For U.S. taxpayers with foreign bank accounts, the FBAR penalty system can feel like walking a tightrope. One small mistake may lead to a $10,000 non-willful penalty, while a different set of actions — even without bad intent — can lead to a $100,000+ willful penalty, or even 50% of the account balance per year.

The difference between these two categories often comes down to willfulness, a word that sounds simple but has a much broader meaning in FBAR cases. Understanding what counts as willful — and what does not — is essential for anyone with foreign accounts.

This blog explains the fine line between non-willful and willful FBAR penalties in plain English, using general principles and themes that courts have emphasized in recent years.

1. Why the Difference Between $10k and $100k Matters

FBAR penalties fall into two major categories:

Non-Willful Penalty

Usually up to $10,000 per year, often applied when the taxpayer makes an honest mistake, misunderstands the rule, or accidentally fails to file.

Willful Penalty

Can be $100,000 or more, and often calculated as 50% of the highest account balance per year. Often, the penalty would be 50% of the highest balance year in real cases. 

The difference is dramatic.
And the dividing line — what makes something willful — can be surprisingly thin.

2. What “Willful” Really Means for FBAR

Most people think willful means:

“I meant to break the law.”

But for FBAR, willfulness includes:

• Knowing you should report but not doing it

• Recklessness — ignoring obvious warning signs

• Willful blindness — choosing not to learn more because you don’t want to know

This broad definition creates a spectrum:

Because recklessness and willful blindness fall under “willful,” the distinction becomes less about intent and more about how your behavior appears.

3. Common Behaviors That Push a Case Toward a Willful Penalty

Below are examples of actions that courts have often treated as signs of willfulness — even if the taxpayer did not intend to avoid reporting.

A. Signing a tax return that falsely says “No foreign accounts”

Your tax return directly asks in Schedule B whether you had foreign bank accounts.
Signing the return with an incorrect answer — even accidentally — has repeatedly been viewed as reckless. (But, this may not completely lead to willfulness. )

Why this matters:

The IRS expects taxpayers to read what they sign.

B. Ignoring obvious clues

Courts look for "red flags," such as:

• Seeing the foreign account question on Schedule B

• Receiving foreign bank statements

• Getting letters about foreign account reporting

• Not asking your CPA questions when unsure

• Repeating the same inaccurate answers year after year

Even if you didn't intend to hide anything, ignoring these signals can be viewed as recklessness, which equals willfulness for FBAR.

C. Using account practices that create secrecy

Certain behaviors — even if not illegal — look suspicious to courts, such as:

• Avoiding U.S. mailing addresses for foreign bank statements

• Holding accounts under foreign entities or trusts without clear explanation

• Moving funds among foreign accounts in confusing ways

If your actions appear to reduce transparency, the IRS may lean toward a willful penalty.

D. Not informing your tax preparer about foreign accounts

Taxpayers commonly say:

“My accountant never told me about FBAR.”

But the IRS asks:

“Did you tell your accountant about the foreign accounts?”

If you didn’t, the responsibility is still on you.
Professionals cannot report what they do not know.

Failing to disclose foreign accounts to your preparer can shift a case from non-willful to willful.

4. Important Modern Nuance: The IRS Must Justify the Penalty Amount

Even if the IRS believes a failure is willful, courts now emphasize that:

The IRS cannot automatically impose the maximum 50% penalty without a proper explanation.

This means the IRS must:

• Follow internal procedures

• Consider the individual taxpayer’s situation

• Justify why a certain penalty amount is appropriate

• Avoid arbitrary or excessive penalties

In other words, the IRS still has broad power — but must show its work when choosing the penalty amount. In other words, the IRS will choose the case where they think they can win. They will not take an unreasonable risk of getting defeated in courts. 

This development helps taxpayers argue for lower penalties, even if their conduct is deemed willful.

5. How to Stay on the Safe Side of the Line

Here are practical steps to help ensure your behavior stays on the non-willful side of the spectrum:

• Read the foreign account questions on your tax return carefully

• Tell your CPA about all foreign accounts

• Keep records and respond to foreign bank notices

• Ask questions when unsure

• Do not ignore letters referencing U.S. reporting obligations

• Avoid account practices that appear secretive

• Do not create unnecessarily numerous accounts or shell corporations

Transparency and curiosity go a long way toward showing non-willfulness.

Final Thoughts

The difference between a $10,000 non-willful FBAR penalty and a $100,000+ willful penalty often depends on the taxpayer’s behavior, awareness, and level of care, not just intent.

Key points to remember:

• Willfulness includes recklessness and willful blindness

• Signing tax returns without reviewing them can be dangerous

• Ignoring warning signs is often treated as willful

• Secrecy (even unintentional) may raise red flags

• IRS penalties must be justified — not automatically maximized

• Proactive transparency is the best protection

If you have foreign accounts and are unsure about your filing history or your risk level, seek guidance before contacting the IRS.

Disclaimer

This blog is for general informational and educational purposes only.
It is not legal, tax, or financial advice.
FBAR penalties depend heavily on the facts of each situation.
If you suspect you may have past FBAR non-compliance, consult a qualified U.S. international tax attorney or tax professional before taking any action.

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