FBAR Penalties: What Happens If You Do Not File

The Report of Foreign Bank and Financial Accounts (FBAR) carries some of the most severe civil and criminal penalties in the tax code. Many H-1B holders with Indian accounts are unaware of this filing requirement until penalties are assessed.

What Is FBAR and Who Must File?

FBAR (FinCEN Form 114) must be filed by any U.S. person who has a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year. As an H-1B holder who passes the Substantial Presence Test, you are a U.S. person for this purpose.

The $10,000 threshold is aggregate — meaning the combined maximum balance across all your foreign accounts during the year. If you have an NRE savings account ($5,000), an NRO FD ($4,000), and a PPF ($3,000), the aggregate is $12,000, and you must file even though no single account exceeded $10,000.

Non-Willful vs Willful FBAR Penalties

The distinction between non-willful and willful is the most critical factor in FBAR penalty assessment:

• Non-willful: You did not know about the FBAR requirement, or you made an honest mistake. The maximum penalty is $10,000 per violation. Courts have debated whether this is per account or per form — recent case law (United States v. Bittner, 2023) held it is per report (form), not per account, for non-willful violations.
• Willful: You knew about the requirement and deliberately chose not to file, or you acted with reckless disregard. The penalty is the greater of $100,000 or 50% of the account balance at the time of the violation. This can exceed the account value over multiple years.

The IRS determines willfulness based on the totality of circumstances. If a CPA or article informed you of FBAR and you still did not file, it could be characterized as willful.

Penalty Amounts: Current Fine Schedule

Streamlined Filing Compliance Procedures

If you have not been contacted by the IRS about your foreign accounts, the Streamlined Filing Procedures offer a path to compliance with significantly reduced penalties:

• Streamlined Domestic (SDOP): For U.S. residents. File 3 years of amended returns, 6 years of FBARs, and pay a 5% miscellaneous offshore penalty on the highest aggregate balance.
• Streamlined Foreign (SFOP): For those living outside the U.S. Zero penalty. Same filing requirements as SDOP.

The key requirement is that your failure must have been non-willful. You must certify this under penalty of perjury.

Delinquent FBAR Submission Procedures

If you reported all your foreign income on your tax returns but simply did not know about the FBAR filing requirement, the Delinquent FBAR Submission Procedures may be the simplest path. File late FBARs through the BSA E-Filing System with a statement explaining why the filings are late.

If the IRS accepts your reasonable cause explanation, no penalties are assessed. This program is ideal for H-1B holders who diligently reported NRO interest on Schedule B and claimed FTC on Form 1116 but had no idea that a separate FBAR was required.

Protecting Yourself Going Forward

• File FBAR by April 15 each year (automatic extension to October 15).
• Report all foreign accounts: NRE, NRO, PPF, EPF, NPS, demat accounts, LIC policies with cash value, and any joint accounts.
• Keep records of maximum balances for each account during the year.
• File even if you are unsure whether you meet the threshold — there is no penalty for filing an unnecessary FBAR.