FBAR Penalties for Late Filing, Failure to File & More
The IRS Can Impose Severe Penalties on Taxpayers Who Fail to File FBAR
The penalties for not filing FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) are $10,000 for non-willful violations and $100,000 for willful violations. Set in 2004, the penalties are indexed to inflation, and as of 2026, they're $16,536 and $165,353, respectively, though the willful violation penalty can get up to 50% of your account balance.
The IRS doesn't always apply these penalties right away, and depending on why you're behind, you may be able to get caught up on your filing requirements without incurring these penalties.
Key takeaways
- FBAR penalties for individuals started at $10,000 and $100,000 for non-willful and willful violations, respectively, but the penalties increase annually with inflation.
- Businesses may face additional penalties for not following rules related to reporting foreign accounts.
- If you show reasonable cause for not filing, the IRS will typically waive the penalties.
- The IRS used to guarantee penalty relief for qualifying taxpayers through its FBAR delinquent submission procedures, but the IRS no longer guarantees that type of administrative relief.
- Penalties are only 5% of your account balance during the highest balance year associated with the disclosure if you qualify for the agency's streamlined disclosure procedures.
How Much Are FBAR Penalties?
As of 2026, the maximum penalty for a non-willful FBAR violation is $16,536. Willful FBAR violations can incur penalties of the higher of $165,353 or 50% of the balance in your foreign account. Originally set at $10,000 and $100,000, these penalties are indexed to inflation, and they increase every year.
The penalties can potentially exceed the balance in your foreign accounts. For example, say you have $50,000 in your foreign bank accounts, and the IRS determines that you have committed a willful FBAR violation. Your penalty can be up to $165,353. If you have $3 million in your foreign accounts, the FBAR willful violation penalty can be up to $1.5 million.
Penalties for Business Violations of the Bank Secrecy Act (BSA)
The IRS can also assess negligent violation penalties to financial institutions and non-financial trades or businesses that do not follow FBAR reporting and recordkeeping requirements as covered in the Bank Secrecy Act (BSA). As of 2026, the penalties for willful violations start at $71,545 per transaction and go up to the greater of the amount of the transaction or $286,184. Originally, these inflation-adjusted penalties were $25,000 and $100,000. As of 2026, FinCEN has assessed record-breaking penalties of up to $125 million. Although these penalties don't affect individuals, they show that the government is serious about these rules -- so if you have a foreign account, your bank is likely to report it.
Legal Codes for FBAR Civil Penalties
As indicated above, there are four civil penalties related to FBAR violations. Here are the penalties and the U.S. Code that outlines the specific laws surrounding each of these penalties.
- Negligent activity 31 USC 5321(a)(6)(A).
- Pattern of negligent activity 31 USC 5321(a)(6)(B).
- Penalty for non-willful violation 31 USC 5321(a)(5)(A) and (B).
- Penalty for willful violations 31 USC 5321(a)(5)(C).
Willful Vs. Non-Willful FBAR Penalties
Non-willful penalties typically apply when you exercised due caution to stay compliant with the filing requirements. Willful penalties apply when you knowingly chose not to file your FBAR, you recklessly disregarded the rules, or you chose not to learn about the requirements (aka willful blindness). A willful penalty can be ten times higher (or even more) than a non-willful penalty. However, non-willful penalties are assessed per year, as ruled by the Supreme Court in Bittner v. United States in 2023, while willful penalties can apply per account per year.
FBAR Willful Reckless Disregard
Here is an example of willful recklessness with the FBAR. Say that you complete your return, and you tick a box on Schedule B saying that you do not have any foreign assets, and another box saying that you don't have to file an FBAR.
When the IRS contacts you about the unfiled FBAR, you claim that you didn't know about the reporting requirement and didn't notice which boxes you ticked on your Schedule B. This may be considered reckless behavior or potentially even tax evasion (which is a crime). When you sign your tax return under penalty of perjury, you are declaring that the information submitted is correct.
Ticking boxes without reading questions or reporting incorrect information is reckless. By extension, the IRS can assess willful penalties in these situations.
FBAR Willful Blindness
Willful blindness occurs in cases where you didn't know about the FBAR filing requirement, and you went out of your way to maintain your ignorance. In other words, you should have known about the FBAR reporting requirement, but you didn't. Again, you don't necessarily need intent for the IRS to assess a willful FBAR penalty. The government can assess your willfulness based on recklessness and blindness.
Civil Willfulness vs. Criminal Willfulness
The above penalties are all civil penalties. If the IRS assesses a civil penalty, you just pay the penalty. You don't worry about criminal charges or jail time. However, in rare cases, the government can assess willful criminal penalties on taxpayers who don't file FBARs. Generally, taxpayers only face criminal FBAR penalties when they are also being accused of other financial crimes such as money laundering and tax evasion.
Criminal FBAR Penalties
Under U.S. Code 31 U.S.C. §5322, you can face criminal FBAR penalties of up to $500,000 and a prison term of up to 10 years. These penalties can apply if you willfully failed to file an FBAR or filed a false FBAR. Again, however, criminal penalties generally only apply in cases where other crimes are involved.
What Is the Maximum FBAR Penalty?
There is no cap on willful FBAR violation penalties, and this rule has been upheld through several Federal circuit court rulings. The penalties are up to $165,353 or 50% of the account balance per account per year, with no upper cap.
In 2009, Mr. Kahn willfully failed to report the funds in his foreign bank accounts. He had just over $8.5 million in two Swiss bank accounts. Because it was a willful failure to file the FBAR, the government assessed a penalty of $4.26 million, which was equal to 50% of his aggregate account balances. The lawyers for his estate argued that a 1987 Treasury Department Regulation limited the penalty for willful FBAR reporting violations to $100,000. The government claimed that a 2004 statutory amendment superseded the regulation. The courts sided with the government in this case, just as they had in several similar Federal District Court cases.
Why Are FBAR Penalties So Severe?
The government uses FBAR penalties to scare taxpayers into compliance and reduce the risk of money laundering and other financial crimes. That is why the Financial Crimes Enforcement Network (FinCEN) handles these returns instead of the IRS directly. FBAR penalties have little to nothing to do with tax; they're about reducing money laundering risks. Even if you report and pay tax on the income from your foreign accounts, you may still face a penalty if you don't file your FBAR.
How Does the IRS Calculate FBAR Penalties?
Once the IRS realizes that you have unfiled FBARs, the agency will assign an examiner to your case. The examiner will attempt to get more details about your foreign accounts and learn why you didn't file the FBAR. You need to navigate this process carefully. The FBAR penalties quoted above are maximums — the examiner can also decide to assess no penalties or smaller penalties on your account.
The examiner is also the person who makes the initial determination of whether your behavior was willful or non-willful. One examiner may consider the situation aggravated negligence but still non-willful. Another examiner may claim that the same set of facts constitutes reckless disregard and thus warrants a non-willful FBAR penalty.
Luckily, this decision isn't final. The FBAR Counsel must approve all non-willful FBAR penalties. And you have the right to appeal the assessment and even take the issue to litigation if needed.
How to Reduce the Risk of FBAR Penalties
The best way to avoid FBAR penalties is to file your FinCEN 114 accurately and on time. If you realize that you missed filing an FBAR, be proactive. It is always better to contact the IRS before the agency contacts you. If the IRS contacts you about unfiled FBARs, reply promptly and provide the requested information, but consider getting a licensed tax professional to represent you so you don't say the wrong thing. Even in this case, you may still be able to avoid penalties if the IRS believes that you had a reasonable cause for missing the filing requirement.
History of FBAR Penalties
In 1970, Congress passed the Bank Secrecy Act (BSA), which contained a requirement for individuals to report their foreign bank accounts. In 1972, the Secretary of the Treasury created the FBAR form so that individuals could report their foreign bank accounts when they filed their income tax returns.
These rules were designed to reduce the risk of money laundering and other financial crimes. As these issues became a more significant problem, Congress passed the Money Laundering Control Act of 1986, and this act included the first penalty for willful failure to file FBAR. After 9/11, Congress decided to increase the willful FBAR penalty again. In 2004, the government passed a statute that increased the penalty for willful failure to file FBAR to the greater of $100,000 or 50% of the aggregate balances in the foreign bank accounts. The $100,000 is indexed for inflation, so it typically increases every year.
FBAR Penalty Waivers
There are situations where you can file late FBAR without incurring penalties. In other cases, an examiner may look at your case's circumstances and decide to issue you a warning without any penalties. If you've been assessed FBAR penalties, you can apply to have them waived, appeal the case, or pursue the issue through litigation.
FBAR Penalty Mitigation Guidelines
The IRS may mitigate the penalties in cases that don't involve tax fraud or criminal charges. Mitigation affects both willful and non-willful violations, and although it's subject to IRS approval may include the following reductions:
- $500 per year for non-willful violations if the maximum aggregate balance of all foreign accounts is less than $50,000.
- The greater of $1,000 per year or 5% of the maximum account balance for willful violations if the maximum aggregate balance of all foreign accounts is less than $50,000.
- $5,000 per year for non-willful violations if the aggregate account balance for the year is between $50,000 and $250,000.
Non-willful FBAR penalties apply per form, which means you can only incur one non-willful filing penalty per year regardless of how many accounts you have. Willful FBAR penalties apply per year as well but can be based on account balances.
FBAR Penalty FAQ
When did the Supreme Court rule that FBAR penalties were per form and not per account?
In 2023, the Supreme Court ruled in United States v. Bittner that the penalties were per form (aka per year that you didn't file an FBAR report) rather than per account.
What is a Section 26 miscellaneous offshore penalty?
It's a penalty of 5% of the balance of unreported foreign accounts. It means the IRS uses its administrative powers under Section 26, rather than applying penalties from Section 31 of the tax code, which covers the Bank Secrecy Act (BSA) and penalties for not filing FBARs.
What's the FBAR penalty if you use the streamlined filing procedures?
The penalty is 5% of the account balance for the year with the highest aggregate balance. For example, if you have $100,000 in your accounts in the highest year related to the disclosure, the penalty is $5,000; otherwise, it would be $10,000 (indexed to inflation) per year you didn't file the FBAR. You can only use the streamlined option if you didn't act willfully.
Why did the IRS remove the delinquent submission penalty waiver guidelines?
The IRS removed its FBAR delinquent submission guidelines and its guarantee that you wouldn't get a penalty if you meet these guidelines in 2026. The agency had a right to do so since the delinquent FBAR submission processes are based on administrative guidelines, not legal code.
Get Help With FBAR Penalties
If you're dealing with FBAR penalties, contact a tax professional today. Using the TaxCure directory, you can search for tax lawyers, CPAs, and enrolled agents who have experience helping taxpayers with this specific issue.
Post reviewed by Sean O'Connor, a tax attorney from Connecticut, and Edward Parsons, a CPA based in Florida.