FBAR penalties turn first on whether the failure was wilful. For a non-wilful failure, the Supreme Court held in Bittner v. United States in 2023 that the civil penalty applies per report, not per account, and the statute imposes no penalty where there was reasonable cause and the accounts were then properly reported. Wilful failures sit under a separate and heavier regime, can be measured against account balances, and can be prosecuted. The IRS FBAR guidance (opens the official IRS page in a new tab) says only that penalties depend on the facts and circumstances.
This post is for US citizens and green card holders in the UK who have missed FBARs, or filed incomplete ones, and want to know what the penalty rules actually say. It goes deeper than the penalties section of our guide to FBAR and FATCA for UK residents: what Bittner decided and left open, how the IRS defines wilfulness, what reasonable cause requires, and how examiners use their discretion. We do not quote penalty amounts, which are set by statute and adjusted for inflation.
What did the Supreme Court decide in Bittner
It decided that the civil penalty for a non-wilful FBAR violation accrues per report, not per account. Failing to file a legally compliant FBAR is one violation, however many accounts the report should have listed. The decision was given on 28 February 2023 by a majority of five justices to four.
Mr Bittner, a dual citizen of Romania and the United States, learned of his reporting duties after returning to the United States from Romania in 2011. He then filed reports for five years, which the government treated as deficient, and later filed corrected reports that covered 272 accounts in all. The government did not suggest his errors were wilful. It counted a separate non-wilful penalty for every account in every year, which multiplied the total many times over. The Fifth Circuit upheld that approach, and the Supreme Court reversed.
Justice Gorsuch wrote for the majority. The duty in the statute is to file reports, and the non-wilful penalty provision ties the penalty to each violation of that duty, not to accounts. Where Congress wanted account-level consequences, it said so: in the wilful penalty, which for certain violations is measured by the balance in an account, and in the reasonable cause exception, which requires each account to be properly reported. The Court also noted that the government's own earlier guidance had described a failure to file as a single violation. Justice Barrett dissented, joined by three colleagues.
What does per report mean for someone with several UK accounts
One FBAR covers one calendar year and lists every foreign account. If that report was not filed, or was filed without some of the accounts, that is one non-wilful violation for the year. Someone with a current account, a savings account, an ISA and a pension who missed three years faces at most three non-wilful violations, not twelve.
The IRS has written this into its procedures. Internal Revenue Manual 4.26.16 (opens the official IRS page in a new tab), revised in August 2025 to reflect the decision, says the failure to file a legally compliant FBAR is a single reporting violation, and that a single non-wilful reporting violation can result in only one penalty. In most non-wilful cases examiners recommend one inflation-adjusted penalty for each violation, and the manual also caps the total of non-wilful penalties across all open years by reference to the highest aggregate balance of the accounts.
Two questions remain open. The Court said it was not deciding what state of mind the government must prove to impose a non-wilful penalty. It also left unanswered whether a report that is late and then filed inaccurately is one violation or two. A late report that is complete and correct is therefore the cleaner position, which is why we build the full schedule of accounts before anything goes to FinCEN on Form 114.
- Not filing an FBAR for a year in which one was due
- Filing on time but leaving an account off the report
- Reporting an account for the first time on a late-filed FBAR
- Giving wrong account details on an otherwise timely report
What makes an FBAR violation wilful
The IRS applies a civil test with three limbs: a knowing violation of a known duty, a reckless violation, and wilful blindness. The burden of establishing wilfulness is on the IRS, and its manual says a finding must be supported by evidence. Wilfulness is rarely proved directly and is usually inferred from conduct.
A knowing violation needs knowledge of the requirement and a voluntary, conscious choice not to meet it. Recklessness is judged objectively, not by what the person believed: the question is whether they clearly ought to have known of a grave risk that the requirement was not being met, and could easily have found out. Wilful blindness means making a conscious effort to avoid learning about the duty. The manual treats a wrong answer, or no answer, to the foreign accounts question on Schedule B of Form 1040 as a significant fact.
No single fact settles it. One of the manual's own examples is a filer who left a closed account off a report by oversight, cooperated fully and had reported the income, and it says no wilful penalty should follow without other evidence. Leaving accounts off later reports once the duty was known, or ignoring an earlier warning letter, can point the other way. These are the documents examiners are told to look at.
- Signed returns and the answer given on Schedule B
- Correspondence with and notes from the return preparer
- Earlier FBARs, warning letters or penalties
- Account statements showing where money came from and how it moved
- Any steps taken to conceal an account or signature authority
How does the wilful penalty differ from the non-wilful one
It is heavier, it can be measured account by account, and reasonable cause is no defence to it. For a wilful failure to report an account, the statute sets the maximum by reference to the balance in that account at the time of the violation. Bittner did not change this, and wilful conduct can also lead to prosecution.
The manual explains how examiners compute a wilful penalty. Mitigation guidelines apply where the filer has no prior FBAR penalties and no relevant criminal convictions, the money did not come from illegal sources or fund crime, the filer cooperated, and no civil fraud penalty was determined for the year. The guidelines work in tiers by account balance, and the manual separately limits the total of wilful penalties across all open years by reference to the highest aggregate balance. We do not quote those tiers or limits.
The statute also gives the government a fixed period, running from the date of the violation, in which to assess a penalty, so older years can fall outside it. The report itself is filed with FinCEN (opens the official FinCEN page in a new tab), not with the IRS and not with the tax return, but FinCEN has delegated examination and penalty enforcement to the IRS. The IRS therefore decides whether a violation was wilful and what penalty, if any, to assert.
When does reasonable cause prevent a non-wilful penalty
When the violation was due to reasonable cause and the account balance was properly reported. The statute says no non-wilful penalty is imposed in that case. In practice that means a complete late or amended FBAR, together with facts showing you exercised ordinary business care and prudence and still fell short of the rule.
Courts have applied the tax code's reasonable cause principles to FBAR cases, and the manual adopts the ordinary business care and prudence test. It is judged on the whole picture: what a careful person in your position would have known and done. For a UK resident that picture often includes years spent outside the United States, UK tax paid on the same income and interest already declared on the US return. It is a defence to be shown with facts, not a status that applies automatically.
Examiners also have discretion short of the defence. The manual says an examiner may decide that the facts do not justify a penalty at all, and may instead issue a warning letter, Letter 3800, and secure the delinquent or amended reports. The factors include earlier warnings or penalties, the amounts involved, the filer's conduct and cooperation, and the total of all penalties proposed. Our tax controversy service handles cases where an examiner has already raised the question.
How do these rules apply to a US citizen in the UK
The amount is rarely the first question. Which side of the wilful line the facts fall on decides the route. Most UK residents who missed FBARs did not know the form existed, which is the non-wilful case that late filing and the streamlined procedures were built for, and Bittner limits the exposure to one report per year.
Take a dual citizen working as a hospital pharmacist in Cardiff who has held a current account, a savings account, a cash ISA and a workplace pension for four years without filing FBARs. Under Bittner her non-wilful exposure is four reports, not sixteen account entries. Her US returns left out the ISA interest, so late FBARs alone would leave the returns wrong, and the Streamlined Foreign Offshore Procedures (opens the official IRS page in a new tab) are the likely fit. Had she ignored a letter from her bank about her US status, that fact would belong in her certification.
The streamlined filing compliance procedures (opens the official IRS page in a new tab) define non-wilful conduct as negligence, inadvertence, mistake or a good faith misunderstanding of the law, and they are closed once the IRS has opened a civil examination. Where conduct may have been wilful, the IRS points instead to its voluntary disclosure practice (opens the official IRS page in a new tab), which does not guarantee immunity. Our posts on late FBARs and on the non-wilful certification cover the mechanics.
Form 8938 carries its own penalty under the tax code, and Bittner does not touch it. Our IRS streamlined filing service and foreign income and FBAR service prepare the filings, and the guide to FBAR and FATCA for UK residents covers the reports themselves.
General information, not advice. The right answer depends on your circumstances and the tax year concerned.
