example). The IRS publishes these rates on https://www.irs.gov.
If your foreign assets exceed $200,000 (single) or $400,000 (married, filing jointly), you need to file both FBAR (FinCEN Form 114) and Form 8938 (Statement of Specified Foreign Financial Assets). They are separate filings with different thresholds and deadlines.
If you and your spouse hold a joint account in Portugal or Mexico, and you both are U.S. citizens, each of you must report the full balance on your FBAR. Don't split it in half.
FBAR is not the only foreign account reporting requirement. If your foreign assets exceed certain thresholds, you must also file Form 8938 (Statement of Specified Foreign Financial Assets) with your U.S. tax return.
For more detail on tax reporting obligations abroad, read our full guide to FBAR and FATCA reporting for expats.
Do not ignore a letter from the IRS. If you receive a notice about unfiled FBARs:
Bright!Tax [PR] provides support for expats facing FBAR compliance issues and can help resolve IRS inquiries through amended filings and penalty relief requests.
While FBAR is primarily a tax and financial compliance issue, your residency status in Portugal or Mexico affects your