Americans with foreign financial accounts live under a parallel reporting system - the FBAR - with its own trigger, its own penalties, and its own paths back for the non-compliant. Here is the system, completely, including the recent development that changed the penalty math.
The Rules
The FBAR files annually when your foreign financial accounts, aggregated, exceeded $10,000 at any moment in the year - independent of whether the accounts earned anything or the money was already taxed. The definition sweeps broadly: bank and brokerage accounts, many foreign pensions and insurance products with cash value, and accounts you merely hold signature authority over. Alongside it runs FATCA's own form for larger holdings, filed with the return - two regimes, two thresholds, both applying to many of the same accounts.
The Penalties, After Bittner
Non-willful violations carry a per-report penalty - and the Supreme Court's Bittner decision settled that it applies per form, not per account, collapsing the nightmare math for people with many accounts and several missed years. Willful violations remain severe: penalties reaching half the account balance per year, with the government proving willfulness through the classic indicia - accounts hidden through intermediaries, mail routed abroad, the foreign-account question answered falsely on a return that knew better. The willful-non-willful line is where these cases are won and lost.
The Three Paths Back
Clean income, missed forms: the delinquent FBAR procedures - file late with an explanation, no penalty. Unreported income with non-willful conduct: the streamlined procedures - three amended returns, six years of FBARs, a sworn non-willfulness certification, and a 5 percent penalty for U.S. residents, zero for qualifying taxpayers abroad. Conduct with willful color: the voluntary disclosure practice, trading a defined penalty for protection against criminal referral. The certification in the middle lane is a sworn statement - chosen wrongly, it manufactures a worse problem than the original - and FATCA means the banks are reporting you regardless, so every favorable lane requires arriving before the government does. The lane analysis is a privileged conversation with a tax attorney, before anything gets filed or certified. Let's have it this week.