The penalty for a willful FBAR violation is the greater of:

• $165,353 per violation (per account, per year)
• 50% of the highest aggregate balance in each unreported foreign account during the year

The penalty is applied for each account and each year the reporting obligation was not met.

1. FBAR penalties are staggering and unique. Unlike IRS income tax penalties authorized under Title 26, FBAR penalties are provided for under Title 31 and not based on tax avoided, but rather account size.
2. There are two types of FBAR penalties: Ugly or disastrous. The “ugly” FBAR penalty is $10,000. This penalty is typically assessed if you can prove your conduct was merely negligent. The “disastrous penalty” is the greater of 50% of account value or $100,000, if the IRS feels you purposely hid assets. Both penalties can be assessed multiple times.
3. Court is an option if you want to fight FBAR penalty assessments. You can have your day in court, but most taxpayers elect to initially file an appeal with the IRS. Your other option is to pay all assessments, and then file a suit for refund in US District Court.
4. The IRS is much easier to deal with when inside the Offshore Voluntary Disclosure Program (OVDP). The main purpose of the FBAR OVDP is to minimize tax, penalty and interest, and to avoid possible criminal prosecution. Secondly, OVDP limits the number of years for which the taxpayer is responsible to eight years. This is why it is extremely important (and advisable) to use the OVDP to limit the FBAR penalty and exposure to tax, penalties and interest.

Once the IRS flags a potential willful FBAR violation, the investigation process begins, and it’s more aggressive than most taxpayers expect. If you’ve received a notice or been contacted by an examiner, here’s what typically follows:

1. Initial Review: The IRS checks your tax returns, FBAR history, and foreign bank data for signs of noncompliance.
2. Information Requests: You may be asked to provide bank records, account statements, and financial documents. Not responding can be used against you.
3. IRS Interview: The IRS may schedule an interview (often after Letter 3709) to ask about your knowledge and intent. What you say here is key.
4. Willfulness Determination: The IRS uses a “more likely than not” standard. Reckless actions or ignoring the rules may be treated as willful, even if you didn’t intend to break the law.
5. Penalty Assessment: If the IRS decides your actions were willful, they’ll calculate penalties and send a notice, often based on 50% of account balances per year.
6. Response Window: You have a limited time to respond or challenge the proposed penalty. Without legal action, it becomes final and collectible.

1. Represent you during IRS interviews and correspondence
2. Review IRS findings and evidence before penalty assessment
3. Build a legal defense that challenges willfulness classifications
4. Protect your position before the case escalates into enforcement

1. Confidential Legal Consultation
   Every engagement starts with a private, attorney-led consultation. This includes a review of any IRS notices, foreign account details, and related filings to understand your exposure and clarify where legal intervention is needed.
2. Case Review and Risk Evaluation
   We perform a detailed review of your FBAR history, tax returns, account documentation, and the IRS’s position. This helps uncover inconsistencies, overreach, or unsupported classifications in the government’s case.
3. Custom Legal Defense Strategy
   Clients receive a tailored legal defense focused on disputing willful classifications, narrowing penalty scope, and leveraging factual or procedural errors in the IRS’s findings. We position your case using applicable law and supporting documentation.
4. Full IRS Representation
   We handle all communication with the IRS on your behalf, including interview preparation, written responses, and direct representation in meetings or correspondence. This helps control the narrative and avoids self-incrimination or missteps.
5. Formal Protests and Appeals
   If the IRS has proposed penalties, we prepare and submit formal protests, legal briefs, or supporting materials to challenge the classification and amount. We also represent you in administrative appeals to resolve the matter before it reaches enforcement.
6. Penalty Negotiation and Relief Support
   Our team assists in securing penalty reductions, installment agreements, or hardship-based resolutions when applicable. All relief options are evaluated in line with your financial position and the legal framework of the case.