Introduction
Podcast 1 – July 2, 2026
Podcast 2 – July 17, 2026
On June 26, 2026 I did a presentation in London, UK titled “The Life And Times Of Mr. FBAR”. Obviously, the presentation included a discussion of how to file delinquent FBARs without triggering an FBAR penalty.
That discussion included references to both:
– “Streamlined filing procedures“; and
– “Delinquent FBAR submission procedures”
On June 30, 2026 the “Delinquent FBAR submission procedures” option was removed from the IRS site. It appears that this specific procedure is no longer an option. Notably, the “Delinquent FBAR submission procedures” option included the promise that:
The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.
To be clear, the “Delinquent FBAR submission procedures” provided a “safe harbour” provision. Under the “Delinquent FBAR submission procedures” penalties would not be imposed if the income from the foreign accounts, which should have been reported on the FBAR, was included on the tax return. In other words: if the only transgression was the failure to file an FBAR, no penalty would be imposed upon filing the FBAR.
Notably, the “Delinquent FBAR submission procedures” were available ONLY when the income from the foreign accounts had been reported on a U.S. tax return. In other words, there was compliance with the tax obligation, but there was a failure to comply with the FBAR reporting obligation.
Significantly, the removal of the “Delinquent FBAR submission procedures” means that the IRS now reserves the right to impose an FBAR penalty in circumstances where the ONLY transgression was the failure to file the FBAR reporting form!
Clearly the IRS is signalling that when it comes to Mr. FBAR:
“The penalty is the purpose and the purpose is the penalty!”
Practically speaking:
Any failure to file an FBAR could subject the individual to FBAR penalties!
The potential of FBAR penalties is confirmed by the IRS here, where they say:
“If the IRS hasn’t contacted you about a late FBAR and you’re not under civil or criminal investigation by the IRS, you should file late FBARs as soon as possible to keep potential penalties to a minimum.”
Notably this describes “potential penalties”. If does NOT say that an FBAR penalty WILL be imposed. It merely confirms that an FBAR penalty MAY be imposed. To repeat, the end of the “Delinquent FBAR submission procedures” is the specific guarantee that FBAR penalties will NOT be imposed under the specific circumstances described in the “Delinquent FBAR submission procedures”.
How to think about FBAR penalties from July 1, 2026 onward
Let’s look to the law.
Civil FBAR penalties are both authorized (but not required) and capped in 31 U.S.C. 5321.
The specific language authorizing FBAR penalties says:
“(5)Foreign financial agency transaction violation.—
(A)Penalty authorized.—
The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.”
Notice that the language is permissive. It gives permission for the Secretary of the Treasury to impose a penalty. Notice how the rest of the statute caps the amount of the penalty that may be imposed.
The statute goes on to distinguish:
Civil non-willful penalties which are capped at $10,000 (currently $16,536 because of statutorily imposed inflation increases) per form (confirmed by the U.S. Supreme Court in Bittner) and are subject to the possibility of a “reasonable cause” abatement; and
Civil willful penalties which (1) are imposed per account (2) are capped at the greater of $100,000 (currently $165,360 because of statutory inflation increases) per account or 50% of the value of the account and (3) are not subject to “reasonable cause” abatement.
It’s probably wise for those advising on FBAR to review the principles of what “reasonable cause” means in the context of FBAR penalties.
(The full text of the 5321 is found in Appendix B of this post.)
Under what circumstances and to what extent will the IRS impose FBAR penalties?
This is anybody’s guess.
There is clearly no “hard and fast” rule. In considering this question it is useful to consider the IRS FBAR Penalty Handbook which is found at:
https://www.irs.gov/irm/part4/irm_04-026-016
The handbook confirms that there is no requirement to impose an FBAR penalty. In addition, the imposition of penalties is to be used to promote compliance. (Of course, the IRS is not bound by this.)
What’s the big picture? What does this mean in context?
Clearly this is NOT good news. Clearly it means that the IRS no longer will specify “safe harbour” rules where no FBAR penalty will be imposed. I do NOT believe that this means that we will immediately see a rash of FBAR penalties. U.S. tax lawyer Virginia La Torre Jeker writing about the end of the “Delinquent FBAR submission procedures” in Forbes suggests that:
The IRS may reasonably conclude that taxpayers have now had ample opportunity to become aware of their filing obligations and that extraordinary administrative relief is no longer needed to the same extent. Whether that conclusion accurately reflects the experiences of Americans abroad is another question. Tax practitioners continue to encounter taxpayers who first discover their filing obligations only after a foreign bank requests U.S. tax documentation or when they begin the process of relinquishing or renouncing U.S. citizenship.
My July 2, 2026 podcast with Virginia is referenced in the above tweet and is found here.
Bottom line:
From July 1, 2026 it is more risky to “fix” FBAR non-compliance than it was prior to July 1, 2026.
It will be interesting to see how the community of Americans abroad responds. Will this change be more likely to encourage FBAR compliance or to discourage FBAR compliance.
What about renunciation? Will this give people one more reason to consider renunciation?
John Richardson – Follow me on X.com/Expatriationlaw
Appendix A – Text of the “Delinquent FBAR submission procedures” as of June 23, 2026
https://web.archive.org/web/20260623112921/https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures
Taxpayers who do not need to use either the IRS Criminal Investigation Voluntary Disclosure Practice or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who:
– have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114, previously Form TD F 90-22.1),
– are not under a civil examination or a criminal investigation by the IRS, and
= have not already been contacted by the IRS about the delinquent FBARs
should file the delinquent FBARs according to the FBAR instructions.
Follow these steps to resolve delinquent FBARs
Review the instructions.
– Include a statement explaining why you are filing the FBARs late.
– File all FBARs electronically at FinCEN’s BSA E-Filing System.
– On the cover page of the electronic form, select a reason for filing late.
If you are unable to file electronically, you may make an inquiry using the various contact options at FinCEN Regulatory Help to determine possible alternatives to electronic filing.
The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.
FBARs will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.
Appendix B – 31 U.S.C. 5321 – Civil Penalties
31 U.S. Code § 5321 – Civil penalties
(5)Foreign financial agency transaction violation.—
(A)Penalty authorized.—
The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.
(B)Amount of penalty.—
(i)In general.—
Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.
(ii)Reasonable cause exception.—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.
(C)Willful violations.—In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314—
(i)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.
(D)Amount.—The amount determined under this subparagraph is—
(i)in the case of a violation involving a transaction, the amount of the transaction, or
(ii)in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.