Avoid FBAR Penalties: What to Do If You Missed Reporting Foreign Accounts

Ever opened a foreign bank account while living abroad? Inherited an international investment? Helped manage a family account overseas? These situations aren’t unusual—but they can trigger a key filing obligation many U.S. taxpayers overlook: the FBAR. Short for Foreign Bank Account Report, the FBAR is required if your foreign financial accounts exceed certain thresholds—and missing the deadline can lead to steep penalties or even criminal charges. Understanding what’s required (and what’s not) can make all the difference in staying compliant and avoiding costly missteps.

Who Must File an FBAR

Any U.S. person, including U.S. citizens, residents, corporations, partnerships, LLCs, trusts, and estates, must file an FBAR if they have a financial interest in or signature authority over one or more foreign accounts whose total value exceeds $10,000 at any time during the calendar year. In short, you need to file if all your foreign accounts equal $10,000 or more, or if the total reached $10,000 during the year, even if it went back down afterward.

Examples of reportable accounts include:

• Bank accounts at foreign financial institutions

• Foreign brokerage or investment accounts

• Offshore mutual funds

• Foreign retirement accounts

 Even if your account doesn't generate any income or interest, you still have to report it if the $10,000 threshold is met.

Common FBAR Mistakes That Lead to Penalties

Mistakes on your FBAR filing can lead to non-compliance and put your offshore tax haven at risk, even if they're unintentional. Three of the most common missteps are:

1) Missing the Deadline

The FBAR is due annually by April 15, with an automatic extension to October 15. It’s not filed with your tax return—it must be submitted electronically through the BSA E-Filing System. Many taxpayers miss this simply because they weren’t aware of the requirement.

2) Misreporting Account Ownership or Value

A lot of taxpayers misunderstand ownership. If you have control over the account and can direct the use of funds, you may need to file. Co-signers and people with power of attorney should take care not to miss a filing requirement. When you file, make sure to accurately report the maximum value of the account during the tax year. You will need and want precise records to ensure reporting compliance.

This issue can also surface in offshore trust structures. For example, trustees may worry about FBAR obligations when a beneficiary becomes a U.S. person—perhaps through marriage or naturalization. While it’s understandable to be cautious, not every change in beneficiary status triggers a filing requirement for the trust manager. Still, it’s a good idea to seek legal advice to assess your responsibilities with confidence.

3) Assuming a Non-Interest-Bearing Account Doesn’t Count

Even if your foreign accounts didn’t earn interest or haven’t been used, they still need to be reported if they push you over the $10,000 threshold. Omitting them—knowingly or not—can result in enforcement. 

What Happens If You Don’t File an FBAR

The IRS treats FBAR noncompliance seriously. The consequences vary depending on whether the error is seen as non-willful or willful:

• Non-willful violations can result in penalties of up to $10,000 per violation per year.

• Willful violations carry penalties of up to $100,000 or 50% of the account balance—whichever is greater—and may also include criminal prosecution. 

Penalties can add up quickly, especially if the issue spans multiple years or multiple accounts. 

If You’ve Missed an FBAR Filing, What Should You Do?

First, know that you’re not alone. Many people discover their FBAR obligation only after they’ve missed a deadline or received a notice from the IRS. Fortunately, there are still paths forward.

The IRS offers programs like the Streamlined Filing Compliance Procedures and the Voluntary Disclosure Program for taxpayers looking to correct mistakes. But these programs can be complex—and once the IRS initiates an audit or investigation, your options narrow.

That’s why, if you think you’re out of compliance, the best next step is to speak with a tax attorney experienced in FBAR defense. It’s not about paperwork at this stage—it’s about strategy.

Why Legal Help Matters

At Kundra & Associates, we don’t just help clients understand their reporting obligations—we represent individuals and businesses when foreign account issues become legal problems. Whether you’re facing IRS scrutiny, civil penalties, or potential criminal exposure, we can help you navigate the situation and protect your rights.

We serve clients throughout Maryland, Virginia, Washington, D.C., the U.S., and internationally, providing clear legal guidance and experienced representation when it matters most.