FBAR Penalties: Non-Willful vs Willful, and What the Bittner Decision Changed

FBAR penalties for a non-willful failure are capped at $10,000 per late or inaccurate report in the statute, adjusted for inflation to $16,536 for penalties assessed on or after January 17, 2025. Willful FBAR penalties can reach the greater of an inflation-adjusted $100,000 or 50% of the account balance. Since the Supreme Court's decision in Bittner v. United States, the non-willful figure is counted once per annual report and not once per account. This guide sets out both regimes, what Bittner changed and what it left alone.

What are the FBAR penalties for a non-willful violation?

A non-willful FBAR violation carries a civil penalty of up to $10,000 under 31 USC 5321(a)(5)(B)(i), increased each year for inflation. The amount is a ceiling. The IRS can charge less, issue a warning letter instead, or charge nothing where there is reasonable cause.

First, the obligation itself. The IRS states that a US person must file an FBAR (FinCEN Form 114) if the aggregate value of their foreign financial accounts exceeded $10,000 at any time during the calendar year. The report is due April 15 of the following year with an automatic extension to October 15, as the IRS FBAR page explains. Our guide to FBAR requirements for expats covers who has to file.

A violation happens when that report is not filed, is filed late, or is filed without all the required accounts. The penalty rules are then applied by IRS examiners under Internal Revenue Manual 4.26.16, which says four things worth knowing:

• One penalty per violation is the norm. In most non-willful cases, examiners will recommend one $10,000 penalty, adjusted for inflation, per violation.
• There is an overall ceiling. The total non-willful penalties across all open years will not exceed 50% of the highest aggregate balance of the foreign accounts to which the violations relate.
• There is a reasonable cause exception. The penalty should not be imposed if the violation was due to reasonable cause and accurate delinquent or amended FBARs are filed.
• A warning letter is an alternative. When there is an FBAR violation, the examiner will either issue Letter 3800, the FBAR warning letter, or determine a penalty. Examiners have discretion over which, and over the amount.

The current inflation-adjusted amounts

The dollar figures in the statute date from 2004. For violations after November 2, 2015 they are adjusted for inflation, and the adjusted maximums are published in 31 CFR 1010.821. The most recent FinCEN adjustment we could confirm was published in the Federal Register on January 17, 2025:

Penalty	Statute	Amount in the statute	Adjusted maximum, assessed on or after January 17, 2025
Non-willful FBAR violation	31 USC 5321(a)(5)(B)(i)	$10,000	$16,536
Willful FBAR violation (fixed-dollar limb)	31 USC 5321(a)(5)(C)(i)(I)	$100,000	$165,353

The adjusted amount that applies depends on the date the penalty is assessed, so check the current table in 31 CFR 1010.821 before relying on a figure.

What did the Bittner decision change?

Bittner v. United States decided that the non-willful FBAR penalty is counted per report, not per account. Before the decision, the government's position was that every account left off a report was its own violation, each with its own penalty.

The facts show what was at stake. According to the Supreme Court's opinion, Alexandru Bittner was a dual citizen of Romania and the United States who learned of the FBAR requirement after returning to the United States in 2011. He filed late reports for 2007 through 2011. The government found them deficient because they did not list every account, and he filed corrected reports covering 61 accounts in 2007, 51 in 2008, 53 in each of 2009 and 2010, and 54 in 2011.

The government did not claim that his errors were willful. It nonetheless treated each of the 272 account entries as a separate violation and calculated a penalty of $2.72 million. Mr. Bittner argued that the statute allowed a maximum of $10,000 per report, which for five reports is $50,000.

The Supreme Court agreed with him on February 28, 2023. Its holding reads: "The BSA's $10,000 maximum penalty for the nonwillful failure to file a compliant report accrues on a per-report, not a per-account, basis." The Court reasoned that the duty in 31 USC 5314 is a duty to file reports, that a report is either compliant or not, and that Congress had tied penalties to accounts only for certain willful violations.

The IRS has since built the decision into its procedures. Internal Revenue Manual 4.26.16 records that it was revised to incorporate the interim guidance on FBAR examinations issued because of Bittner.

What Bittner did not change

• Each year is still its own report. The Court said plainly that multiple deficient reports may yield multiple $10,000 penalties. Six missed years can be six violations.
• One mistake is still a violation. The Court noted that even a seemingly simple deficiency in a single report may expose a person to a $10,000 penalty. Leaving one account off an otherwise complete FBAR counts.
• Willful penalties are still measured by account. The opinion points to the willful provisions as the place where Congress chose to use account balances.
• Other filings are untouched. Form 8938 and the tax return itself have their own penalty rules under the Internal Revenue Code. See FBAR vs Form 8938 for how the two forms differ.

How are willful FBAR penalties calculated?

A willful FBAR penalty can be up to the greater of $100,000, adjusted for inflation, or 50% of the amount in the account at the time of the violation. That is the wording of Internal Revenue Manual 4.26.16.5.5, drawn from 31 USC 5321(a)(5)(C) and (D).

Two features make the willful regime far more serious than the non-willful one. The penalty scales with the money in the account, so a large balance produces a large penalty. And it can apply for each year, so the same balance can be penalized more than once. There is no reasonable cause exception for a willful violation.

The IRS FBAR page adds that FBAR reporting and recordkeeping violations can also carry criminal penalties. Those cases are rare and are outside the scope of this article, but they are the reason anyone with doubts about willfulness should take advice before filing anything.

Where is the line between non-willful and willful?

The IRS treats a violation as willful if the person knowingly violated a legal duty, recklessly violated a legal duty, or acted with willful blindness. Internal Revenue Manual 4.26.16.5.5.1 sets out all three, and states that the burden of establishing willfulness is on the IRS.

The second and third categories are where people are caught out. Recklessness is judged objectively, by asking whether the person disregarded an unjustifiably high risk. Willful blindness is described as making a conscious effort to avoid learning about the reporting requirements. Neither needs proof that you knew the FBAR existed and decided to ignore it.

	Non-willful	Willful
Typical conduct	Negligence, mistake, or not knowing the rule despite acting in good faith	Knowing violation, recklessness or willful blindness
Maximum civil penalty	$10,000 per violation, inflation-adjusted	Greater of $100,000, inflation-adjusted, or 50% of the account balance at the time of the violation
Counted by	Report (Bittner)	Account balance
Reasonable cause exception	Yes	No
IRS overall limit	Total across open years not more than 50% of the highest aggregate balance	Set by the statute and IRS mitigation guidelines
Who must prove what	Taxpayer shows reasonable cause	IRS must establish willfulness

Facts that tend to matter include whether you answered the foreign accounts question on Schedule B of your tax return, whether you told your preparer about the accounts, whether the accounts were in your own name, and what you did once you found out. Our article on the non-willful certification explains how those facts are presented in a Streamlined submission.

An illustrative example

Illustrative example: Priya is a US citizen who has lived in Manchester since 2019. She holds eight UK accounts: two current accounts, three savings accounts, two cash ISAs and a stocks and shares ISA. Their combined balance peaked at the equivalent of $90,000. She filed US tax returns but did not know about the FBAR and missed four of them, for 2021 through 2024. On the government's pre-Bittner reading, eight accounts over four years could have been treated as 32 violations. After Bittner there are four, one per report, so the statutory maximum for penalties assessed today is 4 x $16,536 = $66,144. The Internal Revenue Manual's ceiling of 50% of the highest aggregate balance brings the most an examiner would assess down to $45,000. And because Priya reported the interest and dividends on her returns and has not been contacted by the IRS, she can file the four FBARs under the Delinquent FBAR Submission Procedures, where the IRS says it will not impose a penalty. This is a simplified illustration, not advice for any specific person.

The example shows the three levels that matter: the statutory maximum, the lower figure IRS guidance produces, and the outcome for someone who comes forward first. For most Americans in the UK, the third is the relevant one.

How to avoid FBAR penalties if you have missed filings

The route depends on whether the income from the accounts reached your US tax return.

1. Income reported, FBAR missed. Use the Delinquent FBAR Submission Procedures. File the late FBARs electronically through FinCEN's BSA E-Filing System, select a reason for filing late and include a statement explaining it. The IRS will not impose a penalty if the income was properly reported and taxed and you have not previously been contacted about those years.
2. Income not reported, living abroad, non-willful. Use the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and a certification on Form 14653. The IRS terms say the taxpayer will not be subject to FBAR penalties. Our Streamlined Foreign Offshore Procedures guide walks through it, and how many years of back taxes an expat needs to file explains the year count.
3. Income not reported, living in the United States, non-willful. The Streamlined Domestic Offshore Procedures apply instead. They carry a miscellaneous offshore penalty of 5% of the highest aggregate balance of the foreign financial assets subject to it during the covered period.
4. Any doubt about willfulness. Do not file under a non-willful program until the facts have been reviewed. A certification that does not hold up is worse than no certification.
5. Already contacted by the IRS. The voluntary procedures are generally closed. The case becomes one of reasonable cause, mitigation and negotiation with the examiner.

Whichever route applies, keep the account records. The IRS says FBAR records must generally be kept for five years from the due date of the report. If this is your first FBAR, start with filing an FBAR for the first time.

What people get wrong about FBAR penalties

• "The penalty is $10,000 per account." Not for a non-willful violation. Bittner settled that it is per report.
• "The penalty is automatic." It is a maximum. Examiners have discretion, a warning letter is an option, and reasonable cause removes the penalty.
• "I did not know, so I am non-willful." Not necessarily. Recklessness and willful blindness count as willful, so a person who had every reason to ask and chose not to can be treated as willful without having known the rule.
• "I owe no US tax, so there is no penalty." The FBAR penalty does not depend on tax due. It is a reporting penalty under the Bank Secrecy Act, not the tax code.
• "Small accounts do not count." The $10,000 test is on the aggregate of all foreign accounts. Once it is met, every account goes on the report, and an incomplete report is a violation.
• "Bittner made the FBAR low risk." It limited one multiplier in non-willful cases. Willful exposure is unchanged.

How we help

US/UK Cross Border Tax is a firm of US CPAs and UK tax advisers working as one team, with offices in London, Manchester, New York and San Francisco. We review the facts behind missed FBARs before anything is filed, identify whether the delinquent FBAR or Streamlined route fits, and prepare the reports and returns as one consistent submission. Our IRS streamlined filing service is the usual way clients resolve exposure to FBAR penalties for non-willful failures, our foreign income and FBAR service keeps the filings current afterward, and our tax controversy team acts where the IRS has already made contact. Most of this work is for Americans living in the UK with ordinary bank, savings and pension accounts. To talk through your position, contact us.

If your returns were right and only the form was missed, the delinquent FBAR submission procedures are the route the IRS provides, and they carry no penalty where income was fully reported.