Signature Authority Over a Foreign Account You Do Not Own: Yes, It Can Mean an FBAR

Here is a phone call I get more than you would expect. A client's elderly mother lives in Toronto. Years ago the bank added the client to her account so the client could pay bills if Mom got sick. The client has never deposited or withdrawn a dime for herself. Does she have to file an FBAR?

Quite possibly, yes. The FBAR rule in 31 CFR 1010.350 applies to every United States person who has a financial interest in, or signature or other authority over, a foreign financial account. Ownership is one way in. Control is the other.

What signature authority means

The regulation defines signature or other authority as the authority of an individual, alone or in conjunction with another individual, to control the disposition of assets held in a foreign financial account by direct communication, in writing or otherwise, to the bank or other financial institution that maintains the account.

Read that carefully. Three points drive almost every case.

• It is about authority, not use. If you can instruct the bank to move money, you have it, whether or not you ever did.
• Joint control counts. If two signatures are required and yours is one of them, you have signature authority.
• Direct communication with the institution is the test. Someone who can only tell the account holder what to do does not have signature authority. Someone who can tell the bank does.

A power of attorney given to you over a parent's foreign account, or being added as an authorized signer, usually puts you squarely inside the definition.

The workplace version

The more common version involves work. An American finance manager at a U.S. company has authority over the company's account in Mexico. An American living in Dubai is the treasurer of a local nonprofit and signs its checks. A U.S. citizen is the director of a family company in Israel and is a signatory on its bank accounts.

Each of those people has signature authority over a foreign account they do not own, and each may have an individual FBAR obligation, separate from any FBAR the entity files.

The regulation provides exceptions for some of them. Under 31 CFR 1010.350(f)(2), officers and employees of certain institutions do not have to report signature authority over the employer's accounts, as long as they have no financial interest in the account. The categories include officers and employees of banks examined by federal banking regulators, financial institutions registered with and examined by the SEC or CFTC, certain authorized service providers to registered investment companies, entities with a class of equity securities listed on a U.S. national securities exchange, and U.S. subsidiaries of those entities when the subsidiary is included in the parent's consolidated FBAR, among others.

If you work for a large U.S. publicly traded company and have authority over its foreign accounts, check whether that exception covers you. If you work for a private company, a foreign company or a small nonprofit, the exceptions usually do not apply.

How you report it

A person with signature authority but no financial interest reports the account in a separate part of Form 114 from the part used for accounts the person owns. The form asks for the account information and the name and address of the account owner. The maximum value of the account still matters, because it counts toward your $10,000 aggregate test. That means one large company account can push you over the threshold and require you to report your own small personal accounts too.

The $10,000 test is applied to all the accounts you must report, owned and controlled combined.

If you have authority over 25 or more accounts, the regulation lets you report only the number of accounts and certain basic information, as long as you provide the details if asked. That is common for treasury staff at international companies.

Why the company's FBAR does not cover you

People often assume that if the company files its own FBAR, the employees who sign on the company's accounts are covered. Usually they are not. The obligation in 31 CFR 1010.350 runs to each United States person with signature authority, and the employee is a different person from the employer.

The IRS says so directly in its own manual. IRM 4.26.16.5 notes that there may be multiple civil FBAR penalties when more than one person is required to file an FBAR reporting the same account, such as when someone other than the owner has signature or other authority over it. The manual then states that each person responsible for filing an FBAR reporting the account can be liable for the full amount of the penalty for failing to file.

The one structural relief valve in the regulation is the consolidated report. A U.S. entity that owns more than 50 percent of other entities required to report may file a consolidated FBAR for itself and those entities. The listed-company exception for officers and employees of U.S. subsidiaries depends on the subsidiary being included in the parent's consolidated report. If your exception depends on a consolidated filing, confirm that the filing actually happens each year.

Questions to ask your employer

• Does the company file an FBAR for this account, and is it a consolidated report?
• Does an exception in 31 CFR 1010.350(f)(2) apply to my position? Which one?
• Who keeps the year-end statements, and can I get the maximum value each year?
• If I leave the company, will my signature authority be removed in writing?

Signature authority is not income

Here is the part that should help you sleep. Reporting signature authority on an FBAR does not mean the money is yours for tax purposes. You do not report the interest on your mother's Canadian savings account as your income just because you are a signer. The FBAR is a disclosure report. Tax follows ownership. Disclosure follows control.

Form 8938, the FATCA form, generally does not apply to accounts you merely sign on. It is built around an "interest" in an asset, meaning items that would be reflected on your tax return. See FBAR vs. Form 8938 for the full comparison.

What if you never knew?

Most people with signature-only accounts have no idea. The employee assumes the company handles it. The adult child assumes Mom's account is Mom's business. Those are understandable mistakes, and the FBAR penalty statute, 31 U.S.C. 5321(a)(5), draws a sharp line between non-willful and willful violations.

For a non-willful violation, the maximum penalty is $10,000 in the statute, adjusted for inflation to $16,536 for penalties assessed on or after January 17, 2025, and the statute provides that no penalty applies if the violation was due to reasonable cause and the balance was properly reported. After the Supreme Court's decision in Bittner, non-willful penalties apply per report, not per account.

If you have years of missed signature-authority reporting with no unreported income behind it, your options are different from someone who hid income in a foreign account. Read late FBAR options for the paths available.

Practical steps

• Make a list of every foreign account you can instruct a bank to act on, at work and in your family.
• For work accounts, ask your employer's treasury or compliance department whether an exception in 31 CFR 1010.350(f) applies to you. Get the answer in writing.
• For family accounts, get year-end statements or ask the account owner for the highest balance each year.
• If you are past due, get advice before filing a stack of late reports with explanations you wrote at midnight.

Signature authority is the most innocent route into FBAR trouble. It is also one of the easiest to fix when it is handled correctly. If you want help, let's talk.