FBAR and Offshore Account Defense

By Elizabeth Franklin-Best, Esq., and Christopher Zoukis, JD, MBA

Bittner: why the arithmetic changed in 2023

Before 2023 the government’s position, adopted by some courts, was that the $10,000 non-willful penalty applied per unreported account per year. On that reading a taxpayer with five foreign accounts across five years faced twenty-five penalties for what was, in filing terms, five missing forms.

The Ninth Circuit rejected that reading in United States v. Boyd, 991 F.3d 1077 (9th Cir. 2021), holding the penalty accrued per report. The Fifth Circuit had gone the other way. The Supreme Court resolved it in Bittner.

The Court’s reasoning is textual and worth following, because it also explains what Bittner does not do.

Section 5314 says nothing about accounts. Writing for the Court, Justice Gorsuch observed: “Section 5314 does not speak of accounts or their number. The word ‘account’ does not even appear. Instead, the relevant legal duty is the duty to file reports.”

The obligation is binary. “[T]he statutory obligation is binary. Either one files a report ‘in the way and to the extent the Secretary prescribes,’ or one does not.” A single non-willful mistake in a single report is a violation; multiple errors in one report do not multiply the violation.

So the penalty follows the report. “So multiple deficient reports may yield multiple $10,000 penalties, and even a seemingly simple deficiency in a single report may expose an individual to a $10,000 penalty. But in all cases, penalties for nonwillful violations accrue on a per-report, not a per-account, basis.”

And the willful provision proves the point. The Court noted that Congress did write an account-based rule — but only for a subclass of willful violations. Section 5321(a)(5)(D)(ii) authorizes a penalty of “either $100,000 or 50% of ‘the balance in the account at the time of the violation’—whichever is greater,” for willful failures “to report the existence of an account.” As the Court put it: “here, at last, the law does tailor penalties to accounts. But the statute does so only for a certain category of cases that involve willful violations, not for cases like ours that involve only nonwillful violations.” The government’s attempt to read an account-based rule into the non-willful provision therefore “cuts against” it, under the ordinary rule that language included in one section and omitted from its neighbor conveys a difference in meaning.

One reservation, stated in the opinion’s own footnote. “What, if any, mens rea the government must prove to impose a ‘nonwillful’ penalty is not before us.” Bittner fixed the arithmetic of the non-willful penalty. It did not decide what state of mind, if any, a non-willful penalty requires — and that question remains genuinely open.

Applied Insight — Elizabeth Franklin-Best, Esq., Principal Attorney: Bittner changed the size of the number, not the shape of the case. Where it matters most is at the negotiating table: a government computation built on a per-account theory for non-willful years is now simply wrong, and the correction is arithmetic rather than argument. The harder work is upstream of that — keeping the years characterized as non-willful at all, because the willful provision is where the account balances re-enter and the penalty stops being capped.

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The penalty structure

Non-willful

Section 5321(a)(5)(A) authorizes “a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314,” and (B)(i) caps it: “Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.”

There is a reasonable-cause exception, and it has two elements, both required:

“No penalty shall be imposed under subparagraph (A) with respect to any violation if— (I) such violation was due to reasonable cause, and (II) the amount of the transaction or the balance in the account at the time of the transaction was properly reported.”

Element (II) is the one that defeats most attempts to use it. It is not enough that the failure was innocent; the amount must have been properly reported. A taxpayer who reported nothing at all generally cannot satisfy it.

Willful

Section 5321(a)(5)(C) raises the ceiling dramatically for a willful violation:

“the maximum penalty under subparagraph (B)(i) shall be increased to the greater of— (I) $100,000, or (II) 50 percent of the amount determined under subparagraph (D), and (ii) subparagraph (B)(ii) shall not apply.”

Two things happen at once. The cap becomes the greater of the fixed amount or half the account balance — under (D)(ii), for a failure to report an account, “the balance in the account at the time of the violation.” And the reasonable-cause exception is switched off entirely: “subparagraph (B)(ii) shall not apply.”

For an account of any size, 50% of the balance dwarfs the fixed figure. The willfulness finding, not the number of accounts, is what makes an FBAR case large.

The current adjusted figures

The statutory numbers are not the operative numbers. Under 31 C.F.R. § 1010.821 — current version effective 17 January 2025 — “[t]he adjusted civil monetary penalty amounts replace the amounts published in the statutes authorizing the assessment of penalties.”

Provision	Description in the table	Statutory amount	Adjusted maximum (penalties assessed on or after 17 Jan 2025)
31 U.S.C. § 5321(a)(5)(B)(i)	Foreign Financial Agency Transaction — Non-Willful Violation of Transaction	$10,000	$16,536
31 U.S.C. § 5321(a)(5)(C)(i)(I)	Foreign Financial Agency Transaction — Willful Violation of Transaction	$100,000	$165,353

Table: current inflation-adjusted FBAR civil penalty maximums, from 31 C.F.R. § 1010.821 (eff. 17 January 2025). These figures are adjusted annually — confirm the current table before relying on a number.

Note what the adjustment does not touch: the 50% of account balance alternative in § 5321(a)(5)(C)(i)(II) is a percentage, not a dollar figure, so it is unaffected. In a case involving a substantial account, that percentage remains the operative exposure.

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Willful versus non-willful — the whole case

The civil standard includes recklessness

This is the asymmetry that surprises people, and it is settled.

The root is Safeco Insurance Co. of America v. Burr, in which the Supreme Court explained that where willfulness is a condition of civil liability it generally covers both knowing and reckless violations — and that the same word can carry a narrower meaning in a criminal provision of the same statute.

Applied to FBAR, the courts of appeals have been unanimous:

Court	Case	Holding
3d Cir. (2018)	Bedrosian v. United States, 912 F.3d 144	A person willfully violates the statute if they knowingly or recklessly fail to file
4th Cir. (2020)	United States v. Horowitz, 978 F.3d 80	Civil willfulness includes reckless violations; recklessness is an objective standard
11th Cir. (2021)	United States v. Rum, 995 F.3d 882	Willfulness for civil FBAR penalties includes reckless disregard
6th Cir. (2024)	United States v. Kelly, 92 F.4th 598	Willful violation “includes both knowing and reckless conduct”
9th Cir. (2024)	United States v. Hughes	Joined “every other court of appeals that had addressed the issue”
11th Cir. (2025)	United States v. Schwarzbaum, 127 F.4th 259	Reckless disregard satisfies the civil standard; distinguishes the criminal standard

Table: the circuit consensus on civil FBAR willfulness. There is no split.

What civil recklessness actually requires

It is not negligence, and the courts have been explicit about that. The Fourth Circuit’s formulation in Horowitz — adopted or echoed elsewhere — requires the government to show that the defendant:

1. should have known there was a grave risk that an accurate FBAR was not being filed;
2. was in a position to find out for certain very easily; and
3. disregarded that risk.

Three practical consequences follow.

It is objective. The question is not what the taxpayer subjectively believed but what a person in that position should have appreciated. Civil recklessness is measured differently from criminal recklessness, which requires subjective awareness of the risk.

Signing the return matters. Courts have repeatedly treated the signature on a federal return — which asks about foreign accounts and refers to the FBAR requirement — as evidence bearing on knowledge or willful blindness. A taxpayer who signed under penalties of perjury and did not read the question has a harder case than the intuition suggests.

Willful blindness counts. Deliberately avoiding confirmation of a fact one suspects to be true — believing there is a high probability the reporting obligation exists and taking steps to avoid learning it — has been held sufficient.

But recklessness is a real limit as well as a low bar. Courts have distinguished years that were merely negligent from years that were reckless within the same case. Where the government’s evidence shows carelessness rather than conscious disregard of an obvious risk, the characterisation is contestable — and characterisation is where the money is.

Why the criminal standard is harder for the government

Under Cheek v. United States, criminal willfulness in the federal tax context requires proof of a voluntary, intentional violation of a known legal duty — a good-faith misunderstanding of the law negates it, and the Supreme Court held that the misunderstanding need not even be objectively reasonable. The general criminal willfulness analysis is developed on our tax fraud lawyer page.

The Eleventh Circuit drew the contrast squarely in Schwarzbaum, distinguishing the civil FBAR standard from the criminal one, which requires proof that the defendant knew the conduct was unlawful.

	Civil FBAR willfulness	Criminal willfulness
Standard	Knowing or reckless	Voluntary, intentional violation of a known legal duty
Recklessness sufficient?	Yes	No
Good-faith misunderstanding of the law	Generally not a defense to recklessness	Negates willfulness, even if unreasonable — Cheek
Burden	Preponderance of the evidence	Beyond reasonable doubt

Table: the same word, two standards. This asymmetry is the single most consequential thing to understand about FBAR exposure.

The practical upshot: conduct that would not support a criminal conviction can still support a willful civil penalty measured at half the account balance. Someone who is never charged criminally is not thereby safe.

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The criminal line

Most offshore matters resolve civilly. Criminal referral is the exception rather than the rule — but the exposure is real and it is worth stating precisely.

31 U.S.C. § 5322(a) provides that a person “willfully violating this subchapter or a regulation prescribed or order issued under this subchapter … shall be fined not more than $250,000, or imprisoned for not more than five years, or both.”

Section 5322(b) escalates it: a person willfully violating the subchapter “while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period, shall be fined not more than $500,000, imprisoned for not more than 10 years, or both.”

That second provision is the one that matters in practice, because an offshore case that is charged criminally almost always involves something else — which is why offshore prosecutions are typically brought as tax cases with FBAR counts attached rather than as FBAR cases alone. The companions are usually 26 U.S.C. § 7201 (evasion) and § 7206 (false return), and frequently wire fraud and money laundering counts where funds moved. Where an account is restrained or a forfeiture allegation appears, see asset forfeiture.

We will not tell any reader whether they face a civil or a criminal matter. That assessment requires the file, and the signals — who is asking, what they are asking for, whether the examiner has gone quiet — are the subject of a fact-specific judgment rather than a web page.

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Who has to file — briefly, because it is context

Keep this in proportion: it matters here only because it defines the population exposed to the penalty.

Under 31 C.F.R. § 1010.350, the obligation falls on a United States person with a financial interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year.

Three features generate most of the unexpected liability:

• Signature authority alone is enough. An employee who can sign on an employer’s foreign account, or an adult child on a parent’s account abroad, can have a filing obligation without owning a penny of it.
• The threshold is aggregate, not per account. Ten accounts of $1,500 each cross it; none of them does alone.
• It is a high-water mark. “At any time” during the year — a balance that peaked briefly and was gone by 31 December still counts.

That is the whole of what this page says about the filing rule. We are not a filing service, and if you need to file, the FinCEN system and a return preparer are the right route.

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FBAR is not FATCA

These are two different obligations under two different titles, administered by two different agencies, and they are conflated constantly — including in correspondence from professionals who should distinguish them.

	FBAR	Form 8938
Authority	31 U.S.C. § 5314; 31 C.F.R. § 1010.350	26 U.S.C. § 6038D
Regime	Bank Secrecy Act	FATCA — Internal Revenue Code
Filed with	FinCEN, separately from the tax return	The IRS, with the return
Covers	Foreign financial accounts	Specified foreign financial assets, a broader category
Threshold	Aggregate over $10,000 at any time	Higher, and varies by filing status and residence
Penalty regime	§ 5321 — including the 50%-of-balance willful penalty	Separate penalty provisions in the Code

Table: two obligations that overlap but are not the same. Filing one does not satisfy the other.

The practical consequence: an account can be correctly reported on one form and missing from the other, and the penalty regimes run independently. A taxpayer who believes the matter was handled because a Form 8938 was filed may still have an unaddressed FBAR problem, and vice versa.

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Limitations periods

Two clocks run, and they are different.

Civil FBAR penalty. Section 5321(b)(1): “The Secretary of the Treasury may assess a civil penalty under subsection (a) at any time before the end of the 6-year period beginning on the date of the transaction with respect to which the penalty is assessed.”

Note the trigger. It runs from the transaction, not from a filing date, not from discovery, and not from an assessment.

Criminal tax and FBAR. A criminal FBAR violation under 31 U.S.C. § 5322 carries the general five-year period of 18 U.S.C. § 3282(a); the tax limitations periods are set by 26 U.S.C. § 6531 — three years by default, six years for the principal offenses including evasion and false returns — and are covered on our tax fraud lawyer page.

The consequence worth noting: the civil and criminal windows do not close together. A criminal period can expire while the civil assessment period remains open for the same year, which is one reason an offshore matter that appears to have gone quiet has not necessarily ended.

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How an FBAR penalty case actually proceeds

The procedural shape surprises people, because it does not look like a tax case.

There is no deficiency notice and no Tax Court. An FBAR penalty is not a tax. It is a Bank Secrecy Act civil money penalty, so the deficiency procedures that govern income tax — the statutory notice, the petition to the United States Tax Court, the prepayment forum — do not apply. A taxpayer who expects the familiar sequence will not find it.

The penalty is assessed administratively. The examination is typically conducted by the IRS under delegated authority, the examiner develops a willfulness position, and the penalty is assessed. There is an internal appeals process, but it is administrative rather than judicial.

Then the government has to sue to collect. This is the structural feature worth understanding, because it is where the case is actually contested. Under 31 U.S.C. § 5321(b)(2):

“The Secretary may commence a civil action to recover a civil penalty assessed under subsection (a) at any time before the end of the 2-year period beginning on the later of— (A) the date the penalty was assessed; or (B) the date any judgment becomes final in any criminal action under section 5322 in connection with the same transaction with respect to which the penalty is assessed.”

Three consequences follow, and together they are the most important procedural facts on this page.

The forum is a federal district court. Willfulness is litigated there — on summary judgment or at trial — which is why the reported FBAR willfulness decisions are district court and court of appeals opinions rather than Tax Court ones.

The burden is the government’s, by a preponderance. In the collection suit the United States is the plaintiff and must prove the elements, including willfulness. That is a materially different posture from a tax deficiency case, where the taxpayer ordinarily bears the burden of showing the assessment is wrong.

The two clocks interact. Note § 5321(b)(2)(B): where a criminal action under § 5322 arises from the same transaction, the two-year collection window runs from the date that criminal judgment becomes final — not from assessment. A criminal case therefore extends the government’s time to sue on the civil penalty rather than shortening it.

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Disclosure routes — what they are, and what this page will not say

Two routes exist for taxpayers who want to resolve unreported foreign accounts before the government finds them. We describe what they are. We will not tell any reader that they qualify for either — eligibility turns on facts, on timing, and on program terms that change, and a disclosure made into the wrong route can be worse than none.

Streamlined filing compliance procedures. Available, on their terms, to taxpayers whose failure to report was non-willful, and requiring a certification to that effect. Two features deserve emphasis. The certification is signed under penalties of perjury, which means a taxpayer whose conduct was in fact reckless is certifying to something the government may later contest — using the certification itself. And because civil willfulness includes recklessness, the line between eligible and ineligible is not where an intuitive reading of “I didn’t mean to” would put it.

Voluntary disclosure practice. A separate route, administered through IRS Criminal Investigation, for taxpayers whose conduct may have been willful and who wish to resolve the matter without a criminal referral. It is a practice, not an entitlement; it requires the disclosure to be timely, meaning made before the government has already obtained information about the noncompliance from another source; and its terms change.

The common feature of both: timeliness is measured by what the government already has, not by what the taxpayer knows. A disclosure made after the government has received data from a foreign institution, a treaty request or another taxpayer is not timely, however voluntary it feels. That is a question about facts the taxpayer usually cannot see, and it is the reason these decisions are made with counsel and not from a web page.

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The excessive-fines question

Because a willful FBAR penalty is measured at 50% of an account balance per year, it can exceed the account itself over multiple years. That has produced constitutional challenges under the Eighth Amendment’s Excessive Fines Clause — most prominently in Schwarzbaum, 127 F.4th 259 (11th Cir. 2025), where the Eleventh Circuit weighed the civil penalty against the conduct and against the criminal penalties Congress authorized for the same failure.

Two observations from that analysis are worth carrying.

The court reasoned that Congress “did not treat willful civil FBAR violations lightly”: it authorized substantially higher civil penalties and reserved them for willful conduct. And it noted, in comparing the sanctions, that criminal FBAR penalties accrue per report, not per account — the same structural point Bittner made about the non-willful civil penalty.

The proportionality framework itself is the forfeiture framework, and it is set out on our asset forfeiture page.

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Where this sits

Offshore account exposure rarely arrives alone. The general criminal tax question — evasion, false returns, the eggshell audit, and how a civil examination becomes a criminal referral — belongs to our tax fraud lawyer page. The wider federal fraud framework, including how counts group at sentencing, is on our white collar crime lawyer hub, with the specific offenses on our wire fraud lawyer, bank fraud attorney, embezzlement lawyer and money laundering attorney pages.

Where the accounts sit inside an investment structure or a fund, see securities fraud lawyer and investment fraud attorney. Where an entity’s counsel has begun interviewing staff about the accounts, the individual’s position is addressed on our upjohn warning page. And where the account holder is a provider whose federal-program billing is also under review, that exposure runs through our healthcare fraud attorney hub.

Elizabeth Franklin-Best, P.C. is a federal criminal defense attorney practice handling offshore and federal tax matters nationwide. Sentencing exposure is covered in our federal sentencing pages; where a conviction has been entered, review runs through federal appeals and, for claims outside the trial record, a § 2255 motion.

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Frequently Asked Questions About FBAR and Offshore Accounts

Unreported Foreign Accounts?

Willfulness is the line between a manageable penalty and a criminal referral, and it is decided on facts you can still document.

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Representation begins with a paid, one-hour consultation — a working session in which we review where matters stand and tell you honestly what options remain. We do not promise outcomes.

Reviewed for legal accuracy by Elizabeth Franklin-Best, Esq., Principal Attorney·September 2026