FBAR Compliance: Significant Penalties for Failure to Report Foreign Accounts

U.S. persons with foreign financial accounts may have an annual reporting requirement that is separate from their federal income tax return. The Report of Foreign Bank and Financial Accounts (“FBAR”) is an often-overlooked compliance requirement that can result in significant penalties when taxpayers fail to report foreign accounts properly.

Recent litigation highlights the potential severity of these penalties and the challenges taxpayers may face in disputing them.

FBAR Filing Requirements

Under the Bank Secrecy Act, certain U.S. persons are required to report their financial interests in, or signature authority over, foreign financial accounts when the aggregate value of those accounts exceeds the applicable reporting threshold.

The FBAR is filed electronically with the Financial Crimes Enforcement Network (FinCEN) on FinCEN Form 114. Importantly, the FBAR is not filed with the taxpayer’s federal income tax return.

Because the FBAR is a separate reporting requirement, taxpayers may overlook the filing even when their income tax return has been properly prepared and filed.

Foreign account reporting can also become complicated when accounts are held through businesses, trusts, or other entities. Determining whether an account is reportable requires an analysis of the taxpayer’s ownership interest, signature authority, and other relevant facts.

FBAR Penalties Can Be Significant

The potential penalties associated with FBAR noncompliance can be substantial.

For non-willful violations, the applicable penalty is generally limited to a statutory maximum. However, willful violations can result in significantly higher penalties based on the value of the unreported accounts.

The potential exposure was highlighted in the recent case of U.S. v. Robins. The U.S. Department of Justice alleges that Graham H. Robins failed to report certain Canadian accounts on his 2015 and 2016 FBARs. According to the government, Robins had received multiple warnings regarding his FBAR reporting obligations but failed to disclose the accounts.

The IRS initially assessed approximately $1.1 million in penalties. The government later revised the assessment to $569,000, and with interest, fees, and other amounts, the balance had grown to approximately $740,000 as of July 2026.

Robins has disputed the government’s characterization of his conduct as willful, arguing that his failure to report the accounts was, at most, negligent. He also argued that he received incorrect advice regarding the reporting requirements for certain corporate and trust accounts.

The case demonstrates how quickly FBAR compliance issues can become financially significant.

Willfulness Can Be a Critical Issue

Whether a taxpayer’s failure to file was willful can have a substantial impact on the potential penalty.

In Robins, the government contends that the taxpayer deliberately disregarded his FBAR obligations after receiving warnings and opportunities to disclose the accounts. Robins disputes that position and maintains that his conduct did not meet the applicable standard for a willful violation.

The distinction between willful and non-willful conduct is therefore important when evaluating potential FBAR exposure. Taxpayers who discover an FBAR reporting issue should not assume that an oversight will automatically result in a reduced penalty or that a penalty will ultimately be abated.

Recent FBAR litigation has continued to address both the amount of penalties that may be imposed and the circumstances under which taxpayers can successfully challenge those penalties. The Supreme Court’s 2023 decision in Bittner v. United States, for example, addressed whether non-willful FBAR penalties apply on a per-account or per-form basis. McGuire Sponsel previously discussed the case while it was pending before the Supreme Court.

What Does This Mean for Taxpayers?

FBAR compliance should be addressed proactively rather than after an IRS or FinCEN inquiry.

Taxpayers with foreign financial accounts should consider:

• Identifying all foreign financial accounts in which they have an ownership interest or signature authority.
• Determining whether the aggregate value of those accounts creates an FBAR filing obligation.
• Reviewing prior-year FBAR filings for completeness and accuracy.
• Evaluating whether foreign accounts held through businesses, trusts, or other entities create additional reporting requirements.
• Addressing missed or incomplete filings as soon as possible.

The potential consequences of failing to report foreign financial accounts can extend well beyond the failure to file the form itself. As the Robins case demonstrates, penalties can become substantial, particularly when the government alleges willful noncompliance.

Don’t Overlook FBAR Compliance

FBAR reporting is an important component of U.S. international tax compliance. While the filing itself may appear straightforward, determining whether an account is reportable and understanding the potential consequences of noncompliance can be more complicated.

With increased attention to international reporting and significant penalties for noncompliance, taxpayers and their advisors should address FBAR requirements proactively.

McGuire Sponsel’s Global Business Services team assists CPA firms and their clients with international compliance matters, including FBAR reporting, remediation, and other foreign financial reporting requirements. If you have questions regarding FBAR compliance or other international tax issues, reach out to our Global Business Services team.

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