Late FBAR filing: Using IRS streamlined procedures to avoid offshore account penalties

You have offshore bank accounts, foreign trusts, or international business structures. But you just realized you never filed your FBARs (Reports of Foreign Bank and Financial Accounts).

Don't panic.

The IRS offers programs that can eliminate or reduce penalties if you come forward voluntarily. The key is acting before they contact you.

This guide shows you how to fix late FBAR filing through delinquent FBAR submission procedures and streamlined compliance procedures.

What are FBAR requirements?

The FBAR (FinCEN Form 114) is required if your foreign accounts total more than $10,000 at any point during the year. That's all accounts combined, not each one separately.

You need to report:

• Foreign bank accounts (checking, savings, money market)
• Investment and brokerage accounts abroad
• Foreign trust accounts where you're a beneficiary
• Accounts where you have signature authority (even if you don't own them)
• Foreign retirement and pension accounts
• Life insurance policies with cash value overseas

Important dates:

• Filing deadline: April 15
• Automatic extension: October 15

FBARs are filed online through FinCEN's BSA E-Filing System. You don't include them with your tax return.

FBAR penalties: How bad can it get?

The IRS looks at one thing: Did you know you had to file?

Non-willful violations (you didn't know):

• Maximum penalty: $16,536 per unfiled form
• The Supreme Court ruled this is per form, not per account
• So if you missed one FBAR with 10 accounts, that's one penalty—not ten

Willful violations (you knew but didn't file):

• Penalty: Up to $165,353 OR 50% of your account balance (whichever is higher)
• This applies per year
• Example: $2 million in accounts, 5 missed years = over $5 million in penalties

The IRS can go back 6 years from the due date.

That's why catching up usually means filing 6 years of FBARs.

Which FBAR amnesty program should you use?

Delinquent FBAR Submission Procedures (DFSP)

This is the simplest option if you already reported all your foreign income on tax returns. You just forgot to file the actual FBAR forms.

You qualify if all your foreign account income was reported on US tax returns, you paid all taxes owed, the IRS hasn't contacted you about FBARs, your failure to file wasn't intentional, and you're not under IRS examination.

How to file:

1. Collect account information (names, account numbers, and highest balances)
2. File missing FBARs electronically through the BSA E-Filing System (usually 6 years)
3. Write a short statement explaining why you're late
4. Select the late filing reason on each form
5. Keep your confirmation receipts for 5 years

Good reasons for being late include not knowing about FBAR requirements, your tax preparer never telling you, thinking the $10,000 threshold applied to each account separately instead of the total, or receiving bad advice. Keep your explanation simple and honest.

Streamlined filing compliance procedures

You missed FBARs and you have unreported foreign income. This happens a lot with offshore investment accounts or foreign trust distributions.

The Streamlined Procedures fix both problems at once.

For US citizens living abroad (SFOP): You must have lived outside the US for at least 330 days in one of the past 3 years. File 3 years of amended or late tax returns, 6 years of FBARs, and complete Form 14653 certifying your mistake wasn't intentional. Penalty: $0

For US residents (SDOP): Same filing requirements as above, but the penalty is 5% of your highest account balance during those years.

Both programs only work if you file before the IRS contacts you. Once they start an examination, you're locked out.

Why "quiet disclosure" is a terrible idea

Some people try "quiet disclosure." They file late FBARs without using official IRS programs. They hope nobody notices.

This backfires because you get zero penalty protection, it can trigger IRS audits and criminal investigations, the IRS may treat your mistake as intentional, you lose the chance to use amnesty programs later, and it looks like you're trying to hide something.

The IRS already knows about your accounts. Foreign banks report them through FATCA. The IRS cross-checks those reports against filed FBARs. They have systems that flag non-compliance automatically.

Don't try to sneak under the radar. Use the official programs.

What to do right now

Timing matters more than anything else. All these programs require you to come forward before the IRS contacts you.

Once you get an examination notice or inquiry letter, these options disappear.

Take these steps today:

1. Make a list of all foreign accounts from the past 6 years (include closed accounts)
2. Pick the right program based on whether you reported income or not
3. Get account statements showing highest balances (call the bank if you need old ones)
4. Write your explanation if using DFSP
5. File before the IRS finds out

Can't find old statements? Estimate using the best information you have. Document how you came up with the numbers. The IRS cares more about voluntary compliance than perfect records.

Complex situation? If you have foreign trusts, multi-tier entities, or accounts in many countries, get professional help. The cost is nothing compared to potential penalties or criminal charges.

Bottom line

Missing FBAR filings doesn't mean you're facing automatic penalties. But you need to act fast.

Choose DFSP if you only missed FBARs. Choose streamlined procedures if you also have unreported income. Come forward before the IRS contacts you.

Your offshore protection strategies should help you—not create tax problems. File now through the proper IRS programs. You'll become compliant and avoid six-figure penalties or criminal prosecution.