On June 30th, 2026, the Internal Revenue Service (“IRS”) removed its “Delinquent FBAR Submission Procedures,” representing a significant development for U.S. persons with foreign financial accounts who have failed to file the required Reports of Foreign Bank and Financial Accounts (commonly referred to as “FBAR”).
While the statutory framework governing FBAR filing obligations and penalties remains unchanged, the removal of this administrative procedure creates greater uncertainty for taxpayers seeking to correct historical non-compliance.
The Implications of the Removal
The former Delinquent FBAR Submission Procedures provided an important measure of administrative certainty for certain taxpayers. The procedure generally applied where a taxpayer had properly reported all income associated with foreign financial accounts on their U.S. tax returns, paid all applicable tax, was not under civil examination or criminal investigation, and had not previously been contacted by the IRS regarding the delinquent FBAR filings.
Under those circumstances, the IRS would indicate this would not impose a penalty for the failure to timely file the delinquent FBARs. Therefore, the procedure recognized the distinction between failing to satisfy a foreign account reporting obligation and failing to properly report taxable income associated with those accounts.
Where a taxpayer was otherwise compliant from an income tax perspective and the only deficiency related to the late filing of FBARs, the administrative process provided significant comfort that penalties would not be assessed.
A Shift from Certainty to Discretion
The removal of the procedure does not change the underlying law. Civil FBAR penalties continue to be governed by 31 U.S.C. § 5321, which provides the Treasury Secretary with authority to impose penalties for violations of the FBAR reporting requirements.
Importantly, the existence of a delinquent FBAR filing does not automatically mean that a penalty will be assessed. The circumstances surrounding the taxpayer’s non-compliance remain relevant, including whether the failure was willful, whether reasonable cause exists, and whether the taxpayer has otherwise satisfied their reporting obligations.
However, the practical impact of the IRS’s decision is that taxpayers can no longer rely on a published administrative process that provided a clear pathway to penalty-free correction in qualifying circumstances.
The IRS’s current guidance encourages taxpayers who have not been contacted regarding delinquent FBAR obligations and who are not under examination or investigation to file delinquent FBARs as soon as possible. However, this guidance will provide less certainty than the former procedure because it does not contain the same clear assurance that penalties will not apply.
The result is a transition from a more predictable administrative process to an environment where the taxpayer’s specific facts and circumstances require greater analysis.
The Penalty Framework Remains Fact-Dependent
Although the administrative landscape has changed, the underlying penalty framework remains dependent on the nature and circumstances of the violation.
For non-willful violations, penalties are subject to statutory limitations, and taxpayers may be able to seek relief by demonstrating reasonable cause and that the relevant account or transaction information was properly reported.
Following the United States Supreme Court’s decision in Bittner, non-willful FBAR penalties generally apply on a per-report basis rather than a per-account basis.
By contrast, willful violations may result in substantially greater exposure. Civil willful penalties may be assessed based on the applicable statutory framework and can be significantly higher, including penalties calculated by reference to account balances. In addition, reasonable cause relief generally does not apply in the same manner to willful violations.
As such, determining whether a failure was non-willful or potentially willful remains a critical consideration before any corrective filing strategy is pursued.
Practical Considerations for Taxpayers and Advisers
From a practitioner’s perspective, the removal of the delinquent FBAR submission procedures reinforces the importance of obtaining appropriate advice before making corrective filings.
The analysis should extend beyond whether the taxpayer reported foreign account income and paid the associated tax. Advisers should also consider:
- the reasons the FBAR filings were missed;
- whether reasonable cause arguments may be available;
- whether there is any risk the conduct could be characterized as willful;
- whether additional U.S. tax filings or information returns may be required; and
- whether making a voluntary disclosure or pursuing another IRS compliance pathway may be appropriate.
For many taxpayers, particularly individuals living outside the U.S. or those who have recently become aware of their U.S. reporting obligations, the failure to file FBARs may arise from a lack of awareness rather than an intention to avoid compliance.
The elimination of the former procedure may also signal a continued focus on offshore compliance. Increased international information sharing, foreign financial institution reporting requirements, and greater awareness of U.S. tax obligations have made foreign account reporting issues increasingly visible.
Nevertheless, each taxpayer’s circumstances must be evaluated individually. A taxpayer’s history, intent, disclosure position, and overall compliance record remain important factors in determining the appropriate approach.
Conclusion: Proceeding with Care and Appropriate Advice
The removal of the Delinquent FBAR Submission Procedures represents a meaningful change in the compliance landscape for U.S. persons with foreign financial accounts.
It does not mean that penalties will automatically apply to every delinquent FBAR filing, nor does it mean taxpayers should delay addressing past compliance issues. Rather, it means that corrective action should be carefully considered in the statutory framework, the taxpayer’s individual circumstances, and the potential availability of reasonable cause or other relief.
The previous administrative certainty provided by the delinquent FBAR procedures has been replaced by a more fact-specific environment. For taxpayers and advisers, the importance is that early identification, careful analysis, and informed decision-making is critical when addressing historical FBAR compliance issues.
