FBAR Penalties: Non-Wilful, Wilful and How the IRS Applies Them
How FBAR penalties work for Americans with UK accounts: the non-wilful and wilful maximums now in force, the Supreme Court's per-report ruling in Bittner, reasonable cause, how the IRS limits penalties in practice, and the routes that avoid them.
A letter about foreign accounts can be alarming, but most non-wilful FBAR penalties can be avoided by coming forward through the right route.
Written by the US UK Tax Experts team, cross-border tax specialists
FBAR penalties: an introduction
FBAR penalties are civil fines for failing to report foreign accounts to FinCEN, and they fall into two bands: non-wilful, for honest mistakes, and wilful, for knowing or reckless failures. The non-wilful maximum applies once per late or missing report, not once per account. In practice, most Americans in the UK who missed FBARs through ignorance can still put things right without paying any penalty.
This article explains how the penalties are set and how the IRS applies them. For the full picture of foreign account reporting, read our guide to FBAR and FATCA reporting. Our FBAR and FATCA service page explains how we prepare the reports.
What triggers FBAR penalties
The FBAR is FinCEN Form 114, the annual report of foreign financial accounts. The IRS FBAR page says you must file when your foreign accounts together exceed $10,000 at any time in the year. It is due on 15 April, with an automatic extension to 15 October. Therefore, an American with a UK current account, savings and an ISA usually needs to file. Penalties arise when a required report is late, missing or wrong.
Who enforces them
FinCEN owns the FBAR rules, but it has delegated enforcement to the IRS. Consequently, the IRS examines FBAR compliance, usually alongside an income tax audit. The penalties sit in the Bank Secrecy Act, not the tax code. That is why some tax relief, such as tax credits, has no bearing on them.
How the IRS finds out
UK banks report accounts held by US persons. HMRC's manual on the UK rules for US account reporting explains that UK financial institutions must identify and report this information to HMRC. Similarly, the IRS page on the Foreign Account Tax Compliance Act explains that foreign financial institutions report on the foreign assets held by their US account holders. As a result, the IRS may already know about your UK accounts before you file anything. Furthermore, the reports include balances, so missing FBARs are easier to spot than many people assume. That is why banks ask customers about US citizenship.
What is the maximum non-wilful FBAR penalty?
The statute sets the non-wilful maximum at $10,000 per violation, adjusted each year for inflation. The current figure is $16,536 for penalties assessed on or after 17 January 2025.
The statutory rule
The penalty comes from 31 USC 5321(a)(5). A non-wilful violation is one that was not intentional, such as not knowing the rule existed. The statute sets a $10,000 maximum for such violations. However, no penalty applies if the violation was due to reasonable cause and the balance was later properly reported.
The inflation-adjusted figure
Federal law requires agencies to adjust civil penalties for inflation. The figures appear in 31 CFR 1010.821. FinCEN's most recent adjustment, published in the Federal Register on 17 January 2025, set the non-wilful maximum at $16,536. We could not find a later FinCEN adjustment, so that figure appears to remain current.
Per report, not per account
In Bittner v. United States, decided on 28 February 2023, the Supreme Court settled a key question. The non-wilful penalty accrues per report, not per account. Before the ruling, the IRS had argued for a penalty on each unreported account. Consequently, someone with ten UK accounts and five late years now faces at most five non-wilful penalties, not fifty.
How are wilful FBAR penalties calculated?
Wilful FBAR penalties are far larger: up to the greater of an inflation-adjusted $100,000 or 50% of the account balance at the time of the violation. They apply per account, and reasonable cause is no defence.
The wilful maximum
Under section 5321(a)(5)(C), the wilful cap is the greater of $100,000 or half the balance. The inflation-adjusted version of the $100,000 figure is $165,353, again for penalties assessed on or after 17 January 2025. For an unreported account, the balance used is the balance at the time of the violation. Therefore, a large account can generate a penalty far above the fixed figure.
What wilful means
Wilfulness is not limited to deliberate concealment. The IRS manual on FBAR penalties, IRM 4.26.16, says the civil test covers knowing violations, reckless violations and wilful blindness. Wilful blindness means making a conscious effort to avoid learning about the requirements. Recklessness covers someone who clearly ought to have known of a grave risk that the rules were not being met. For example, ticking "no" to the foreign accounts question on a US return can be used as evidence.
Criminal penalties
Separately, 31 USC 5322 sets criminal penalties for wilful violations. These include fines of up to $250,000 and prison of up to five years, with higher limits in aggravated cases. Criminal cases are rare and involve deliberate concealment. Nevertheless, they explain why wilful conduct needs specialist legal help, not just a tax return.
How does the IRS apply FBAR penalties in practice?
The IRS rarely imposes the maximum. Its manual tells examiners to use judgment, consider mitigation and cap totals across all open years.
The non-wilful approach
According to IRM 4.26.16, each failure to file a legally compliant FBAR is a single reporting violation. In most non-wilful cases, examiners recommend one penalty per violation, capped at $10,000. Moreover, the total non-wilful penalty across all open years may not exceed 50% of the highest aggregate balance. Examiners may also decide that a warning letter is enough.
The wilful cap
For wilful cases, the manual limits the total across all open years. Generally, it may not exceed 50% of the highest aggregate balance. In no event may the total exceed 100% of that balance. Therefore, the IRS does not stack 50% penalties year after year on the same money.
Mitigation levels
The manual also sets mitigation guidelines, with levels based on the maximum aggregate balance. To qualify, you need no recent criminal or prior FBAR penalty history, clean funds, cooperation with the IRS and no civil fraud penalty. At the lowest level, for balances of $50,000 or less, the mitigated penalty is the greater of $1,000 per year or 5%. Higher levels apply larger percentages as balances rise. However, mitigation is guidance for examiners, not a right.
Form 8938 is separate
Form 8938 is a different report, filed with the tax return rather than with FinCEN. It has its own penalty under section 6038D of the tax code. The base penalty is $10,000, with up to $50,000 more for continuing failures after an IRS notice. Therefore, the same UK accounts can create exposure under two separate regimes.
The six-year limit
The IRS has six years to assess FBAR penalties. Under 31 USC 5321(b)(1), the period begins on the date of the violation. For a missed FBAR, that is generally the due date of the report. Consequently, only the most recent six years are usually at risk.
Can reasonable cause avoid FBAR penalties?
Yes, for non-wilful cases. If the failure had reasonable cause and the accounts are now properly reported, no non-wilful penalty should be imposed.
What reasonable cause means
Reasonable cause is a failure despite ordinary business care and prudence. IRM 4.26.16 says the non-wilful penalty should not be imposed if the violation was due to reasonable cause and accurate late or amended FBARs are filed. Typical facts include not knowing you were a US citizen, or relying on a professional who did not mention the rule. However, each case turns on its own facts.
Why the old route has gone
For years, the IRS ran Delinquent FBAR Submission Procedures for people with no unreported income. However, the IRS removed that page in July 2026. Consequently, filing late FBARs on their own with a statement is no longer a recognised penalty-free route. Instead, most people need one of the routes below.
The Streamlined procedures
The Streamlined Filing Compliance Procedures are the main route for non-wilful filers. On the Foreign route, eligible people living abroad are not assessed FBAR penalties at all. You file three years of returns and six years of FBARs, and pay any tax and interest. Our guide to the Streamlined Filing Compliance Procedures explains eligibility.
What should you do if you missed FBARs?
Act before the IRS contacts you. Once an examination starts, the Streamlined procedures are generally no longer available.
Check whether you had to file
First, total the highest balance of each foreign account for each year. If the combined figure never exceeded $10,000, no FBAR was due. Remember that pensions with an account element, joint accounts and accounts you can sign on may count. Our article on FBAR for Americans in the UK lists the accounts that usually count.
Choose the right route
If your tax returns are also missing, the Streamlined route usually covers both. If your returns were filed and only information returns are missing, the IRS Delinquent International Information Return Submission Procedures may apply to forms such as 8938. Where conduct may have been wilful, you should take legal advice before filing anything. In our experience, most UK cases are clearly non-wilful.
Records to gather
Start with a list of every account you held in the last six years, including closed ones. For each, you need the highest balance in each calendar year. Most UK banks can supply this from statements or on request. In addition, note the account number, the bank's address and whether anyone else held the account jointly. These details go on every report.
File through the BSA system
FBARs are filed online through FinCEN's BSA E-Filing System, not with the tax return. Each year needs its own report. When filed as part of a Streamlined submission, each report gives the Streamlined procedures as the reason for filing late. Afterwards, keep a copy of every filed report and its confirmation with your tax papers, so your records stay complete.
A worked example of FBAR penalties exposure
Consider a typical case. Susan is 56, a US citizen who has lived in Norfolk since her twenties. She never knew about the FBAR. She has a current account, two savings accounts and an ISA, together worth about $120,000. She also filed no US returns.
Without action, Susan faces up to six non-wilful penalties, one per missed year, rather than one per account. Under the manual, the total would also be capped at half her highest balance. However, she qualifies for the Streamlined Foreign route because she lives in the UK. She files three years of returns and six FBARs, and certifies her non-wilful conduct. As a result, the IRS assesses no FBAR penalties. She pays only any tax and interest due. This is an illustrative example, not a real client.
If the facts had been different
Suppose instead that Susan had known of the rule and hidden the accounts. In that case, the Streamlined procedures would not be available, because they require a certification of non-wilful conduct. A wilful case calls for legal advice and a different disclosure route. Moreover, the wilful penalty would be measured against her balances, not a fixed amount. That contrast shows why the facts of each case matter so much.
How US UK Tax Experts can help
US UK Tax Experts prepares FBARs, Form 8938 and the related US and UK returns from one file. Where FBARs were missed, we check which years were required, then prepare the reports through the right route, usually the Streamlined Foreign procedures. We explain your exposure to FBAR penalties before anything is filed. Where conduct may have been wilful, we work alongside your lawyer rather than in place of one.
Conclusion
FBAR penalties look frightening on paper, but they work differently in practice. Non-wilful penalties apply per report, are capped across years and can be removed by reasonable cause. Wilful penalties are severe, yet still capped by IRS policy. For most Americans in the UK who simply did not know, the Streamlined Foreign route avoids FBAR penalties altogether.
Contact us
If you are worried about FBAR penalties, email hello@usuktaxexperts.com or use our contact form. Tell us which years you missed and roughly what your accounts held. We reply within one working day.
Frequently asked questions
For a non-wilful failure, the maximum is $16,536 per report for penalties assessed on or after 17 January 2025. For a wilful failure, it is the greater of $165,353 or 50% of the account balance. The IRS often imposes less under its own guidelines.
Non-wilful FBAR penalties are charged per report, meaning per year, after the Supreme Court's 2023 decision in Bittner v. United States. Wilful penalties are calculated by reference to each account's balance.
Yes, for non-wilful violations. If the failure was due to reasonable cause and the accounts are now accurately reported, no non-wilful penalty should be imposed. Reasonable cause does not protect wilful violations.
Wilful conduct includes knowing violations, reckless disregard of the rules and wilful blindness. Wilful blindness means deliberately avoiding learning about the requirement. Honest ignorance of the rule is usually non-wilful.
The IRS has six years from the date of the violation to assess an FBAR penalty. For a missed report, that is generally the due date of the FBAR.
Not through a standalone route. The IRS removed its Delinquent FBAR Submission Procedures page in July 2026. Non-wilful filers living abroad usually use the Streamlined Foreign Offshore Procedures, under which FBAR penalties are not assessed.
Most do not, if they come forward before the IRS contacts them. Those whose failure was non-wilful can usually use the Streamlined Foreign route, which waives the penalties for eligible filers.
