The numbers quoted online for FBAR penalties are frightening, and most of them describe cases that look nothing like yours. A retired couple who never reported a savings account in their home country is not treated the same way as someone who moved money offshore to hide it. The law draws that line itself. Here is how the penalties are actually structured, and what keeps them small or off the table.
FBAR penalties are not automatic
The statute says the government may impose a penalty for an FBAR violation, not that it must. The IRS's own guidance says whether penalties are asserted depends on facts and circumstances. In practice, FBAR penalties are considered as part of an examination. Filing a late FBAR does not by itself send you a bill.
Non-willful and willful violations
Everything turns on willfulness. For a non-willful violation, the statutory maximum civil penalty is $10,000. For a willful violation, it is the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. Both dollar figures are adjusted for inflation every year, so the current maximums are higher than these base amounts. Willful violations can also carry criminal penalties.
Non-willful conduct, in the IRS's words, is negligence, inadvertence, or mistake, or a good faith misunderstanding of the requirements of the law. Not knowing that a savings account opened before you moved to the United States had to be reported can fit that description, though the IRS weighs the facts of each case.
Per report, not per account
How a non-willful penalty is counted changed in 2023. In Bittner v. United States, the Supreme Court held that the non-willful penalty applies per annual FBAR report, not per account listed on it. Someone with eight accounts and five missed years faces at most five non-willful penalties, one for each missed year. Willful penalties are still measured against account balances, which is why the willful line matters so much.
Can FBAR penalties be waived?
Yes, in two main ways. The first is reasonable cause. The statute itself says no non-willful penalty is imposed when the violation was due to reasonable cause and the account balance was properly reported, and the IRS's manual tells its examiners not to assert a penalty when the failure was not willful, was due to reasonable cause, and the account is properly reported on the late FBAR. Reasonable cause has to be shown, with facts and documents, which is why the explanation that goes in with a late filing deserves real care.
The second is the IRS streamlined filing compliance procedures, for taxpayers whose failure was non-willful but who also left foreign income off their returns. Taxpayers living in the United States who complete the streamlined domestic procedures pay a single 5% miscellaneous offshore penalty and are not subject to FBAR penalties, information return penalties or accuracy-related penalties on those filings. Taxpayers who qualify as living abroad use the streamlined foreign procedures, which carry no miscellaneous offshore penalty at all. Our guide to late FBAR filing compares these routes.
Why the account below $10,000 can still matter
A single account with a few thousand dollars in it does not trigger an FBAR on its own. The test is the combined value of all your foreign accounts, so a small account still has to be listed in a year when your accounts together passed $10,000. Leaving it off is still a reporting failure, which is why every account goes on our list.
When the IRS has already made contact
If the IRS has opened a civil examination of any of your tax years, the streamlined procedures are no longer available, and the case is worked through the examination itself. You can authorize a representative for FBAR matters with Form 2848, describing the matter as relating to the Report of Foreign Bank and Financial Accounts. As enrolled agents we represent clients in FBAR examinations through our FBAR and FATCA compliance service. Where there is any question of willful conduct, that question is settled with counsel before anything is filed. Either way, a No-Obligation Tax Resolution Case Evaluation is the right first step, ideally before the IRS writes to you.