Part V · Compliance · No. 01

The FBAR

A U.S. person with foreign-financial-account interests exceeding $10,000 in aggregate at any point during the year must file FinCEN Form 114 annually. The report is made under the Bank Secrecy Act rather than the Internal Revenue Code, and its civil penalties — up to 50% of an account balance for willful violations — are among the most severe in the information-reporting system.

What is reported

FBAR (Foreign Bank and Financial Accounts Report; FinCEN Form 114) reports financial interest in, or signature authority over, foreign financial accounts. "Financial accounts" include bank accounts, securities accounts, mutual fund accounts, and certain other accounts at foreign financial institutions. Custody of art, gold, or other tangible assets at non-financial-institution premises is generally outside FBAR scope; bullion held in a foreign financial-institution allocated account may be FBAR-reportable depending on account characterization.

Who must report

U.S. persons: U.S. citizens, U.S. residents (resident aliens for income-tax purposes), U.S. domestic entities (corporations, partnerships, LLCs, trusts) — regardless of whether the entity itself has any U.S.-source income.

Thresholds

The aggregate value of all foreign accounts must exceed $10,000 at any point during the year. The threshold is per-person not per-account; a person with three accounts of $4,000 each must report. Signature authority alone triggers reporting (no financial interest required); each authorized signer reports separately.

The form

FinCEN Form 114, filed electronically through BSA E-Filing System. Calendar-year filing due April 15 with automatic extension to October 15 (no separate extension request needed). Filed to FinCEN (the Treasury Department's Financial Crimes Enforcement Network), not to the IRS, though IRS administers BSA-related civil and criminal enforcement.

Penalties

• Non-willful penalty. Up to $10,000 per violation under the statute, adjusted for inflation to $16,536 for penalties assessed after 17 January 2025 (31 C.F.R. §1010.821). Because no federal civil-penalty inflation adjustment was made for 2026 (OMB Memorandum M-26-11), the 2025 figures continue to apply in 2026. Bittner v. United States, 598 U.S. 85 (2023), held that the non-willful penalty accrues per report, not per account — rejecting the government’s per-account position.
• Willful penalty. Up to the greater of $100,000 (inflation-adjusted to $165,353 for penalties assessed after 17 January 2025, unchanged for 2026) or 50% of the balance in the account at the time of the violation. Willfulness can include reckless disregard of the duty to file (United States v. Williams, 489 F. App'x 655 (4th Cir. 2012)).
• Criminal. Willful violations are felonies under 31 U.S.C. §5322: up to $250,000 and five years’ imprisonment, rising to $500,000 and ten years where the violation occurs with another federal-law violation or as part of a pattern of illegal activity involving more than $100,000 in a 12-month period.

Relief procedures

• Streamlined Filing Compliance Procedures. For taxpayers whose failure to report was non-willful. Domestic offshore procedure for U.S. residents (5% miscellaneous offshore penalty); foreign offshore procedure for non-U.S. residents (no penalty).
• Delinquent FBAR Submission Procedures. For taxpayers who do not need to use streamlined and have no unreported income; allows filing of late FBARs with explanation.
• IRS Criminal Investigation Voluntary Disclosure Practice. For potentially willful conduct (requests are made on Form 14457); resolution involves tax, interest and substantial civil penalties, and a timely, accepted disclosure is generally not referred for criminal prosecution. The former Offshore Voluntary Disclosure Program closed in September 2018.

Recent guidance

Bittner (2023) is the leading recent authority on non-willful penalties. Willfulness (including reckless disregard) continues to be litigated in the courts of appeals. The Streamlined and Delinquent FBAR Submission Procedures remain available as of this review; check irs.gov before relying on them.

Foreign-asset interaction with luxury holdings

For luxury-asset planning, FBAR exposure arises principally from:

• Foreign bank accounts maintained for foreign vessel or aircraft operations.
• Foreign accounts of the U.S. owner of a private island.
• Operating accounts of foreign-flagged yacht charter businesses.
• Foreign financial-institution accounts of U.S. expatriating residents pursuing Italian, Portuguese, Swiss, or UAE residency.
• Signature authority of family-office personnel over family entity accounts abroad.

Reviewed October 2026