What ended is the administrative assurance that a qualifying filer would not face the draconian statutory penalties for late FBAR compliance. With DFSP no longer a recognized path for remediating a late FBAR, filers that may have previously been eligible for DFSP may now be subject to penalties for filing delinquent FBARs. This recent change may reflect the IRS attitude towards their expectation of taxpayer education surrounding these obligations so many years after the introduction of the foreign information reporting non-compliance initiatives such as OVDI and OVDP. Foreign information reporting compliance initiatives have evolved over the years, and this change is another such example.
While the DFSP is closed, what has not changed is the analysis that underlies consideration for the proper path forward. Taxpayers that also have unreported income tied to their foreign accounts/asset non-compliance whose conduct was non-willful, may still utilize the Streamlined Filing Compliance Procedures, while it remains open. This page explains what changed, what the program was, and how to consider your path forward now if the Streamlined Filing Compliance Procedures are not available to you. Your specific facts and circumstances may open other doors to compliance.
What changed on July 1, 2026
The IRS removed the Delinquent FBAR Submission Procedures. The dedicated DFSP page on irs.gov now returns a 404 error; the procedure is gone, not relocated. In its place, the IRS FBAR page states the current rule plainly:
Filing an FBAR late or not at all is a violation and may subject you to penalties.
IRS, Report of Foreign Bank and Financial Accounts (FBAR) page
The same page tells late filers what to do:
If the IRS hasn't contacted you about a late FBAR and you're not under civil or criminal investigation by the IRS, you should file late FBARs as soon as possible to keep potential penalties to a minimum.
IRS, FBAR page
For taxpayers with unreported income, that page now points to “the Streamlined filing compliance procedures,” with no mention of DFSP (per the IRS FBAR page, verified July 2, 2026). Forbes reported the change the same day (Virginia La Torre Jeker, Forbes, July 2, 2026).
This fits a longer factual pattern in how the IRS has handled offshore relief. The Offshore Voluntary Disclosure Program (OVDP) closed in 2018. The Delinquent International Information Return Submission Procedures (DIIRSP) were later revised to drop their earlier no-penalty assurance, so relief there is now evaluated on the facts and circumstances rather than granted automatically. DFSP was eliminated on July 1, 2026. The Streamlined Filing Compliance Procedures remain available, but they are administrative and discretionary, not a statutory right. That is the pattern you should plan around: administrative relief exists at the IRS’s discretion and can be narrowed or withdrawn at their discretion.
Eli Noff’s read of the move, after reviewing the change:
It is currently unclear why the IRS took this action, but my thoughts are that they are conforming the DFSP to the DIIRSP, which was changed a few years ago, removing the 'no penalty if no unreported income' structure and defaulting penalty relief to the high-bar reasonable cause standard.
Eli Noff, Hughes Noff Tax Law
What DFSP was, framed as history
Until July 1, 2026, the Delinquent FBAR Submission Procedures were a path the IRS offered to taxpayers who had simply failed to file a required FBAR (FinCEN Form 114) and had no related unreported income. The underlying FBAR obligation has not changed: it triggers when the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the calendar year, per FinCEN and IRS FBAR requirements. If you crossed that threshold in prior years and did not file, you are delinquent. What changed is the remedy available to you.
Under the old procedure, a taxpayer who cleared its eligibility conditions and had properly reported and paid all tax on the foreign-account income could file the delinquent FBARs and the IRS would not impose a penalty for the late filing. That no-penalty assurance is what ended.
If a taxpayer previously came in for a delinquent FBAR submission procedure, assuming they were non-willful and had no unreported income, they would simply file late and no FBAR penalty would be assessed. The guidance and options changed if there was unreported foreign income. Delinquent FBAR submission procedures specifically used to state that it was for taxpayers who did not need to use the Voluntary Disclosure Practice or the streamlined procedures to file delinquent or amended returns to report and pay additional tax. Once we have to report and pay additional tax on previously unreported foreign income, we were no longer in the delinquent submission procedure anymore. This, and other considerations, are still relevant when determining how to come into compliance.
Eli Noff, Hughes Noff Tax Law
Income and willfulness were two factors that helped navigate the compliance path under DFSP, and they are still relevant now. The procedure is gone; but the fork in the road and the relevance of these factors, is not. Taxpayers now also need to carefully understand the reasonable cause standard to avoid FBAR penalties and should also be well-educated on the potential statutory penalties the IRS may assess.
What to do now
The procedure that offered an automatic no-penalty result for qualified taxpayers is gone, so the question of “how do I file correctly and minimize exposure” may have a different answer. The current guidance, and the underlying facts, sort into a few paths.
- If you have no unreported income and the IRS has not contacted you: the IRS says to file the late FBARs as soon as possible to keep potential penalties to a minimum. Because the automatic no-penalty path is gone, the defense now rests on reasonable cause. You establish, in the late-filing explanation and your records, why the failure to file was not willful and was due to reasonable cause. The IRS considers reasonable cause a high standard and careful analysis of your facts and circumstances should be considered.
- If you have unreported income from the foreign accounts: the IRS FBAR page points to the Streamlined Filing Compliance Procedures. Streamlined still requires non-willful conduct and carries its own cost, described below.
- If your conduct was willful, or the facts show indicia of willfulness: the Voluntary Disclosure Practice may be the proper path to address that exposure. It is not penalty-free, but it is the route designed for willful noncompliance.
- If you are unsure which of these describes you: that uncertainty is the reason to get the facts sorted before you file anything. Filing into the wrong path may result in a costly mistake.
One thing the change did not do: the Streamlined Domestic and Foreign Offshore Procedures (SDOP and SFOP) were not expanded to absorb late FBAR filers who have no unreported income.
I did not see any new changes or expansion of SDOP or SFOP to allow delinquent FBAR filers with no unreported income to use those procedures.
Eli Noff, Hughes Noff Tax Law
In plain terms: if you have no unreported income, Streamlined is not your fallback door. For non-willful taxpayers, the path is the late filing itself, supported by reasonable-cause which should be carefully evaluated prior to filing.
The Streamlined Domestic Offshore Procedures carry a 5% miscellaneous offshore penalty. The Streamlined Foreign Offshore Procedures (for taxpayers residing abroad) carry no penalties. Both require non-willful conduct, per the IRS Streamlined pages. For the full underlying exposure, see FBAR penalties. For the mechanics of preparing and late-filing the forms themselves, see can I file FBAR for previous years.
The stress, fear and overall emotional response when discovering the non-compliance is understandable
Upon discovery of the non-compliance, people normally experience a tremendous sense of fear, usually because of something they read about the application of willful FBAR penalties in a specific case that was referenced online. The numbers they see are real numbers. They are just, in many cases, the wrong numbers for the situation in front of them and their particular fact pattern.
First, we focus on their specific facts. Many of the cases they're reading result from Swiss bank crackdowns, where people were willfully hiding money abroad, or sophisticated taxpayers and businesspeople who had unreported foreign accounts and income and may have additional negative facts besides just failing to file the FBAR. Perhaps there's significant income tax non-compliance, other bad facts, and indicia of willfulness. So first things first is to understand the taxpayer's facts.
Eli Noff, Hughes Noff Tax Law
Here is the math that drives the panic, and why it may not apply. A willful FBAR violation carries a civil penalty of the greater of $165,353 (the 2026 inflation-adjusted version of the statutory $100,000) or 50% of the account balance, assessed per account, per year, under 31 U.S.C. § 5321(a)(5)(C). Stack it across multiple accounts and multiple years and you get the figures that circulate online. That penalty can exceed the balance in the account.
That is the willful penalty. A non-willful violation has different considerations. After the Supreme Court’s decision in Bittner v. United States, 598 U.S. 274 (2023), the non-willful penalty is capped at $16,536 per form (inflation adjusted for 2026), assessed per annual FBAR, not per account. Four unfiled years with fifteen accounts each is at most four non-willful penalties, one per year, not sixty. The “per account, per year” arithmetic that keeps people up at night is applicable to the willful penalty only.
Many clients are taking a story they read that may be similar only due to the non-compliance and applying it to their own situation, but they are not seeing the forest for the trees. They're not seeing the bigger picture of how their case is different.
Eli Noff, Hughes Noff Tax Law
None of this is meant to belittle the penalty regime; with the automatic relief gone, the stakes of getting the path right have risen, not fallen. The objective of the diagnostic below is to find out which story is yours before anyone prepares a single form.
The gate that is often misread: unreported income
When people self-diagnose their offshore problem, the place they often err, is with respect to the unreported foreign income. They look at the FBAR in isolation and miss a critical question: was all the income from those foreign accounts actually reported and taxed on your U.S. returns?
Clients tend to overlook the unreported income component. A lot of times people call because of one particular procedure, but we end up using something different, because there was some other non-compliance, particularly on the income tax side. That's the core issue I find: people don't look at it holistically. They're looking at just the FBAR alone, and they don't see how it fits into the grand scheme of coming into compliance.
Eli Noff, Hughes Noff Tax Law
Under the old procedure, unreported income directed you out of DFSP towards Streamlined for non-willful taxpayers. With DFSP gone, income is still the fork: the IRS FBAR page routes taxpayers with unreported income to the Streamlined Filing Compliance Procedures. If a foreign account earned interest, dividends, or capital gains that never made it onto your return, you have an income tax problem riding alongside the FBAR problem, and that determines your path. “I missed an FBAR” and “I missed an FBAR and never reported the income” still lead to two different doors with two different costs.
The cascade: why an FBAR problem rarely travels alone
The other reason to look holistically before choosing a path is that foreign accounts rarely show up by themselves. One missing form tends to imply others.
It's unusual to just have FBAR noncompliance. There's either an income tax component, or if the dollars are high enough for the foreign assets, an 8938 FATCA component. Then there are other components that may come with owning a foreign mutual fund, which may be considered a PFIC, on Form 8621. Maybe they have an interest in a foreign company they inherited; then there's Form 5471 potential. And a 3520 for the inheritance of that asset, or other gifts of assets over $100,000 from a foreigner. So suddenly it starts spiraling, and the penalties start accumulating.
Eli Noff, Hughes Noff Tax Law
Map your full footprint before you commit to a path. The adjacent forms each have their own thresholds and their own penalty regimes:
- Form 8938 (FATCA). Reporting of specified foreign financial assets is triggered above thresholds ranging from $50,000 (year-end) / $75,000 (at any point in the year) for an unmarried person living in the U.S., up to $400,000 / $600,000 for married-filing-jointly taxpayers living abroad. It is filed together with the income tax return. Note that the Form 8938 and the FBAR overlap in some areas, but they are not the same form and have different filing thresholds. The Form 8938 is more expansive and covers not only foreign accounts like the FBAR, but also other foreign financial assets.
- Form 8621 (PFIC). A foreign mutual fund may be considered a passive foreign investment company, reported on Form 8621, per the IRS form.
- Form 5471 (foreign corporation). An interest in a foreign company, including one you inherited, can trigger Form 5471 depending on structure and ownership percentage, per the IRS form instructions. Its own penalty regime applies.
- Form 3520 (foreign gifts and bequests). Receipt of a foreign gift or bequest above $100,000 from a foreign individual or estate is reportable on Form 3520 Part IV, per the IRS Form 3520 instructions.
If any of these forms are also in your non-compliance picture, filing the FBAR alone does not solve your problem. You are coordinating a multi-form compliance plan, and the FBAR is one piece of it. That is exactly the situation where treating the FBAR in isolation produces a costly mistake.
How we approach these compliance issues
Everything above is why we carefully review the facts before the strategy is set. That has become more important since the automatic relief disappeared, not less.
Phase 1, let's learn all the facts. Let's start by figuring out what should have been filed, what the penalty consequences are, and how to fix it. I like to first educate clients as to the default statutory penalty framework they are facing, so they can make an informed decision.
Eli Noff, Hughes Noff Tax Law
The bottom line
If you researched these compliance procedures yourself, you already know how quickly one question becomes ten.
Google searching these issues can result in a heightened sense of anxiety, because it starts opening various doors that you don't know how to coordinate. It's important to talk to a professional to understand how it all fits together and pick the right path to come into compliance, to avoid making costly mistakes.
Eli Noff, Hughes Noff Tax Law
So, what happened to the Delinquent FBAR Submission Procedures and what happens now? They ended on July 1, 2026. A late FBAR remains a violation, and without the old procedure it may carry a penalty. If the IRS has not contacted you and you are not under investigation, and you have no unreported income, the IRS says to file your late FBARs as soon as possible to keep potential penalties to a minimum. Building a reasonable-cause record is now more important than before. If you have unreported income, the Streamlined Filing Compliance Procedures may be the proper compliance path. If your conduct was willful, the Voluntary Disclosure Practice should be carefully examined. The name of the procedure you may have come searching for is gone, and the diagnostic that helps guide your path into compliance is now more critical.