FBAR Violations and Foreign Account Reporting Failures

FBAR violations have produced some of the largest tax-related penalties in U.S. history. Penalties stack across multiple accounts and multiple years — non-willful violations of $10,000 per account per year, willful violations of 50% of account balance per year. The IRS has prosecuted thousands of foreign account cases since 2009 through Offshore Voluntary Disclosure Programs.

Who Must File FBAR

FBAR is required from any U.S. person with:

• A financial interest in or signature authority over;
• One or more foreign financial accounts;
• With aggregate value exceeding $10,000 at any point during the calendar year.

"U.S. person" includes citizens, resident aliens, and U.S. entities. "Financial interest" reaches accounts owned outright or through entities. "Signature authority" reaches accounts where the person can direct disbursements even without ownership.

The aggregate threshold means a single account or many accounts trigger the requirement once total combined value exceeds $10,000.

Civil Penalties

Non-Willful Violations

• $10,000 per violation (adjusted for inflation, currently ~$15,000);
• The Supreme Court resolved the per-account-vs-per-form split in Bittner v. United States, 598 U.S. ___ (2023): non-willful penalty is per form (one penalty per year), not per account;
• Reasonable cause defense available.

Willful Violations

• Greater of $129,210 (inflation-adjusted) or 50% of account balance at the time of violation;
• Per account, per year — penalties stack rapidly;
• Defined as voluntary, intentional disregard of a known legal duty.

Criminal Penalties

Willful failure to file FBAR is a federal felony under 31 U.S.C. § 5322:

• Up to 5 years for the basic offense;
• Up to 10 years when committed in connection with another federal crime or as part of a pattern of illegal activity over $100,000;
• Up to $250,000 fine ($500,000 corporate);
• Each year unfiled is a separate offense.

Criminal FBAR cases are usually charged alongside tax evasion and money laundering in offshore tax-evasion prosecutions.

Willfulness Standard

Willfulness in FBAR cases is broader than in tax cases. Courts have held that "reckless disregard" of the FBAR requirement satisfies willfulness — meaning a defendant who consciously avoided learning about the requirement can be found willful. United States v. Williams, 489 F. App'x 655 (4th Cir. 2012); United States v. McBride, 908 F. Supp. 2d 1186 (D. Utah 2012).

This is significantly easier to prove than the Cheek willfulness standard for substantive tax crimes.

Streamlined Filing Compliance Procedures

The IRS Streamlined Filing Compliance Procedures provide a pathway for non-willful filers to come into compliance:

Streamlined Domestic Offshore Procedures (SDOP)

For U.S. residents with non-willful failures. Requirements:

• File 3 years of amended returns and 6 years of FBARs;
• Pay all taxes plus interest;
• Pay 5% Title 26 miscellaneous offshore penalty;
• Certify non-willfulness.

Streamlined Foreign Offshore Procedures (SFOP)

For U.S. expats. Same returns and FBAR requirements but no 5% penalty.

Eligibility ends if the IRS has begun examining or contacting the taxpayer. Streamlined is not available for willful filers — they must use Voluntary Disclosure Practice.

Voluntary Disclosure for Willful FBAR Cases

The 2018 Voluntary Disclosure Practice (VDP) governs willful FBAR cases. Penalties typically:

• Most recent 6 years of FBAR penalties — 50% civil FBAR penalty for the highest aggregate balance year;
• Tax + penalty + interest for the most recent 6 years;
• 20% civil fraud penalty under IRC § 6663 OR 75% civil fraud penalty under IRC § 6651(f) for failure to file.

VDP is the only reliable path to avoid criminal prosecution for willful FBAR violations. Eligibility requires that the IRS not yet have contact information about the foreign account.

What to Do If You Are Under Investigation or Charged

1. Do not speak with IRS Criminal Investigation (CI) agents without an attorney — even informally. Special agents are not auditors; they investigate crimes.
2. Do not destroy or alter records — destruction can become obstruction under 18 U.S.C. § 1519 with a 20-year maximum.
3. Locate and preserve all bank records, returns, ledgers, emails, and accountant correspondence.
4. Discontinue the conduct — but do not amend returns or take corrective action without counsel; both can be used against you.
5. Engage federal tax defense counsel immediately — call L and L Law Group at (214) 466-1398, available 24/7.

Frequently Asked Questions

What is FBAR?

Report of Foreign Bank and Financial Accounts — FinCEN Form 114, required of U.S. persons with foreign accounts aggregating over $10,000. Filed annually by April 15.

Is failure to file FBAR a crime?

Civil penalties always; criminal penalties only when willful. Willful failure to file is a federal felony with up to 5-10 years imprisonment.

How is FBAR willfulness defined?

Voluntary, intentional violation of a known legal duty. Courts have held that reckless disregard satisfies willfulness — making FBAR willfulness easier to prove than tax-crime willfulness.

What is the maximum FBAR penalty?

For willful violations: greater of $129,210 (inflation-adjusted) or 50% of account balance per year, per account. Penalties stack across years and accounts and can exceed account balances.

Can the IRS find out about my foreign accounts?

Yes. The Foreign Account Tax Compliance Act (FATCA) requires foreign banks to report U.S.-owned accounts. Most major countries now share information automatically with the IRS through the Common Reporting Standard.

Speak With a Frisco Criminal Defense Attorney

If you or a loved one is facing federal tax crimes charges in Frisco, Collin County, or anywhere in the Dallas-Fort Worth metroplex, the time to act is now. L and L Law Group attorneys are available 24 hours a day, 7 days a week. Call (214) 466-1398 for a free, confidential consultation, or submit your case online and a licensed attorney will contact you directly.

This article is general information, not legal advice. Texas and federal criminal law are complex and fact-specific — please consult a licensed attorney about your particular situation. Past results do not guarantee future outcomes.