Didn’t File an FBAR? Here’s What to Know About FBAR Penalties

When it comes to IRS penalties, the FBAR has a reputation for being one of the harshest. Miss it, and suddenly that “forgotten form” feels less like a slip-up and more like a five-figure headache.

Here’s the deal: U.S. citizens, green card holders, and certain residents have to report foreign bank and financial accounts over $10,000 on FinCEN Form 114 each year. It’s not optional, and the government keeps a close eye on compliance.

But don’t panic. While the penalties can look intimidating on paper, the IRS doesn’t treat every late FBAR the same way. Understanding the categories—and what the agency considers reasonable cause—can make the difference between a stern warning and a serious fine.

What are FBAR penalties?

Under the Bank Secrecy Act (BSA), U.S. persons with foreign financial accounts exceeding $10,000 must file FinCEN Form 114 each calendar year. The form is separate from your federal tax return and must be e-filed through the Financial Crimes Enforcement Network (FinCEN).

If the FBAR isn’t filed on time, the penalties can vary depending on intent and circumstances:

• Non-willful penalties: For unintentional mistakes, the IRS may impose civil fines—often up to $16,536 per report, per year.
• Willful penalties: If the IRS determines you knowingly failed to file or tried to hide accounts, penalties can reach the greater of $165,353 (2025) or 50% of the account balance at the time of the violation.
• Criminal charges: In extreme cases involving fraud or tax evasion, willful violations may lead to criminal prosecution in addition to civil fines.

Non-willful vs. willful FBAR violations

The IRS makes a sharp distinction between mistakes made in good faith and deliberate non-compliance. Understanding where your situation falls can mean the difference between a manageable fine and life-changing penalties.

Non-willful violations

Non-willful violations occur when a U.S. person fails to file an FBAR without intent to conceal. Common examples include missing the deadline, misunderstanding the $10,000 threshold, or overlooking joint accounts.

• Penalty amount: Up to $16,536 per report, per year; discretion and reasonable-cause relief may apply.
• How penalties are applied: Following the Supreme Court’s 2023 decision in Bittner v. United States, non-willful penalties are assessed per form, not per account.
• Relief available: If you can show reasonable cause and demonstrate good faith, the IRS may reduce or waive the penalty.
• Practical impact: A taxpayer with five accounts totaling $15,000 who missed the deadline could face a single penalty up to $16,536 (2025) for that year—not five separate penalties—subject to discretion and reasonable cause.

Willful violations

Willful violations involve knowingly failing to report accounts—or acting with “reckless disregard” for the requirement. These cases are treated far more seriously.

• Penalty amount: The greater of $165,353 (2025) or 50% of the account balance at the time of the violation, per account/per year.
• Potential consequences: Civil penalties are most common, but willful violations can also lead to criminal charges, fines up to $500,000, and even prison.
• What the IRS looks for: Repeatedly failing to disclose accounts, ignoring IRS notices, or moving money between banks to avoid detection can all be treated as evidence of willfulness.

How are FBAR penalties calculated?

FBAR penalties depend not only on the type of violation (non-willful vs. willful) but also on how the IRS measures your accounts and applies the law. The result can range from manageable to overwhelming, depending on the facts.

• Maximum account balance: For willful, penalties are typically computed per account using the account’s balance at the time of violation; non-willful is per report (not tied to balance), though mitigation guidelines consider balances.
• Per year, per account, or per form: For years, the IRS often assessed penalties on a per account, per year basis, multiplying liability quickly. The Supreme Court’s 2023 Bittner v. United States decision limited non-willful penalties to per form—but willful penalties can still apply per account.
• Compounding risk: Because penalties can stack across multiple accounts and multiple years, a taxpayer who failed to file for several years may face liability far exceeding the original account balances.
• Court and IRS discretion: District courts and the IRS have applied these rules differently, making outcomes case-specific. Factors like cooperation, compliance history, and whether accounts were disclosed on the income tax return can all influence the final penalty.
• Statute of limitations: The assessment statute is six years under 31 U.S.C. §5321(b) for all FBAR violations. It doesn’t auto-extend for willfulness; however, the IRS can obtain a taxpayer’s consent to extend, and different clocks apply to record-keeping violations and to filing civil actions (generally 2 years after assessment).

Can FBAR penalties be waived or reduced?

FBAR penalties are serious, but they’re not always applied at the maximum level. The IRS has multiple ways to soften the blow, depending on your intent, history, and how quickly you correct the mistake.

• Reasonable cause relief: If you can prove that the failure to file was due to circumstances outside your control—like reliance on bad advice, illness, or confusion over reporting rules—the IRS may waive civil penalties. Strong documentation and a clear explanation are essential.
• First-time leniency: U.S. persons who missed an FBAR once, especially for modest account balances, may qualify for reduced penalties or even a warning letter. The IRS often reserves harsher penalties for repeat offenders.
• Streamlined procedures: The Streamlined Filing Compliance Procedures are available to taxpayers whose violations were non-willful. They allow you to file back FBARs and amended tax returns, usually with either no penalty (for foreign residents) or a flat 5% penalty (for U.S. residents).
• Voluntary disclosure: For taxpayers with willful violations or large unreported balances, the Voluntary Disclosure Program provides a path back into compliance. While penalties are higher than under streamlined procedures, they’re generally less severe than those imposed after an audit.
• Appeals and litigation: Taxpayers who believe the IRS acted unfairly can challenge penalties administratively or take the case to district court. Some court decisions have reduced penalties where the IRS overreached or applied rules inconsistently.

How does the IRS find out about foreign accounts?

If you’re wondering how the IRS uncovers unreported accounts, the short answer is: they have plenty of tools. Between global reporting laws and domestic enforcement, hiding foreign assets has become nearly impossible.

• FATCA reporting: Under the Foreign Account Tax Compliance Act, foreign financial institutions must report U.S. account holders and balances directly to the IRS.
• International agreements: Cross-border data-sharing agreements between the U.S. and foreign governments give the IRS access to account information worldwide.
• Audits and reviews: Tax preparers, routine audits, and document mismatches can flag inconsistencies that point to unreported accounts.
• Whistleblowers: Tips from insiders, disgruntled business partners, or even former spouses have led to IRS investigations of hidden accounts.

Simply put, the U.S. government has made FBAR reporting enforcement a high priority—and attempting to hide accounts risks escalating penalties, including criminal charges for willful FBAR violations.

How to get back into compliance

If you’ve missed an FBAR filing, the IRS offers different programs depending on your situation. The key is knowing which path fits your case:

• If you reported all income but forgot the FBAR: Use the Delinquent FBAR Submission Procedures. You can file late FBARs without facing penalties.
• If you didn’t report some income but the mistake wasn’t willful: The Streamlined Filing Compliance Procedures let you catch up by filing amended returns and FBARs, usually with reduced penalties (and none at all if you live abroad).
• If you knew about the requirement and failed to file: The Voluntary Disclosure Program is your safest route. While it carries higher penalties, it offers protection against the most severe willful FBAR penalties and possible criminal prosecution.

Common mistakes leading to FBAR penalties

FBAR reporting rules catch many taxpayers off guard. The requirements look simple on paper, but small errors can create expensive compliance problems. Here are some of the most frequent—and costly—mistakes:

• Overlooking joint accounts or signature authority: Even if the account isn’t “yours” in the everyday sense, it may still count. Joint accounts with a spouse, business partner, or family member are reportable, as are accounts where you only have signature authority (for example, as a company officer).
• Misunderstanding the $10,000 threshold: The filing requirement kicks in if the aggregate maximum value of all foreign accounts tops $10,000 at any point in the calendar year. It’s not $10,000 per account, and it doesn’t matter if balances only briefly cross that line. Five $3,000 accounts equal one $15,000 reporting obligation.
• Mixing up FBAR and FATCA: FBAR (FinCEN Form 114) is filed with the Financial Crimes Enforcement Network, while FATCA (Form 8938) is attached to your income tax return. They overlap but aren’t interchangeable—many taxpayers mistakenly assume filing one form covers both requirements.
• Ignoring multiple years of reporting: Missing one year of FBAR filing is a problem; missing several years can multiply penalties quickly. The IRS can assess fines for each year of non-compliance, and in willful cases, those penalties may be applied to each account.

Getting FBAR compliance right

FBAR penalties are steep for a reason: the U.S. government takes foreign account reporting seriously. But with the right approach—and the right guidance—you can avoid missteps, minimize risk, and stay compliant year after year.

At Bright!Tax, we specialize in helping Americans abroad navigate complex reporting rules, from FBAR forms to full international tax filings. Our expat tax experts understand the nuances of non-willful vs. willful violations, relief programs, and compliance strategies—so you don’t have to face the IRS alone.

Get in touch today, and let us help you file with confidence.

Frequently Asked Questions