You Don’t Have to Intend to Break the Law to Face the Maximum FBAR Penalty

Most people assume “willful” means intentional. They think the IRS has to prove you knew about FBAR and deliberately decided not to file it. Reyes is another reminder that this is not how the courts see it.

What Reyes actually says

In January 2026, the Second Circuit held that reckless disregard of the FBAR filing requirement is enough to support the maximum willful penalty. In other words, you do not need evidence that the taxpayer sat down, understood the law, and intentionally decided to break it.

If the facts show the taxpayer ignored obvious warning signs, failed to review what was being signed, concealed the existence of foreign accounts, or acted with reckless indifference to the filing obligation, that can be enough.

Why this matters

That standard is brutal because many foreign-account cases involve facts that look careless rather than criminal: not telling the preparer about the account, checking “no” on Schedule B without reviewing it, or assuming a foreign account does not count because it was inherited, dormant, or jointly held.

Those are exactly the facts that create danger. Once the IRS can frame the behavior as reckless disregard instead of simple oversight, the penalty landscape changes dramatically.

What the penalty exposure looks like

• Non-willful FBAR penalties can already be painful.
• Willful FBAR penalties can escalate to the greater of $100,000 or 50% of the account balance, adjusted for inflation and subject to the facts of the case.
• When multiple years are involved, the numbers can become absurd very quickly.

Who should pay attention right now

• U.S. taxpayers with unreported foreign bank or brokerage accounts
• People with inherited foreign accounts
• Dual citizens who assumed another country handled everything
• Foreign nationals now filing in the U.S.
• Business owners with signature authority over non-U.S. accounts

What to do instead of waiting

If foreign accounts were missed, the move is not to panic. The move is to assess the facts while you still have choices. Depending on the situation, that may mean reviewing prior returns, FBAR history, Schedule B answers, communications with preparers, account balances, and whether a streamlined or other corrective filing path is available.

What you should not do is assume “I didn’t mean to” will save you. Reyes is another warning that intent is not the only thing the courts care about.