Can the IRS Really Take Half the Money in My Foreign Bank Accounts?

If you have money tucked away in a foreign bank account, you’ve probably heard the scary stories: the IRS can swoop in and take half of your balance if you haven’t filed the proper paperwork. It sounds extreme, but there’s some truth to it. U.S. taxpayers with foreign accounts are required to file an annual FBAR (Report of Foreign Bank and Financial Accounts), and the penalties for missing one can be steep.

The good news is, you have options to get back into compliance before things spiral out of control.

Key Takeaways

• U.S. taxpayers must file an FBAR (FinCEN Form 114) if their combined foreign account balances exceed $10,000 at any point during the year.

• Penalties for non-willful violations can reach $10,000 per account, per year, while willful violations can result in fines of up to 50% of the account balances (or $100,000 if greater), per year, and possible criminal charges.
• FBAR penalties are indexed to inflation, and as of 2025, they are $16,536 for non-willful violations and up to $165,353 for willful violations.

• The IRS can discover undisclosed accounts through FATCA reporting, international information-sharing agreements, and audits—waiting and hoping they won’t find out is extremely risky.

• If you’ve missed an FBAR, programs like the Delinquent FBAR Submission Procedures, Streamlined Filing Compliance Procedures, and the Voluntary Disclosure Practice may help you get back into compliance and limit penalties.

• The sooner you act, the more options you’ll have. An experienced FBAR lawyer can help you navigate the process and protect your assets.

What Is an FBAR and Who Needs to File One?

The FBAR, or Report of Foreign Bank and Financial Accounts, is a form the U.S. government uses to keep track of offshore assets. Officially known as FinCEN Form 114, it must be filed each year by anyone who has foreign accounts that total more than $10,000 at any point during the calendar year.

Who exactly needs to file? U.S. citizens, green card holders, and even certain businesses and trusts are required to submit an FBAR if they meet that threshold. It doesn’t matter if the accounts are checking, savings, investment accounts, or even accounts where you’re just a signatory but don’t technically own the money. If you can access the account and the total value across all foreign accounts goes over $10,000 at any point during the year, the FBAR applies to you.

The form isn’t complicated on its own, but it can be easy to overlook, especially if you’ve been banking overseas for years and didn’t realize U.S. reporting rules apply. That’s why so many high-income taxpayers and expats find themselves playing catch-up.

Can the IRS Really Take Half Your Foreign Bank Account?

The short answer is yes, in some situations, the IRS can take up to half the balance in your foreign account as a penalty. This applies to willful FBAR violations, which means the IRS believes you intentionally avoided reporting your accounts or were recklessly indifferent to the filing requirement.

Here’s how it works: the penalty for a willful violation can be the greater of $100,000 or 50% of the account balance at the time of the violation. That’s per year, per account. However, it’s important to note that the FBAR penalties are indexed to inflation, and as of 2025, the penalty for willful violations is the greater of $165,353 or half of the account balance.

If your account balance is $400,000, your penalty would be $200,000 (half of the balance). But if your account balance is $300,000, the penalty would be $165,353 (the willful FBAR penalty).

That’s why it’s so important to know where you stand. The IRS doesn’t always jump straight to the maximum penalty, but it absolutely has the authority to do so in willful cases.

Willful vs. Non-Willful FBAR Violations

When it comes to FBAR penalties, intent makes all the difference. The IRS separates violations into two categories: willful and non-willful.

• Non-willful violations are usually honest mistakes. Perhaps you were unaware of the FBAR’s existence or misunderstood the filing requirements. In these cases, the penalty is typically up to $10,000 per violation ($16,536 as of 2025), which can still add up but is far less severe than the willful penalty.
• Willful violations, on the other hand, are treated much more seriously. The IRS applies this label when it believes you intentionally avoided filing or were deliberately indifferent to your obligations. This could include things like hiding accounts in a relative’s name, moving money around to avoid detection, or ignoring advice from your tax professional about filing an FBAR.

To put it simply, a non-willful violation might cost you thousands, but a willful violation could cost you half your account balance or well over $100,000—and that’s for every year you failed to report.

How Does the IRS Discover Undisclosed Foreign Accounts?

Think the IRS will never find out about your overseas accounts? That’s a dangerous gamble. The days of hidden offshore accounts are long gone. Through the Foreign Account Tax Compliance Act (FATCA) and international information-sharing agreements, foreign banks are now required to report account information for U.S. taxpayers.

That means the IRS often knows about your foreign accounts before you even realize you should have filed an FBAR. They also receive tips from whistleblowers, review wire transfer data, and sometimes even uncover accounts during audits or foreign tax investigations.

The takeaway? It’s extremely risky to hope the IRS won’t notice a missed FBAR. Once they make contact, your options for reducing penalties shrink dramatically, and the possibility of willful penalties or even criminal charges goes up.

Missed an FBAR? Options to Get Back into Compliance

If you’ve realized you missed filing an FBAR, the worst thing you can do is ignore it and hope it goes away. The IRS has programs in place that allow taxpayers to get back into compliance, but the key is acting before the government contacts you. Once the IRS is at your door, your options are much more limited, and the penalties can skyrocket.

Here are the main paths available:

Delinquent FBAR Submission Procedures

If you simply forgot to file and you don’t owe any additional tax, you may qualify for this option. You can use this option if you reported income from the foreign accounts on your tax return, but you didn’t file the FBAR. You can also use this option if your foreign accounts didn’t generate any income.

You’ll file the missing FBARs with an explanation for the delay. As long as the IRS hasn’t already reached out to you about the issue, penalties are often waived.

Streamlined Filing Compliance Procedures

This program is for non-willful violations where you should have filed an FBAR but didn’t, and you also have unreported tax from the FBAR. That may include situations where you didn’t file an income tax return at all or where you filed but didn’t report the income from your foreign accounts.

This option requires you to file the past three years of tax returns (if needed) and six years of FBARs, along with a statement explaining why the failure was non-willful. There’s a one-time penalty of 5% of your highest account balance during the covered period, which is far less than the 50% willful penalty.

Voluntary Disclosure Practice (VDP)

If you’re concerned the IRS might view your violation as willful, this is likely your safest route. The VDP lets you disclose unreported foreign accounts before the IRS catches you, which can significantly reduce penalties and avoid criminal prosecution. The process is more involved—you’ll need to file eight years of returns and FBARs, pay back taxes, and deal with a higher penalty—but it’s still a much better outcome than facing full willful penalties.

No matter which path you’re considering, it’s smart to get professional guidance. The language you use in your submission can make or break your case, and guessing your way through the process could land you in deeper trouble.

Why You Shouldn’t Ignore the Problem

It can be tempting to take a “wait and see” approach, but when it comes to missed FBARs, time is not on your side. The longer you delay, the higher your risk of facing severe penalties—and possibly criminal charges. Remember, the IRS can impose fines of up to 50% of your account balance per year for willful violations, and they often look back multiple years. Those numbers add up fast.

Beyond the financial hit, the IRS has been ramping up its offshore enforcement efforts for years. With FATCA agreements in place, banks around the world are actively reporting U.S. account holders. Hoping to stay under the radar is a gamble you’re almost certain to lose.

Even if you believe your violation was non-willful, ignoring the issue makes it harder to argue that you acted in good faith. Taking action now gives you access to programs that can reduce penalties and protect you from the harshest consequences.

FAQs About FBAR Penalties and Foreign Bank Accounts

If you’re worried about FBAR penalties or aren’t sure where you stand, you’re not alone. Below are answers to some of the most common questions we hear from clients about foreign bank accounts and IRS enforcement.

Can the IRS really take half the money in my foreign bank account?

Yes, in cases of willful FBAR violations, the IRS can assess penalties of up to 50% of the account balance per year, per violation. If multiple years are involved, the total penalties can quickly exceed the account’s value. This is why it’s crucial to address missed FBAR filings as soon as possible.

Can the FBAR penalty exceed the balance in my account?

Yes, if the current year’s inflation-adjusted penalty is more than 50% of your account balance, the IRS can assess that penalty, even if it’s more than the amount in your account. For example, in theory, if you have a willful FBAR violation on an account with $20,000 in 2025, you can face a willful FBAR penalty of $165,353.

However, the Internal Revenue Manual (IRM) advises IRS employees against taking this route, except in extreme situations, but the law clearly allows these high penalties.

What is considered a willful FBAR violation?

A willful violation occurs when the IRS believes you intentionally avoided filing an FBAR or showed reckless disregard for the requirement. Examples include hiding accounts, ignoring advice from tax professionals, or using complex account structures to conceal funds. Non-willful violations are generally unintentional mistakes or misunderstandings.

What happens if I missed filing FBARs for several years?

You still have options. Depending on your situation, you may qualify for the Delinquent FBAR Submission Procedures, the Streamlined Filing Compliance Procedures, or the Voluntary Disclosure Practice. Each program has different requirements and potential penalties, so professional guidance is critical.

How does the IRS find out about foreign bank accounts?

Through the Foreign Account Tax Compliance Act (FATCA) and other international information-sharing agreements, many foreign banks are required to report account information for U.S. taxpayers. The IRS also uses audits, whistleblowers, and data from wire transfers to identify undisclosed accounts.

Will I face criminal charges for missing an FBAR?

Criminal charges are generally reserved for the most serious willful violations, especially where there’s evidence of concealment or fraud. However, even if criminal charges are unlikely, civil penalties can be devastating. Acting before the IRS contacts you greatly reduces the risk.

Do I need a lawyer to fix a missed FBAR?

While you can file on your own, working with an experienced FBAR lawyer gives you the best chance to minimize penalties and avoid missteps. Your lawyer can determine which compliance program is best for you and help you craft the strongest case possible.

How Timothy S. Hart Law Group Can Help

FBAR cases can be highly complex, and the stakes are high. Violations can lead to steep financial penalties and, in some cases, even criminal charges. You have the best chance of avoiding these serious outcomes with the guidance of an experienced New York FBAR lawyer.

Timothy S. Hart will thoroughly review the issues with your FBAR disclosures and develop a strategic plan tailored to your situation from the very start. With a strong focus on offshore bank and financial account matters, our firm can help you avoid the most severe penalties or work to have those penalties reduced.

To schedule a free, no-obligation consultation with attorney Timothy S. Hart, call our Albany law office at (518) 213-3445 or our New York City office at (917) 382-5142 today. The sooner you act, the more options you’ll have for protecting your finances and your peace of mind.