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) 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 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 does an FBAR report?

An FBAR (FinCEN Form 114) must be filed by any US person who has a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year. Reportable accounts include foreign bank accounts, securities accounts, mutual funds, life insurance with cash value, retirement accounts, and certain other holdings.

§5314](https://www.law.cornell.edu/uscode/text/31/5314) 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 securities accounts (brokerage accounts holding stocks, bonds, mutual funds).

Foreign mutual funds and other foreign-issued pooled investment vehicles.

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.

How do you file an FBAR?

FBAR is filed electronically with FinCEN (not the IRS) through the BSA E-Filing System using FinCEN Form 114. The filing deadline is April 15, with an automatic extension to October 15 that requires no separate request. Paper filings are not accepted for current-year FBARs. The form requires identifying information for the filer and details for each foreign account.

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.

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. complexity arises when there are many accounts, accounts in countries with limited bank disclosures, or signature authority without financial interest situations.

What is the non-willful FBAR penalty after Bittner?

After the Supreme Court's 2023 decision in Bittner v. United States, 598 U.S. 85, the maximum non-willful FBAR penalty is $10,000 per report (per year), not per account. The inflation-adjusted maximum for 2025 is approximately $15,611 per report. This per-report cap applies regardless of how many foreign accounts were left unreported.

§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.

What is the willful FBAR penalty?

The willful FBAR penalty under 31 U.S.C. §5321(a)(5)(C) is the greater of $100,000 or 50% of the account balance at the time of the violation. For 2025, the inflation-adjusted minimum is approximately $156,107. The Bittner decision did not alter the willful penalty framework, which remains assessed on a per-account basis.

§5321(a)(5)(C), the maximum penalty for willful FBAR violations is the greater of:

50% of the balance of the account at the time of the violation.

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.

How does the IRS determine willful vs. non-willful FBAR violations?

The IRS evaluates willfulness based on factors including knowledge of the foreign account, awareness of the reporting requirement, large unexplained cash transactions, structuring to avoid reporting, and failure to disclose accounts to tax preparers. Courts are split on whether reckless disregard suffices or actual knowledge of the legal duty is required.

The line between willful and non-willful is the procedural and 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 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 with 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.

Does the FBAR penalty have a reasonable cause exception?

The non-willful FBAR penalty includes a reasonable cause exception under §5321(a)(5)(B)(ii). To qualify, the violation must have been due to reasonable cause and the account balance or transaction must have been properly reported. The willful FBAR penalty does not have any reasonable cause exception.

The non-willful penalty under §5321(a)(5)(B)(ii) has a reasonable cause exception.

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.

How do the Streamlined Filing Compliance Procedures work for FBAR?

The IRS Streamlined Filing Compliance Procedures allow taxpayers with non-willful FBAR failures to come into compliance by filing 3 years of amended returns and 6 years of FBARs. The foreign offshore track (SFOP) carries no penalty, while the domestic track (SDOP) requires a 5% penalty on the highest aggregate account value during the covered period.

For non-willful prior FBAR failures, the Streamlined Filing Compliance Procedures provide a pathway to come into compliance. The procedures were established in 2014 and remain available as of 2026.

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 penalty consequences.

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 protection against later penalty assessment.

How does the IRS Voluntary Disclosure Practice work for FBAR?

The IRS Voluntary Disclosure Practice (VDP) provides a remediation path for willful FBAR failures. Taxpayers submit a preclearance request to IRS Criminal Investigation, then provide full financial disclosures and amended returns. The VDP typically involves civil penalties in the 25-50%+ range but provides protection from criminal prosecution.

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).

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 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.

What is the statute of limitations for FBAR penalties?

FBAR penalties are subject to a 6-year statute of limitations under 31 U.S.C. §5321(b)(1), measured from the date of the violation. This is separate from the general Title 26 tax assessment limitations period under 26 U.S.C. §6501. The IRS can assess FBAR penalties for any violation that occurred within this 6-year window.

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 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 does FBAR coordinate with FATCA Form 8938?

FBAR (FinCEN Form 114) and FATCA Form 8938 are separate reporting requirements with different filing thresholds, asset categories, and penalty structures. FBAR reports foreign financial accounts to FinCEN under Title 31, while Form 8938 reports foreign financial assets to the IRS under 26 U.S.C. §6038D as part of Form 1040. Both may be required for taxpayers with foreign holdings.

FBAR and FATCA Form 8938 (Statement of Specified Foreign Financial Assets) are separate but related reporting requirements:

For a US person with 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 does FBAR fit in the broader tax-debt landscape?

FBAR penalties interact with several IRS collection and enforcement tools, including passport revocation for related tax debt, currently not collectible status, offer in compromise, and collection due process protections. Advisors who participated in FBAR failures with knowledge may also face separate penalties under §6701 for aiding or abetting understatement.

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.

Taxpayers who have been filing FBARs correctly should continue annual filing and consider parallel Form 8938 obligations. Those with unfiled FBARs should evaluate whether prior failures were willful or non-willful to determine the appropriate remediation path: Streamlined Procedures for non-willful failures, or Voluntary Disclosure Practice for willful ones.

For US persons with foreign accounts who have been filing FBARs correctly:

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.

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 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 signing this certification when the failures were actually willful can substantially increase the consequences.

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 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 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).

Bittner clarified the per-report rule for non-willful penalties; the willful/non-willful determination remains the 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.