Non-willful FBAR penalties run to roughly $16,500 per report for 2026, and after the Supreme Court’s decision in Bittner v. United States that penalty applies per report, not per account. Willful FBAR penalties are far higher, generally the greater of about $165,000 or half the account balance, and can be assessed for each year.

This article explains how the penalties work, how the IRS proves willfulness, and the ways to reduce or avoid them. To discuss your exposure with counsel, call (415) 968-1780.

Non-willful FBAR penalties

A non-willful violation is a failure to file that was not intentional, often because the taxpayer did not know the FBAR existed. The statutory penalty ceiling is $10,000, adjusted for inflation to roughly $16,500 for 2026.

The critical point, settled by the Supreme Court in Bittner v. United States in 2023, is that the non-willful penalty applies per report rather than per account. Before Bittner, the IRS argued for a separate penalty on every unreported account, which could multiply a single late FBAR into a six-figure exposure.

Now a non-willful failure to file one year’s FBAR is a single penalty, regardless of how many accounts that FBAR should have listed. The figure is a ceiling, not a floor, and it can often be reduced or eliminated, as explained below.

Willful FBAR penalties

Willful violations are a different world. The penalty is the greater of approximately $165,000 (an inflation-adjusted figure) or 50% of the balance in the account at the time of the violation, and it can apply for each year of a willful failure.

Over several years, a willful FBAR penalty can exceed the entire value of the account. In the most serious cases, willful failures can also carry criminal exposure under the Bank Secrecy Act.

This is why the willful-versus-non-willful line is the single most important issue in any FBAR penalty matter, and why it should be assessed by an attorney under privilege before you make any filing.

What makes an FBAR violation “willful”?

Willfulness does not require a confession that you meant to break the law. Courts have held that it includes not just knowing violations but also reckless disregard of a known filing duty and willful blindness to it.

In practice, the IRS builds a willfulness case from circumstantial facts: whether you signed a tax return, whether you checked the box on Schedule B about foreign accounts, whether you knew the account existed and had access to it, and whether you took steps that look like concealment, such as moving money or closing an account after learning of the requirement.

Because willfulness is proven by inference, the facts around what you knew and when you knew it matter enormously, and framing them correctly is a large part of the defense.

Reasonable cause: the primary defense to a non-willful penalty

Even a non-willful penalty can be avoided if you can show reasonable cause, meaning you acted with ordinary business care and prudence but still failed to file. The analysis is a facts-and-circumstances test.

Reliance on a qualified tax professional whom you fully informed, a good-faith and reasonable misunderstanding of an obscure requirement, serious illness or incapacity, and steps you took to come into compliance once you learned of the duty all support reasonable cause.

It is not a magic phrase; it is a documented showing, and how it is presented to the IRS often decides whether a penalty is sustained or abated.

How to reduce or eliminate FBAR penalties

There is usually more than one path, and the right one depends on your facts, especially the willfulness question and whether you also had unreported income.

• Delinquent FBAR Procedures. If you have no unreported income tied to the accounts and you are not under examination, you may be able to file the late FBARs with a reasonable-cause statement and avoid a penalty. See our Delinquent FBAR Procedures page.
• Streamlined Filing Compliance Procedures. For non-willful taxpayers who also had unreported income, the streamlined program caps the offshore penalty at a set percentage of the highest account balance, and eliminates it entirely for many taxpayers living abroad. See our Streamlined Offshore Procedures page.
• IRS Voluntary Disclosure Practice. Where willfulness is a real concern, the formal voluntary disclosure route provides a path that addresses criminal exposure, in exchange for a defined penalty framework.
• Reasonable cause and IRS mitigation. Even outside a formal program, the IRS has internal mitigation guidelines, and a documented reasonable-cause showing can reduce or remove a proposed penalty at examination or on appeal.
• Litigation. FBAR penalties can be contested in federal court, and the willfulness standard and penalty calculation are both litigable.

We help you choose among these in Streamlined vs. IRS Voluntary Disclosure: Which Path Fits Your Case. The wrong choice, including a quiet back-filing of FBARs, can turn a manageable problem into a willfulness fight, so make this decision with an attorney first.

How long does the IRS have to assess an FBAR penalty?

The government generally has six years to assess an FBAR penalty, running from the June 30 due date that applied for the year in question. That is a long window, and it means older unfiled years can still be on the table. It also means timing matters: coming forward before the IRS contacts you keeps the most options open, because the streamlined and delinquent procedures generally close once an examination begins.

How Kugelman Law helps

We represent taxpayers in FBAR penalty matters from start to finish: assessing the willfulness question honestly, choosing the right compliance path, building the reasonable-cause record, and defending penalties at examination, in IRS Appeals, and in litigation.

For related work and the full offshore picture, see our FBAR filing requirements article and our offshore and international tax attorney page. Where a matter reaches into a broader IRS examination, our colleague Otto Bosch, a former IRS Revenue Agent from the Large Business & International division, leads the firm’s audit-defense work.

Our results reflect what disciplined advocacy achieves in high-stakes tax disputes. In one federal matter, two IRS Notices of Deficiency proposing more than $557,000 across six years were settled in U.S. Tax Court down to roughly $38,000, and with avoided interest and California exposure the client effectively saved over $1.2 million. Results depend on specific facts. Past results do not guarantee future outcomes.

Talk to an attorney before you respond to an FBAR penalty

If you are facing an FBAR penalty, or you know you have unfiled FBARs, get a privileged assessment before you file or respond to the IRS. Schedule a paid, privileged consultation with Kugelman Law by calling (415) 968-1780 or visiting our contact page.

Frequently asked questions

How much is the penalty for not filing an FBAR?

For 2026, a non-willful FBAR penalty runs to roughly $16,500 per report, and after Bittner v. United States it applies per report rather than per account. A willful penalty is far higher, generally the greater of about $165,000 or 50% of the account balance, and can apply for each year. These figures are inflation-adjusted, so confirm current amounts.

What is the difference between a willful and non-willful FBAR penalty?

A non-willful penalty applies to an unintentional failure to file and is capped at roughly $16,500 per report for 2026. A willful penalty applies when the failure was intentional, reckless, or willfully blind, and is the greater of about $165,000 or half the account balance, per year, with possible criminal exposure in extreme cases.

Can I get an FBAR penalty reduced or removed?

Often, yes. Options include the Delinquent FBAR Procedures (no penalty where there is no unreported income), the Streamlined Filing Compliance Procedures for non-willful taxpayers, a documented reasonable-cause showing, IRS mitigation guidelines, and litigation. The right approach depends on your facts and should be chosen with an attorney.

What does the IRS have to prove for a willful FBAR penalty?

Willfulness includes knowing violations as well as reckless disregard of a known filing duty and willful blindness. The IRS typically proves it with circumstantial facts, such as signing a return, the Schedule B foreign-account question, knowledge of and access to the account, and any conduct that looks like concealment.

How long does the IRS have to assess an FBAR penalty?

Generally six years from the applicable due date. That is a long window, so older unfiled years can still be assessed, which is why coming forward before the IRS makes contact keeps the most options open.

About the author

Alex Kugelman is the founder and managing attorney of Kugelman Law, with nearly two decades of federal tax controversy experience including U.S. Tax Court and U.S. District Court litigation. He is admitted in California and before the U.S. Supreme Court, the U.S. Tax Court, and the U.S. District Court for the Northern and Eastern Districts of California, and served as San Francisco Chair of the Federal Bar Association Tax Division in 2018. He is nationally recognized for cryptocurrency tax and has been quoted in the Financial Times and the New York Post on California tax enforcement. For FBAR matters that reach into IRS examinations, his colleague Otto Bosch, a former IRS Revenue Agent from the Global High Wealth group within the Large Business & International division, leads the firm’s federal audit-defense work.

This article is attorney advertising and general information, not legal advice, and it describes penalty figures that adjust over time. FBAR penalty matters are fact-specific. Contacting Kugelman Law does not create an attorney-client relationship.