For US persons with foreign financial accounts, understanding and complying with FBAR (Report of Foreign Bank and Financial Accounts) requirements is critical—especially when facing FBAR penalties. U.S. persons with financial interests in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year must file an FBAR. The consequences of non-compliance can be severe, ranging from substantial monetary penalties to potential criminal prosecution in serious cases.

What FBAR Penalties Could I Face If I Don’t File My FBAR?

FBAR penalties range from $10,000 per non-willful violation to the greater of $100,000 or 50% of account balances for willful violations (subject to inflationary increases), with possible criminal prosecution in serious cases. The severity depends on whether the IRS determines your failure was willful or non-willful, and penalties can accumulate across multiple years and accounts.

Understanding FBAR Filing Requirements and FBAR Penalties

Before diving deeper into penalties, you should understand who must file an FBAR and what the process entails. The Bank Secrecy Act requires U.S. persons to report their foreign financial accounts if the aggregate value exceeds $10,000 at any time during the calendar year. This includes:

U.S. citizens and residents
Green card holders
Entities such as corporations, partnerships, and LLCs created under U.S. laws
Trusts and estates formed under U.S. laws

The term “financial accounts” encompasses a broad range of holdings, including:

Bank accounts (checking, savings, time deposits)
Securities accounts (brokerage accounts, mutual funds)
Other financial accounts (insurance policies with cash value, annuities)
Virtual currency accounts
Certain foreign retirement accounts

The FBAR (FinCEN Form 114) must be filed electronically through FinCEN’s BSA E-Filing System by April 15 of the year following the calendar year being reported. However, there’s an automatic extension to October 15 if you miss the April deadline. Remember, FBAR filing is separate from your tax return filing. While you may also need to report foreign accounts on Form 8938 (Statement of Specified Foreign Financial Assets) with your tax return, this doesn’t replace the FBAR requirement, and both may be necessary depending on your situation.

Non-Willful FBAR Violations and Penalties

When the IRS determines that your failure to file an FBAR was non-willful—meaning you didn’t know about the requirement or made an honest mistake—you may still face substantial penalties. However, these penalties are less severe than those for willful violations.

A non-willful violation can result in a civil penalty of up to $10,000 per violation, adjusted for inflation. For many years, what constituted a “violation” was the subject of considerable legal debate. Historically, the IRS sometimes interpreted this to mean $10,000 per unreported account per year, which could quickly multiply into enormous penalties. However, a landmark 2023 Supreme Court decision in Bittner v. United States clarified that non-willful FBAR penalties apply per form, not per account. This means if you failed to file one FBAR that should have reported 10 accounts, you face one $10,000 penalty rather than $100,000 in penalties.

You may avoid penalties entirely if you can establish “reasonable cause” for your failure to file. Reasonable cause typically involves showing that you exercised ordinary business care and prudence but still failed to file the required FBAR. Factors that may support reasonable cause include:

Reliance on the advice of a professional tax advisor who was informed of the foreign accounts
Recent inheritance of foreign accounts
No history of FBAR penalties or criminal tax violations
Limited education or financial sophistication

These factors are evaluated case-by-case, with the IRS considering your specific circumstances and the steps you took to comply with the law. Even with reasonable cause, prompt correction of the filing error is important to demonstrate good faith to the IRS.

The IRS examination process for non-willful cases typically involves a detailed review of your financial records, interviews, and an assessment of your knowledge of filing requirements. If you receive a notice about an FBAR examination, seeking professional assistance promptly is advisable.

Willful FBAR Violations: When Penalties Become Severe

The stakes rise dramatically when the IRS determines that your failure to file was willful. A willful violation occurs when you knew about the FBAR requirement and intentionally failed to comply, however the Courts have broadened the definition of willfulness and established that willfulness can be proven through:

Direct evidence of intentional violation
Reckless disregard of the filing obligation
“Willful blindness” – deliberately avoiding learning about the requirement
“Constructive Knowledge”

For willful violations, the civil penalty can be the greater of $100,000 or 50% of the account balance at the time of the violation, per account per year. For multiple years of non-compliance, the penalties can potentially exceed the value of the accounts themselves.

Beyond civil penalties, willful violations can lead to criminal prosecution, resulting in fines up to $250,000 and imprisonment for up to 5 years. If combined with other violations, fines can reach up to $500,000 and imprisonment for up to 10 years.

The IRS must establish willfulness by “clear and convincing evidence” in civil cases, and “beyond a reasonable doubt” in criminal cases. They often look for patterns such as:

Concealing foreign accounts
Establishing complex structures to hide ownership
Making false statements to financial institutions or tax preparers
Filing tax returns that omit foreign income

These indicators help the IRS distinguish between innocent mistakes and deliberate attempts to hide assets from U.S. authorities. The presence of multiple indicators markedly increases the likelihood of willful penalties being applied.

Notable cases illustrate the severity of willful FBAR penalties. In United States v. Williams, the Fourth Circuit upheld willful FBAR penalties against a taxpayer who had checked “no” on Schedule B regarding foreign accounts despite having Swiss accounts. In United States v. Horowitz, the court found willfulness when taxpayers with a Swiss account had knowledge of their general reporting requirements but failed to inquire about specific foreign account reporting obligations.

The Statute of Limitations for FBAR Penalties

The IRS generally has six years to assess FBAR penalties, starting from the due date of the FBAR. For example, for an unfiled 2022 FBAR (due April 15, 2023), the statute would normally expire on April 15, 2029.

However, this timeline can be extended in certain circumstances.

Options for Delinquent FBAR Filers

If you’ve discovered your FBAR filing obligations belatedly, several IRS programs may help you come into compliance with reduced or eliminated penalties:

Delinquent FBAR Submission Procedures
These procedures are for taxpayers who don’t need to use the Streamlined Filing Compliance Procedures and:
- Have reported all income from foreign financial accounts on their U.S. tax returns
- Have only failed to file FBARs
- Were not previously contacted by the IRS about delinquent FBARs
Under these procedures, file the delinquent FBARs electronically with a statement explaining why you’re filing late. If these conditions are met, the IRS will not impose penalties.
Streamlined Filing Compliance Procedures
For taxpayers whose non-compliance was non-willful, these procedures offer a way to file delinquent FBARs and amended tax returns with reduced penalties. There are two versions:
- Streamlined Foreign Offshore Procedures: For U.S. taxpayers residing outside the U.S., with no FBAR penalties assessed.
- Streamlined Domestic Offshore Procedures: For U.S. taxpayers residing in the U.S., with a 5% miscellaneous offshore penalty based on the highest year-end aggregate value of foreign financial assets during the disclosure period.
Voluntary Disclosure Practice
For taxpayers with potentially willful violations who want to avoid criminal prosecution, the IRS offers the Voluntary Disclosure Practice. This doesn’t guarantee immunity from prosecution but offers a path to resolution with potentially reduced penalties compared to what might result from an investigation.

While “quiet disclosure” (simply filing missed FBARs or tax returns without utilizing one of the enumerated paths listed above) might seem tempting, it carries major risks. The IRS can detect these submissions and may open an examination with full penalties.

How to Respond If You Receive an FBAR Penalty Notice

If you receive a notice proposing FBAR penalties, it’s necessary to understand your options and act quickly:

Initial Response Options
You typically have 30 days to respond to the FBAR penalty notice – options include paying the penalty, requesting an appeal, or providing additional information.
Pre-assessment Appeal Rights
Before the penalty is assessed, you can request an appeal with the IRS Office of Appeals, an independent organization within the IRS that aims to resolve tax disputes impartially.
Post-assessment Options
If the penalty has been assessed, you have several options:
- Pay the penalty and file a claim for refund
- If the claim is denied, you can file suit in the U.S. District Court or the Court of Federal Claims
- Dispute the penalty in litigation brought by the US Department of Justice to reduce the penalty to Judgement.
Negotiation Strategies
Potential approaches include:
- Providing evidence of reasonable cause
- Evaluating the nature of the penalty and ensuring all relevant facts are before the IRS.
- Ensuring the IRS agent assessing or determining the penalty is properly following the Internal Revenue Manual provisions on this topic.
- Demonstrating financial hardship through an Offer in Compromise
- Requesting a reduced penalty based on your specific circumstances

Professional representation is particularly valuable at this stage. For instance, consulting an international tax attorney with FBAR experience can help you navigate these complex procedural requirements and advocate for penalty reduction or abatement.

Preventative Measures and Best Practices

To avoid FBAR penalties in the first place, consider these best practices:

Maintain Thorough Records
Keep records of all foreign accounts, including account statements, ownership documents, and communications with financial institutions, for at least five years.
Coordinate with Foreign Financial Institutions
Ensure they have your correct status as a U.S. person for FATCA reporting, which can serve as a backup verification of your accounts.
Calendar Annual Filing Requirements
Set reminders for FBAR filing deadlines (April 15, with automatic extension to October 15).
Use Technology Solutions
Consider software that tracks foreign account balances and generates alerts when they approach the $10,000 threshold.
Stay Informed About Reporting Requirements
FBAR regulations can change, so maintain a relationship with a tax professional who focus in international tax matters.
Address Inherited or Newly Discovered Accounts Promptly
Do not delay addressing compliance issues when you discover or inherit foreign accounts.
Consider Consolidating Accounts
While this doesn’t eliminate reporting requirements, fewer accounts can simplify compliance.

The expertise of qualified international tax professionals is invaluable for navigating these complex requirements. In many cases, consulting an international tax lawyer can provide the guidance needed to ensure that you not only comply with current obligations but also plan proactively to minimize future reporting burdens.

By understanding FBAR requirements and taking proactive steps to meet them, you can avoid the substantial penalties that can result from non-compliance, whether willful or non-willful.

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FBAR Penalties: What Happens If You File Late or Don’t File at All?