FBAR penalty framework: 31 U.S.C. §§ 5314 and 5321, the $10,000 non-willful per-report cap under Bittner, the willful penalty at greater of $100K or 50% of account, and the Streamlined Filing Compliance Procedures
If you have foreign bank or financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year, you are required to file an annual FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts). The reporting obligation is not part of the Internal Revenue Code; it's authorized by the Bank Secrecy Act of 1970 at 31 U.S.C. §5314, and the penalties are at 31 U.S.C. §5321. The reports are filed with FinCEN (the Financial Crimes Enforcement Network), but the IRS handles enforcement under a 2003 memorandum of understanding.
The Title 31 framework is what makes FBAR substantively different from Title 26 tax obligations. The penalties are structured differently (no specific limitation period, separate "willful" and "non-willful" categorizations, no formal IRS deficiency procedures), and the case law is decided under different statutory interpretation frameworks. The Supreme Court's February 2023 decision in Bittner v. United States, 598 U.S. 85 (2023) substantially clarified one major aspect of the framework: non-willful penalties accrue on a per-report (per-year) basis, not on a per-account basis.
For US persons with foreign accounts who have not been filing FBARs, or who have been filing incomplete FBARs, the question of how the penalty framework applies is the substantial concern. The penalty exposure can be substantial; the path to cure depends on whether the prior failures qualify as willful or non-willful, and on whether the Streamlined Filing Compliance Procedures or the IRS Voluntary Disclosure Practice provides the appropriate remediation framework.
What FBAR reports
Per 31 U.S.C. §5314 and the implementing regulations at 31 C.F.R. §1010.350, a US person must file an FBAR if:
The person has a financial interest in, or signature or other authority over, one or more financial accounts located outside the United States; AND
The aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
The $10,000 threshold is aggregate (combined across all foreign accounts), not per-account. A person with three accounts of $4,000 each must file an FBAR even though no single account exceeds $10,000. The threshold uses the maximum value at any point during the year, not the year-end value.
"Foreign financial accounts" include:
Foreign bank accounts (checking, savings, time deposits).
Foreign securities accounts (brokerage accounts holding stocks, bonds, mutual funds).
Foreign mutual funds and other foreign-issued pooled investment vehicles.
Foreign-issued life insurance with cash value.
Foreign retirement accounts (with specific country-by-country considerations).
Foreign-held precious metals if held in a financial account.
Foreign cryptocurrency accounts (FinCEN announced in 2020 that it intended to issue regulations clarifying that virtual currency is reportable, though final regulations on this are still pending as of 2026).
"US person" includes US citizens, US resident aliens, US partnerships, US corporations, US trusts, and US estates. Citizenship-based reporting is the key feature; US citizens living abroad with foreign accounts are subject to FBAR reporting regardless of residency.
The filing mechanics
FBAR is filed annually with FinCEN, not with the IRS. The 2024 filing form (for tax year 2024) was due April 15, 2025, with automatic extension to October 15, 2025 (no separate extension request needed; the automatic extension applies).
The form is FinCEN Form 114, filed electronically through the BSA E-Filing System at bsaefiling.fincen.treas.gov. Paper filings are not accepted for current-year FBARs.
The form requires:
Identifying information for the filer.
Each foreign account: bank name, account number, account type, country, maximum value during the year.
For signature authority cases (without financial interest), specific information about the entity that has the financial interest.
The form is relatively short for individuals with few foreign accounts. Substantial complexity arises when there are many accounts, accounts in countries with limited bank disclosures, or signature authority without financial interest situations.
The non-willful penalty under Bittner
Per 31 U.S.C. §5321(a)(5)(A), the maximum penalty for non-willful FBAR violations is $10,000 per violation. The "per violation" question (whether each unreported account constitutes a separate violation, or each non-filed FBAR report constitutes a single violation) was the subject of the Bittner litigation.
The facts of Bittner: Alexandru Bittner, a dual US-Romanian citizen, returned to the US in 2011 and learned of his FBAR reporting obligations. He filed late FBARs for 2007-2011 but the initial filings omitted 25+ of his foreign accounts. The IRS assessed $2.72 million in penalties, calculated as $10,000 per unreported account for each of the 5 years (272 violations total).
The Fifth Circuit upheld the per-account calculation in United States v. Bittner, 19 F.4th 734 (5th Cir. 2021). The Ninth Circuit had reached the opposite conclusion in United States v. Boyd, 991 F.3d 1077 (9th Cir. 2021), holding that the penalty was per-report.
The Supreme Court resolved the circuit split in Bittner v. United States, 598 U.S. 85 (2023), in a 5-4 decision authored by Justice Gorsuch. The Court held that the $10,000 non-willful penalty applies on a per-report (per-year) basis, not on a per-account basis.
The substantive effect: a non-willful FBAR filer with 5 years of missing reports and 20 accounts per year faces a maximum non-willful penalty of $50,000 ($10,000 × 5 years), not $1,000,000 ($10,000 × 5 years × 20 accounts).
The dollar threshold of $10,000 is itself subject to inflation adjustment under the Federal Civil Penalties Inflation Adjustment Act. For 2025, the inflation-adjusted maximum non-willful penalty is approximately $15,611 per report. The annual adjustment applies to violations assessed in the current year, not violations that occurred in prior years.
The willful penalty
Per 31 U.S.C. §5321(a)(5)(C), the maximum penalty for willful FBAR violations is the greater of:
$100,000; OR
50% of the balance of the account at the time of the violation.
For substantial accounts, the 50% calculation dominates. A willful failure to report a $5 million foreign account produces a $2.5 million penalty. A willful failure to report a $50,000 account produces a $100,000 penalty (the statutory minimum because 50% of $50,000 is $25,000, less than $100,000).
The inflation adjustment increases the willful penalty as well. For 2025, the inflation-adjusted $100,000 minimum is approximately $156,107.
The Bittner decision did not address willful penalties; it only resolved the per-account vs. per-report question for non-willful violations. The willful penalty framework remained intact after Bittner.
The willful vs. non-willful determination
The line between willful and non-willful is the substantial procedural and substantive question in FBAR enforcement. Bittner did not resolve this question; the Supreme Court explicitly noted that the case did not address the willful/non-willful determination.
The lower courts have applied varying standards:
The Fourth Circuit and Eleventh Circuit have held that "willfulness" includes "reckless disregard" of the FBAR filing requirement.
The Ninth Circuit has held that willfulness requires actual knowledge of the requirement or "voluntary, intentional violation of a known legal duty."
The IRS Internal Revenue Manual (IRM 4.26.16) instructs examiners to find willfulness based on facts including: knowledge of the foreign account, knowledge of the reporting requirement, large unexplained cash transactions, structuring of transactions to avoid reporting, failure to disclose accounts to tax preparers, and similar factors.
The substantial practical implication: cases involving wealthy individuals with substantial foreign holdings and active tax planning are at risk of being characterized as willful. Cases involving small accounts of individuals with limited international financial sophistication are more likely to be characterized as non-willful.
For taxpayers under IRS examination on FBAR issues, the willfulness determination is the critical factual question. The penalty difference between willful and non-willful can be many orders of magnitude. Counsel familiar with the specific evidentiary patterns the IRS uses to establish willfulness is essential for cases at risk of willful characterization.
The reasonable cause exception
The non-willful penalty under §5321(a)(5)(B)(ii) has a reasonable cause exception. The penalty does not apply when:
The violation was due to reasonable cause; AND
The amount of the transaction or the balance in the account at the time of the transaction was properly reported.
The "properly reported" prong is sometimes the limiting factor. A taxpayer who had reasonable cause for the FBAR omission but who also did not report the foreign income on their Form 1040 may not qualify for the reasonable cause exception because the underlying transactions/balances were not properly reported either.
The willful penalty does not have a reasonable cause exception. The fact that a taxpayer had a good reason for their action does not mitigate the willful penalty; only the willful/non-willful characterization itself can be challenged.
The Streamlined Filing Compliance Procedures
For non-willful prior FBAR failures, the Streamlined Filing Compliance Procedures provide a substantial pathway to come into compliance. The procedures were established in 2014 and remain available as of 2026.
The Streamlined framework has two tracks:
Streamlined Foreign Offshore Procedures (SFOP) for taxpayers who meet the non-US residence requirements. Penalty for SFOP: $0. The taxpayer files 3 years of amended returns (Form 1040X) plus 6 years of FBARs, pays any back taxes plus interest, but does not pay an FBAR penalty.
Streamlined Domestic Offshore Procedures (SDOP) for US residents. Penalty for SDOP: 5% of the highest aggregate value of foreign accounts during the relevant period. The taxpayer files 3 years of amended returns plus 6 years of FBARs, pays back taxes plus interest, plus the 5% penalty.
Both tracks require the taxpayer to certify under penalty of perjury that the prior failures were non-willful. The certification is the critical procedural element; making the certification falsely can convert a non-willful failure into a willful one with substantial penalty consequences.
Eligibility for Streamlined requires:
The prior failures were non-willful.
The taxpayer is not under IRS examination for any tax year.
The IRS has not initiated a civil examination of the taxpayer for any tax year.
For taxpayers who meet these requirements and whose prior failures genuinely were non-willful, the Streamlined Procedures are typically the right path to remediation. The procedures are well-defined, the cost is predictable, and the closing letter the IRS issues provides substantive protection against later penalty assessment.
The IRS Voluntary Disclosure Practice
For willful FBAR failures (or for taxpayers who do not qualify for Streamlined for other reasons), the IRS Voluntary Disclosure Practice provides an alternative remediation path. The Voluntary Disclosure Practice (VDP) is the successor to the now-closed Offshore Voluntary Disclosure Program (OVDP) and Offshore Voluntary Disclosure Initiative (OVDI).
Under the current VDP framework:
The taxpayer submits a preclearance request to IRS Criminal Investigation.
If preclearance is granted, the taxpayer submits a full voluntary disclosure including detailed financial information and amended returns.
The IRS calculates penalties based on the taxpayer's specific facts, typically including a substantial penalty in the 25-50%+ of asset value range for willful failures.
The VDP provides protection from criminal prosecution (the primary concern in willful FBAR cases) but does not eliminate civil penalties.
For taxpayers with genuinely willful failures, the VDP is generally the appropriate path. The cost is substantial but it is substantially less than the consequences of a referred criminal investigation and trial.
Statute of limitations
FBAR penalties are not subject to the general 26 U.S.C. §6501 limitations period that applies to Title 26 tax assessments. Instead, FBAR penalties are subject to the 6-year limitations period in 31 U.S.C. §5321(b)(1), measured from the date of the violation.
For a non-filed 2023 FBAR (originally due April 15, 2024, extended to October 15, 2024), the 6-year limitations period runs from October 15, 2024 (or April 15, 2024, depending on the analytical framework). The IRS has substantial time to assess penalties; cases involving multiple unreported years can produce stacked penalties for each year within the limitations window.
The substantial implication: catching up FBAR filings for prior years before the IRS reaches the case is generally the cleaner outcome. Once the IRS has identified the unreported accounts and begun an examination, the remediation paths become more constrained.
How FBAR coordinates with FATCA Form 8938
FBAR and FATCA Form 8938 (Statement of Specified Foreign Financial Assets) are separate but related reporting requirements:
FBAR (FinCEN Form 114) under 31 U.S.C. §5314 reports foreign financial accounts to FinCEN.
Form 8938 under 26 U.S.C. §6038D reports foreign financial assets to the IRS as part of the Form 1040.
The two forms have different thresholds (Form 8938 thresholds are higher, ranging from $50,000 to $400,000 depending on filing status and residency), different categories of reportable assets (Form 8938 reaches some assets not covered by FBAR), and different penalty structures.
For a US person with substantial foreign holdings, both forms may be required, and the failure to file either can produce separate penalties. Coordinating FBAR and Form 8938 filings is part of the substantive compliance for taxpayers with international financial activity.
How FBAR fits in the broader tax-debt landscape
The framework operates in coordination with several other Halstonberg tax-debt provisions:
§7345 passport revocation can apply to seriously delinquent FBAR-related tax debt (the underlying tax on the unreported income, not the FBAR penalty itself).
Currently Not Collectible status can apply to FBAR penalties for taxpayers who cannot afford to pay.
Offer in compromise is available for FBAR penalties, with the standard reasonable collection potential analysis.
Collection due process procedures apply to FBAR penalty collection in the same way as other federal tax collections.
§6701 aiding/abetting can apply to tax preparers, attorneys, or advisors who participated in FBAR failures with knowledge.
Practical guidance
For US persons with foreign accounts who have been filing FBARs correctly:
Continue annual filing. The April 15 due date (with automatic extension to October 15) is the operational deadline. Keep documentation of foreign account balances throughout the year to support the maximum-value calculation.
Consider Form 8938 separately. The Form 8938 reporting on Form 1040 is a parallel requirement; the two forms together provide the complete US reporting framework for foreign holdings.
For US persons with foreign accounts who have not been filing FBARs:
Evaluate whether prior failures were willful or non-willful. The Streamlined Procedures are available for non-willful failures; the VDP is the path for willful failures. The willful/non-willful determination is the substantive starting point for the remediation strategy.
For Streamlined eligibility, confirm the residency requirements (SFOP vs. SDOP) and the certification standard. The non-willfulness certification under penalty of perjury is substantive; signing this certification when the failures were actually willful can substantially increase the consequences.
Engage counsel familiar with FBAR remediation. The Streamlined and VDP frameworks have specific procedural requirements that change periodically. Counsel familiar with the current state of the practice can provide the most current strategy.
For US persons under IRS examination on FBAR issues:
The willfulness determination is the critical question. The case-specific facts (knowledge of accounts, knowledge of reporting requirement, structure of transactions, dealings with tax preparers) determine the willful/non-willful characterization.
The Bittner decision provides substantial protection for non-willful violations. The per-report cap of $10,000 (inflation-adjusted to ~$15,611 for 2025) limits the non-willful penalty exposure regardless of the number of unreported accounts.
For substantial willful penalty assessments, judicial review is available. The 6-year FBAR limitations period and the §5321 framework provide procedural protections; FBAR penalty cases can be litigated in federal district court (not Tax Court, since Title 31 penalties are not within the Tax Court's jurisdiction).
The FBAR framework continues to evolve. Bittner clarified the per-report rule for non-willful penalties; the willful/non-willful determination remains the substantive litigation battleground. Streamlined and VDP provide structured remediation paths for taxpayers who proactively address prior failures. For taxpayers caught by IRS examination before they reach out, the procedural and substantive defenses are more limited but still meaningful.