Chapter 7

What Happens If He Doesn't

Non-willful and willful penalties, reasonable cause, and the procedures that exist for people who are late but not crooked

Hipster looking worriedly up at a wall calendar with the 15th circled in marker.

The penalty section is what finally got Hipster to sit down and file. Read it carefully: the gap between "forgot" and "hid it on purpose" is enormous.

Non-willful (no intent): up to $10,000 per violation by statute, adjusted for inflation. Under 31 CFR § 1010.821 (effective January 17, 2025; the 2026 adjustment was cancelled), the maximum is $16,536. There's a built-in exception: no penalty if the violation was due to reasonable cause and the account balance was properly reported.

Willful (deliberately false, or deliberately not filed): a different league. 31 U.S.C. § 5321(a)(5)(C) sets the maximum at the greater of $100,000 (inflation-adjusted to $165,353; the 50 percent prong isn't adjusted) or 50 percent of the account balance at the time of the violation. On a big account, 50 percent dwarfs the flat amount, and the reasonable cause exception doesn't apply.

Criminal: 31 U.S.C. § 5322(a) allows a fine up to $250,000, up to five years in prison, or both. Under § 5322(b), violating another federal law, or a pattern of illegal activity over $100,000 in 12 months, raises it to $500,000, ten years, or both.

None of that is Hipster. He's late, not hiding anything, and just didn't know. The IRS's advice for someone like him: if the IRS hasn't contacted you and you're not under investigation, file late FBARs as soon as possible to keep potential penalties to a minimum, and give the reason in the BSA E-Filing System (a drop-down, or "other" with a written explanation). If unreported foreign income is also in play, the Streamlined Filing Compliance Procedures cover returns and FBARs together for non-willful filers, with a reduced penalty or none depending on where you live.

The Law, Actually

31 U.S.C. § 5321(a)(5)(B)(i) -- non-willful maximum of $10,000 per violation, inflation-adjusted to $16,536 under 31 CFR § 1010.821 (effective Jan. 17, 2025); OMB Memorandum M-26-11 cancelled the 2026 adjustment.
31 U.S.C. § 5321(a)(5)(B)(ii) -- no penalty if the violation was due to reasonable cause and the balance in the account was properly reported.
31 U.S.C. § 5321(a)(5)(C), (D) -- willful maximum of the greater of $100,000 (adjusted to $165,353; the 50 percent prong is not adjusted) or 50 percent of the account balance at the time of the violation; the reasonable cause exception does not apply.
31 U.S.C. § 5322(a) -- willful violation: fine up to $250,000, imprisonment up to 5 years, or both.
31 U.S.C. § 5322(b) -- willful violation while violating another federal law, or as part of a pattern of illegal activity over $100,000 in 12 months: fine up to $500,000, imprisonment up to 10 years, or both.
IRS FBAR page; FinCEN late-filing instructions (fincen.gov/filing-late); Streamlined Filing Compliance Procedures -- late FBAR filers who have not been contacted by the IRS should file as soon as possible and give the reason in the BSA E-Filing System; the Streamlined procedures address returns and FBARs together for non-willful filers.

Bottom Line

Penalty amounts adjust with inflation, so treat these dollar figures as current as of October 2026. Willful versus non-willful is the line that matters. If you're simply late and have nothing to hide, filing late beats not filing.