Missed your FBAR? The rules changed in July 2026.
The FBAR (FinCEN Form 114) is the report the US Treasury requires from US citizens, residents, and green-card holders if the aggregate of the maximum values of all the foreign financial accounts in which they have a financial interest or signature or other authority (bank, brokerage, mutual fund, and certain pension accounts, not just checking and savings) exceeded $10,000 at any time during the calendar year. If you missed it, the statutory non-willful penalty is severe. There is still a way back, but as of 1 July 2026 it is no longer a guaranteed one.
On 1 July 2026 the IRS removed the Delinquent FBAR Submission Procedures page from its website with no announcement, no explanation, and no replacement guidance. That page was the written promise that qualifying non-willful filers would face no penalty. It is gone. Relief has not disappeared, but it has moved from a published waiver to a discretionary judgment call, and the burden has shifted onto you to document why you qualify.
First, a diagnostic question
Two catch-up pathways remain, and the July change affects only one of them. Which one is even available turns first on whether your federal tax returns are also late. A third case fits neither: someone with unfiled covered years who does not meet the non-residency test cannot use SFOP, and SDOP works only by amending returns already on file. That situation needs advice on the full facts rather than a track.
I only missed FBARs
Your US federal income tax returns (Form 1040) are completely up to date and all foreign income was reported. You only forgot the bank disclosures.
Late FBAR filing with reasonable cause
Still a single submission through the FinCEN portal, but the explanation now carries the outcome. Penalty relief is available and discretionary, not guaranteed.
I missed returns AND FBARs
You have not filed a US tax return in one or more years, or you filed returns but omitted foreign accounts and earnings.
Streamlined Amnesty (SFOP)
A package of 3 years of tax returns, 6 years of FBARs, and a signed non-willful certification on Form 14653, with all tax and applicable statutory interest due paid with the submission. For a qualifying SFOP submission there is no offshore penalty and FBAR penalties are not asserted. The track is open only where the applicable non-residency test is met. For citizens and lawful permanent residents that is 330+ full days outside the US and no US abode in at least one covered year; someone who is neither is tested on failing the substantial presence test, and on a joint return both spouses must qualify. This program remains open.
Is this the IRS offshore amnesty program?
Effectively, yes. People searching for an "IRS offshore amnesty program" are usually looking for what replaced the old Offshore Voluntary Disclosure Program (OVDP), which the IRS closed in 2018. For non-willful expats, the Streamlined Foreign Offshore Procedures are the current route to disclose late foreign accounts and income without an offshore penalty, for those who meet the non-residency test. It is the same program covered on this page and in our full Streamlined guide. Not sure how FBAR and Streamlined fit together? See the side-by-side comparison.
What actually changed on 1 July 2026
For roughly a decade the IRS published a procedure telling taxpayers in plain language that if their income had been reported and their tax paid, filing the missed FBARs late would carry no penalty. The page stated it directly: the IRS would not impose a penalty for the failure to file the delinquent FBARs. On 1 July 2026 that page disappeared. There was no press release, no notice, and no superseding guidance. The old URL now returns a 404 rather than redirecting anywhere.
Two things are worth saying about that before drawing conclusions from it. The removal was unannounced, but it was not entirely unforeshadowed: the IRS had always reserved the right to withdraw the procedure, and IRM 20.1.9.24.2 said in terms that it could be discontinued at any time. And much of the commentary since has treated this as the end of penalty relief for late FBARs, which is too broad. What was withdrawn was the published promise, not the underlying relief.
What survived: IRM 4.26.16.3.11
The Internal Revenue Manual provision that governs how examiners handle this situation is still in force, and survived the manual's 26 August 2025 retransmittal verbatim. IRM 4.26.16.3.11 states that "a penalty will not be asserted" for an account where all three of the following are true:
Not willful. The failure to report the account on a timely filed FBAR was not willful.
Reasonable cause. The failure was due to reasonable cause.
Properly reported. The account was properly reported on the delinquent FBAR you are now filing.
The honest caveat, and it matters: the Internal Revenue Manual does not carry the force of law and confers no rights on taxpayers. That is settled: Fargo v. Commissioner, 447 F.3d 706, 713 (9th Cir. 2006). You cannot compel the IRS to follow it. What the IRM does do is tell examiners they are responsible for adhering to it, and an examination is where FBAR penalties are actually proposed. That is a real protection in practice and a materially weaker one than the written guarantee it replaced, because examiner and managerial discretion still sit on top of it.
Two further limits worth stating plainly. First, the IRM is internal guidance and can be revised or withdrawn. It goes through a formal transmittal and clearance process rather than simply vanishing the way the webpage did, so it is not quite as easy to change, but that process runs internally and taxpayers get no advance say in it. Nothing about its survival so far guarantees its survival next year. Second, the IRS's own current FBAR guidance still says late FBARs may be penalized and that the outcome depends on the facts. Nothing on this page is a safe harbor, and anyone telling you the outcome is certain in either direction is overstating what is knowable.
How to file a late FBAR now
The mechanics are unchanged. What changed is how much weight rests on the second step.
Electronic filing: Log into the BSA E-Filing System (the FinCEN portal) and file the missing FBARs electronically for each late year.
Reason for filing late: The form offers a drop-down of common reasons. Selecting "Other" opens a free-text box capped at 750 characters.
Why the 750 characters now matter
Under the old published procedure, the explanation was close to a formality. The waiver was standardized, so a single sentence saying you had not known about the requirement was generally enough. That is no longer the posture. The removal of the page signals a shift from standardized administrative clemency toward individualized evaluation, which means the reasonable-cause narrative is the thing being assessed rather than a box being ticked.
Reasonable cause rewards specific, verifiable facts: what you understood about your obligations and why, when and how you learned otherwise, whether you relied on a professional and what they told you, and what you did once you knew. It is unimpressed by generalities. "I did not know" is a conclusion. The facts that make it credible are what belong in those 750 characters, and fitting them there is a drafting problem rather than a form-filling one.
Be aware that reasonable cause in the FBAR context is applied strictly, and the reported outcomes should temper any confidence. There is no statutory definition; courts have imported the reasonable-cause principles developed under Title 26, and the IRM itself points examiners to Jarnagin v. United States, 134 Fed. Cl. 368 (2017) and United States v. Ott (E.D. Mich. 2019) for that approach. In Jarnagin the taxpayers argued reasonable cause against roughly $80,000 in non-willful penalties and lost, the court holding they had not exercised ordinary business care and prudence where they had not read their own returns closely enough to see the FBAR question. Neither of those taxpayers succeeded on the defense. The standard is fact-intensive and it is frequently not met. Anyone who tells you a given set of facts clearly qualifies is claiming more certainty than the decisions support. This is the part of the process where the July 2026 change bites, and it is the reason we now treat FBAR-only cases as work rather than as an administrative errand.
What counts as reasonable cause for a late FBAR?
There is no checklist in the statute. The working standard, imported from Title 26 case law, is whether you exercised ordinary business care and prudence and still failed to file. Examiners weigh the whole picture: your education and business background, whether the foreign accounts were disclosed to your return preparer, whether the income from them was reported and the tax paid, how the accounts came to exist (opened for everyday banking in the country where you live is a different fact from opened remotely from the US), and what you did once you learned the requirement existed.
Reliance on a professional deserves its own paragraph, because it is the strongest argument available and the most commonly fumbled. The Supreme Court's distinction in United States v. Boyle, 469 U.S. 241 (1985) is that relying on an agent to handle a filing for you is not reasonable cause, but relying on professional advice about whether a filing was required can be. The fact pattern that works is not "my accountant handled everything." It is "my preparer knew about the foreign accounts and never told me an FBAR was required." Jarnagin collapsed on precisely this point: the taxpayers had never told their accountants the Canadian account existed, so there was no advice to rely on, and signing returns without reading the foreign-account question on Schedule B was itself the failure of ordinary care.
Acceptable reasons for filing an FBAR late, and reasons that carry no weight
| Carries real weight | Carries little or none |
|---|---|
| All foreign income was reported on timely returns and the tax paid; the only failure was the form itself. | "I didn't know," with no facts showing why not knowing was reasonable. It is a conclusion, not a reason. |
| Your preparer knew the accounts existed and never raised the FBAR (the Boyle advice-side fact). | "My accountant handled everything," where the accountant was never told about the accounts (Jarnagin). |
| The accounts are ordinary local banking where you live: salary, rent, groceries, opened because you live there. | "The balances were small." Size can limit the penalty; it does not excuse the violation. |
| Prompt correction once you learned: a dated discovery, professional help engaged, every account reported in full. | Learning of the requirement and sitting on it. Delay after discovery is the fact examiners punish hardest. |
Do you need a cover letter for a delinquent FBAR?
No. Searches for a "delinquent FBAR cover letter" trace back to the paper-filing era, when practitioners attached an explanatory letter to late forms. The BSA E-Filing system accepts no attachments with an FBAR. The reason-for-late-filing field, the drop-down plus the 750-character box behind "Other," is the only channel you have at the filing stage. Two consequences follow. Everything that matters has to survive compression into that box. And a fuller reasonable-cause memorandum with exhibits (the preparer's engagement letter, the date-stamped FATCA letter from your bank, proof the income was reported) is still worth preparing, because if an examiner later proposes a penalty, that memorandum is what your response is built from. We prepare both together for exactly that reason. For annotated sample statements and the full drafting guide, see the late-FBAR cover letter guide.
A sample reasonable cause statement (worked example)
The facts below are invented and the structure is the point: residence, income reported, who knew what, discovery, prompt correction, completeness, and the ask. Everything in your version must be true and checkable; this is a federal filing, and a false explanation creates worse exposure than the late form ever did.
"I am a US citizen and have lived in Germany since 2011. All interest from my Commerzbank and DKB accounts was reported on my timely filed Forms 1040 and all tax was paid. My returns were prepared each year by a German preparer who knew of these accounts and never advised me that FinCEN Form 114 was required; I had no other reason to know of it. I learned of the requirement on 12 May 2026 from my bank's FATCA letter and engaged US tax counsel within two weeks. I am now filing complete FBARs for 2020 through 2025, reporting every account I hold. The failure was non-willful and due to reasonable cause, and I request that no penalty be asserted, consistent with IRM 4.26.16.3.11."
683 of 750 charactersWhy each clause is there:
- "Lived in Germany since 2011" frames the accounts as local-life banking, not offshore structuring.
- "All interest was reported and all tax paid" is the fact the old published procedure was built on, and it removes any suggestion of a tax motive.
- "My preparer knew of these accounts and never advised me" is the advice-side reliance fact from Boyle, and the one the Jarnagin taxpayers could not supply. One caution: reliance carries full weight only where the adviser was competent to give US cross-border advice, so if your preparer had no US tax expertise, say what they knew rather than claiming reliance on their judgment.
- "Learned on 12 May 2026 from my bank's FATCA letter" gives a checkable discovery date, and "engaged counsel within two weeks" shows correction rather than delay.
- The closing sentence asks for the specific relief IRM 4.26.16.3.11 authorizes instead of offering a general apology.
Copy the shape, not the sentences. A statement that reads like a template invites the question of whose facts these really are. One built from your own dated, verifiable facts is the best version of this argument you can make; if you would rather have it drafted and reviewed, that is what we do.
How far back can the IRS actually go?
A point that often gets left out of late-FBAR guidance. Under 31 U.S.C. §5321(b)(1) the IRS has six years to assess a civil FBAR penalty, and in practice that window runs from the FBAR's due date for the year in question rather than from the date of any underlying transaction. Once a penalty is assessed, the government has a further two years to bring a civil action to collect it.
This matters because it tells you what you are actually exposed to. If your unfiled years are old enough, some may already sit outside the assessment window, which is worth establishing before you file so that you know the real size of the problem. The exposure is bounded rather than open-ended.
To be explicit, because this point is easy to misread: the above describes the legal framework. It is not a suggestion to sit on unfiled FBARs and wait for the clock to run. Doing that is a poor strategy for reasons the limitation period does not capture. The FBAR obligation recurs every year, so waiting adds fresh violations rather than only ageing old ones. The window can be extended by consent, and courts have upheld penalties assessed after six years where the taxpayer signed such an agreement (United States v. Solomon, 570 F. Supp. 3d 1195 (S.D. Fla. 2021), treating the period as a waivable affirmative defense rather than a jurisdictional bar). Most importantly, every route discussed on this page depends on your disclosure still being voluntary. If the IRS reaches you first, the argument you are left with is materially worse.
The penalty exposure: Statutory vs. Amnesty
Expats often read horror stories about FBAR penalties. Here is what the statutory law states, and what the voluntary routes do about it (for real-world tripwires such as joint accounts, Wise balances, and HOA accounts, see our FBAR traps guide):
Statutory Penalties (Without Amnesty)
Imposed on expats caught by the IRS before voluntarily filing
- Non-Willful Failures: A statutory maximum of $16,536 per annual report. Under the Supreme Court's 2023 Bittner ruling, the non-willful penalty is assessed per annual report (form), not per account.
- Willful Failures: A statutory maximum, under 31 U.S.C. §5321(a)(5)(C), of the greater of $165,353 or 50% of the balance in the account at the time of the violation. That is a ceiling on what may be assessed per violation, not an automatic or minimum amount. Willful conduct also carries potential criminal exposure.
- Why these are 2025 figures: These maximums normally adjust for inflation each year. There is no 2026 adjustment. OMB Memorandum M-26-11 (17 April 2026) canceled it because the Bureau of Labor Statistics did not publish October 2025 CPI-U data during the funding lapse, and the statute permits no substitute month. Agencies were told to keep applying the 2025 amounts, so these are the current figures.
Coming forward voluntarily
Applied to expats who step forward before the IRS makes contact
- Via Streamlined (SFOP): FBAR penalties capped at $0. The IRS waives both non-willful filing and account disclosure penalties. Unchanged in July 2026.
- Via Streamlined (SFOP), tax penalties: Waived. All failure-to-file and failure-to-pay penalties are eliminated. You still pay any tax owed plus statutory interest.
- FBAR-only, post-July 2026: No published guarantee. Examiners are directed by IRM 4.26.16.3.11 not to assert a penalty where conduct was non-willful, reasonable cause is established, and the account is properly reported on the late FBAR.
The critical prerequisite: Voluntary disclosure
Both routes share a hard, absolute requirement: you must act while your disclosure is still voluntary. If there is an IRS civil examination or IRS Criminal Investigation before you submit your catch-up filings, Streamlined closes entirely and the discretionary relief under the IRM becomes far harder to obtain. Coming forward before the IRS does is what keeps both routes on the table at all. The July 2026 withdrawal fits a broader pattern of the IRS narrowing the administrative routes back into compliance, which is an argument for moving sooner rather than waiting to see what replaces it.
Common questions
Did the IRS end penalty relief for late FBARs?
Not exactly. What ended on 1 July 2026 was the published Delinquent FBAR Submission Procedure, which promised in writing that no penalty would be imposed on qualifying non-willful filers. The IRS removed that page without any announcement or explanation. Relief itself still exists, and the statutory part of it is not discretionary. 31 U.S.C. 5321(a)(5)(B)(ii) is unchanged and is not discretionary: it bars a penalty outright where the violation was due to reasonable cause AND the account balance was properly reported. What ended is the published administrative route that promised that outcome without establishing it case by case; IRM 4.26.16.3.11 is the examiner guidance, directing no penalty where the failure was non-willful, due to reasonable cause, and the account properly reported on the delinquent FBAR. Reasonable cause alone does not carry it, and the difference now is that you have to establish the conditions rather than point at a published procedure.
What is IRM 4.26.16.3.11 and why does it matter?
It is the provision of the Internal Revenue Manual, carried forward verbatim in the manual's 26 August 2025 retransmittal, stating that a penalty will not be asserted where three conditions are met: the failure to report the account was not willful, the failure was due to reasonable cause, and the account was properly reported on the delinquent FBAR. It survived the July 2026 webpage removal. Two limits matter. The IRM does not carry the force of law and confers no rights on taxpayers (Fargo v. Commissioner, 447 F.3d 706 (9th Cir. 2006)), so you cannot compel the IRS to follow it; it tells examiners they are responsible for adhering to it, which is a practical protection rather than a guarantee. And because it is internal guidance, it can be revised or withdrawn as quietly as the webpage was.
Can I still just file the late FBARs myself?
The filing mechanism has not changed. Late FBARs still go to FinCEN through the BSA E-Filing system, and the form still asks you to select a reason for filing late. What changed is the consequence of doing it badly. Under the old published procedure a thin explanation was usually enough because the waiver was standardized. Now the explanation is the thing being evaluated.
Does this affect the Streamlined program?
No. The Streamlined Filing Compliance Procedures are unaffected and remain open. SFOP still carries a 0% offshore penalty and SDOP still carries 5%. If your tax returns are also late, this change does not touch the streamlined route. Which track is even available then is a narrower question than it looks: SDOP works through amended returns, so it does not fit unfiled years, and SFOP requires the non-residency test. Someone with unfiled covered years who does not meet that test fits neither, and needs a different conversation rather than a track.
How long is the reasonable cause statement?
FinCEN's form gives you a drop-down of common reasons. If you select "Other" you get a free-text box capped at 750 characters. That is a tight budget for facts that now carry the outcome, which is the main practical argument for having the statement drafted rather than improvised.
What are acceptable reasons for filing an FBAR late?
There is no fixed list. The standard is ordinary business care and prudence, and the facts that carry weight are specific ones: all foreign income was reported and the tax paid; the accounts were ordinary local banking in your country of residence; your return preparer knew the accounts existed and never raised the FBAR; and you acted promptly once you learned of the requirement. Bare assertions carry little: "I didn't know" without facts showing why not knowing was reasonable, or "my accountant handled everything" where the accountant was never told about the accounts, which is the argument that failed in Jarnagin v. United States.
Do I need a cover letter for a delinquent FBAR?
No. The BSA E-Filing system accepts no attachments with an FBAR, so there is nowhere to put one. The explanation goes in the form's own reason-for-late-filing field: a drop-down of common reasons, plus a 750-character free-text box if you select Other. A fuller reasonable-cause memorandum with supporting documents is still worth preparing, but it is held in reserve for the examiner if a penalty is later proposed, not submitted with the FBAR.
How far back can the IRS assess an FBAR penalty?
Six years, under 31 U.S.C. 5321(b)(1). The statute refers to the date of the transaction; for filing violations the IRS treats that as the FBAR due date for the year concerned. Once a penalty is assessed the government has a further two years to sue to collect it. Older unfiled years may already sit outside the assessment window, which is worth establishing before you file so you know the real size of the exposure. This is not a reason to wait: the obligation recurs annually so delay adds new violations, the period can be extended by consent (United States v. Solomon, 570 F. Supp. 3d 1195 (S.D. Fla. 2021), upholding penalties assessed after six years where the taxpayer had signed an extension), and every route back depends on your disclosure still being voluntary.
Is reasonable cause a reliable defense?
It is the right argument to make and it is not a guarantee, and the reported outcomes lean against taxpayers. There is no statutory definition of reasonable cause for FBAR purposes; courts have applied the principles developed under Title 26, and the IRM directs examiners to Jarnagin v. United States, 134 Fed. Cl. 368 (2017) and United States v. Ott (E.D. Mich. 2019) for that approach. In Jarnagin the taxpayers raised reasonable cause against roughly $80,000 in non-willful penalties and lost, because they had not exercised ordinary business care and prudence. Neither taxpayer succeeded on the defense. Treat it as fact-intensive and frequently unmet rather than as a reliable fallback.
Should I wait to see if the IRS republishes the procedure?
Waiting carries the same risk it always did, and arguably more. Acting before the IRS does is what preserves your options: it is an express Streamlined requirement and it keeps the facts clean for a reasonable-cause argument. It is not a separate statutory condition of the section 5321 reasonable-cause exception or of the three IRM conditions, but prior IRS contact complicates every route. If there is an IRS civil examination or IRS Criminal Investigation first, the discretionary relief under the IRM is far harder to obtain and the Streamlined door closes entirely.
Reviewed by Ilya Fayerman, Esq. (NY Bar) on