Understanding FBAR penalty rules is critical if you hold foreign bank accounts or investments. These rules dictate how the IRS assesses fines for missing or late FBAR (Foreign Bank Account Report) filings, and they can bite into your returns if you’re not careful. In this guide, you’ll learn about your filing obligations, key deadlines, penalty structures and relief options, plus recordkeeping best practices to keep your global assets compliant. If you’re not sure where to begin, check out how to file FBAR form for step-by-step instructions.
Understand FBAR obligations
As a U.S. person, citizen, green card holder or resident alien, you must file an FBAR (FinCEN Form 114) if you have a financial interest in or signature authority over foreign accounts and the aggregate value exceeds $10,000 at any time during the calendar year. Reporting applies to bank accounts, brokerage accounts, mutual funds and similar financial accounts held abroad. Start by:
Identify eligible filers
You need to file if you meet any of these criteria:
- You are a U.S. citizen, resident alien, partnership, corporation, trust or estate
- You have signature authority over a foreign financial account
- The combined value of all your foreign accounts exceeded $10,000
Review reporting thresholds
The $10,000 threshold is an aggregate amount. If two accounts each held $6,000 on the same day, you must file even though neither account alone hit $10,000. Note that threshold calculations differ from FATCA reporting threshold, which applies to FATCA rather than FBAR.
Follow e-filing process
Since January 1, 2025, you must file electronically through FinCEN’s BSA E-Filing System. For more information on the digital filing steps, see FBAR e-filing process.
Recognize reporting deadlines
FBAR filings are due by the following dates:
Know due dates
- Regular due date: April 15 of the year after the calendar year reported
- Automatic extension: October 15 (no request needed)
For details on the deadline, check FBAR filing deadline.
Apply extension rules
The extension to October 15 applies automatically. In case of natural disasters or other emergencies, the IRS may grant further extensions. Keep an eye on IRS notices or FATCA IRS regulations for any special relief.
Review FBAR penalty rules
Penalties for failing to file or late filing depend on whether the violation was willful or not. They are assessed per FBAR form, not per account.
Review non-willful penalties
Non-willful failures can result in civil penalties up to $10,000 per form per year, with amounts adjusted for inflation. The IRS may waive these penalties if you correct the violation promptly, show reasonable cause and have no underreported income related to the foreign accounts.
Review willful penalties
Willful violations carry much harsher penalties. For each year you fail to file, you could face:
- Civil penalty equal to the greater of $100,000 or 50 percent of the account’s maximum balance
- Criminal penalties including fines up to $250,000 and up to five years in prison
This makes timely compliance vital if you want to protect your investments.
Use compliance relief options
If you’ve fallen behind on your FBARs, the IRS offers several programs to mitigate penalties depending on your circumstances.
Use delinquent FBAR procedures
The Delinquent FBAR Submission Procedures allow you to file late reports without penalties if:
- You properly reported and paid tax on all income from the foreign accounts
- You have not been previously contacted by the IRS regarding those years
- You file along with a statement explaining your reason for late filing
To get started, review the FBAR filing instructions.
Use streamlined offshore program
The Streamlined Foreign Offshore Compliance Program is designed for non-willful filers who did not report income from foreign sources correctly. Under this program you file delinquent FBARs and returns for the prior three years, often paying reduced penalties of 0 to 5 percent of the offshore balance.
Consider voluntary disclosure
If you suspect willful violations, the IRS Criminal Investigation Voluntary Disclosure Practice (VDP) may help you avoid prosecution. Under VDP you disclose all past noncompliance, pay penalties and cooperate fully. See IRS Publication 5569 for more on criminal penalty guidelines.
Maintain compliant records
Good recordkeeping supports your FBAR filings and any penalty relief requests.
List key records
Keep copies of:
- Bank and brokerage statements for each foreign account
- Account opening agreements or contracts
- Your filed FinCEN Form 114 confirmations
- Correspondence with financial institutions
Observe retention periods
You’re required to keep FBAR-related records for five years from the due date of each report, including extensions. Officers or employees with signature authority only may rely on their employer’s records, but documenting your steps is still best practice.
Assess investment impact
Understanding how FBAR penalty rules apply to real situations can help you protect your portfolio.
Illustrate expat scenario
Imagine you live in Germany and you have two savings accounts in France. Each reached a peak balance of $8,000 last year. Even though neither account hit $10,000 on its own, the combined value exceeded the reporting threshold. If you missed those FBARs unintentionally, you could face non-willful penalties of up to $20,000 (two forms at $10,000 each).
By filing delinquent FBARs under the appropriate procedures and demonstrating reasonable cause, you may avoid those fines and keep your investments on track.
Mitigate investment disruption
To minimize future risk:
- Set calendar reminders for April 15 and October 15 each year
- Use tax software or a cross-border specialist to handle filings
- Review your account balances regularly against the $10,000 threshold
Staying proactive with FBAR compliance helps you keep your foreign investments secure and penalty-free.