FBAR Willful vs Non-Willful: Where Courts Draw the Line

The Stakes: Two Penalty Tracks, One Word Apart

Federal law builds two entirely different penalty regimes on the single word "willful," and the gap between them is the widest in American tax enforcement. A non-willful failure to file the foreign-account report is capped, under the current inflation-adjusted figures, at $16,536 per year. A willful failure carries the greater of $165,353 or 50% of the highest account balance, applied per account, per year, across a six-year window. Our FBAR penalties guide covers the mechanics. This page is about the word itself, drawn from cases where real people learned which side of it they were on. One note before the cases begin. These are published decisions in other parties' matters, not clients of this firm, and they predict nothing about yours.

The Supreme Court showed how much the word matters in 2023. Alexandru Bittner, a Romanian-born naturalized citizen, filed five late reports after learning of the duty, and the Court noted that "because Mr. Bittner’s late-filed reports . . . collectively involved 272 accounts, the government thought a fine of $2.72 million was in order." The Court disagreed, holding that "in all cases, penalties for nonwillful violations accrue on a per-report, not a per-account, basis." Five reports, a maximum of $50,000. The Court added that "The answer makes a difference, especially for immigrants who hold accounts abroad and Americans who make their lives outside the country." The government never alleged willfulness, and that one word saved him millions.

The willful pole looks like Isac Schwarzbaum, a Boca Raton man whose willful penalties on his Swiss accounts produced a judgment of $12,255,813 even after Florida's federal appeals court struck $300,000 of it as constitutionally excessive. The collection fight has since produced repatriation orders, a contempt finding, and an arrest warrant. We tell that story in full in the $12 million Swiss inheritance, and its darkly comic sibling in the account in the dog's name.

The Third Circuit put the gap in two sentences in Bedrosian, using the statute's base figures before inflation adjustments. "If this omission was accidental, the IRS could fine Bedrosian up to $10,000. But if he willfully filed an inaccurate FBAR, the penalty skyrockets: the greater of $100,000 or half the balance of the undisclosed account at the time of the Bank Secrecy Act violation." His undisclosed account held about $2 million, so the word "willful" was worth roughly $975,789 to the government. It got the word, as you will see below.

What Does Willful Mean in an FBAR Case?

Here is the part that catches nearly everyone off guard. "Willful" does not mean here what it means in ordinary speech, or even what it means in criminal tax law. Courts read the civil willful penalty to cover three kinds of conduct, namely knowing violations, reckless ones, and willful blindness (deliberately not looking when you had every reason to). The definition traces to the Supreme Court's Safeco decision, which described civil recklessness as "conduct violating an objective standard: action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known."

For anyone in Florida, the controlling decision is United States v. Rum, where the federal appeals court that governs Florida's courts, the Eleventh Circuit, wrote that "Following our precedent interpreting the analogous language in § 6672, we hold that willfulness in § 5321 includes reckless disregard of a known or obvious risk. In so doing, we join with every other circuit court that has interpreted this provision." Decisions from other circuits are persuasive rather than binding here, but as that sentence says, they all point the same way. The working test, which the Eleventh Circuit adopted in Rum by quoting the Fourth Circuit's Horowitz opinion, which in turn took it from the Third Circuit's Bedrosian decision, asks whether the filer "(1) clearly ought to have known that (2) there was a grave risk that an accurate FBAR was not being filed and if (3) he was in a position to find out for certain very easily."

Notice what is missing from that test. Your actual state of mind. The standard is objective, so a sincere misunderstanding does not defeat it. The Eleventh Circuit said so directly in its 2026 Niksich decision, holding that the taxpayer's "argument that he did not willfully violate the law but merely misunderstood it is insufficient to preclude summary judgment under an objective standard." The Second Circuit reached the same place months earlier in Reyes, quoting with approval a New York federal court's observation that "a defendant’s subjective belief does not negate a finding of recklessness or willful blindness."

The contrast with criminal law is deliberate and sharp. As the Second Circuit explained, again drawing on the Supreme Court's language, "Statutory interpretation of the term “willful” in the civil context stands in sharp contrast to its construction in the criminal context, where it is understood “as limiting liability to knowing violations,” i.e., the violation of a “known legal duty.”" A criminal prosecution requires proof you knew the duty and defied it. The civil penalty needs far less, which is why people underestimate their exposure.

The Schedule B Question That Decides Most Cases

Every year, Schedule B of the federal income tax return asks the question that ends up deciding most of these cases. In the 2007 version the court quoted in Rum, it read, "At any time during 2007, did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?" The instructions next to it point to the FBAR filing requirement. A "no" answer while the account existed, on a return signed under penalty of perjury, is the fact pattern in nearly every case the government wins.

The doctrine took shape in a 2012 Fourth Circuit case called Williams, involving a man who answered "no" after Swiss authorities had frozen his accounts. He testified that he "never paid any attention to any of the written words" on his federal tax return. The court was unmoved, quoting an earlier Sixth Circuit decision for the rule that "A taxpayer who signs a tax return will not be heard to claim innocence for not having actually read the return, as he or she is charged with constructive knowledge of its contents." The court concluded that "This conduct constitutes willful blindness to the FBAR requirement" and that "at a minimum, Williams's undisputed actions establish reckless conduct". Williams deserves a candid label. It is an unpublished decision, non-binding by its own terms, and it was decided 2 to 1 over a dissent. But it has been widely followed, and the same court turned its rule into published, binding law in Horowitz in 2020.

A Utah district court added the next brick the same year in McBride, the case of a businessman who was pitched an offshore profit-shielding plan and, by his own account at the sales meeting, responded, "This is tax evasion." He bought the plan anyway and never told his accountant about the foreign accounts. The court found him willful on every theory it discussed, and its formulation travels well beyond its facts. "An improper motive or bad purpose is not necessary to establish willfulness in the civil context."

Two appellate cases show how far the principle reaches into sympathetic territory. Alice Kimble was made a joint owner of a Swiss UBS account her parents opened. Her father, whose family had been murdered in the Holocaust, kept the account secret out of fear he might one day need to flee again, and asked her to preserve the secrecy. She did. She never told her accountant, and her returns denied any foreign account, signed but unreviewed. The Federal Circuit affirmed a willful penalty of $697,299, half the account, summarizing that "In other words, Ms. Kimble had a secret foreign account, she had constructive knowledge of the requirement to disclose that account, and she falsely represented that she had no such accounts." And in Horowitz, a physician couple who had banked their Saudi earnings in Switzerland talked about the tax question with their friends abroad but never with the professional who did their returns. The Fourth Circuit's sentence has become the standard warning. "Yet, if the question of whether they had to pay taxes on foreign interest income was significant enough to discuss with their friends, they were reckless in failing to discuss the same question with their accountant at any point over the next 20 years." The court affirmed willfulness without a trial.

The Facts That Sink People

Read enough of these opinions and the same handful of facts appears again and again. Courts call them badges of concealment, and any one of them can carry the government's case.

Said Rum, a Tampa businessman, opened his Swiss account with a $1.1 million deposit, by his own admission to keep the money away from a potential judgment creditor. He chose a numbered account instead of a named one and paid the bank a fee to hold his mail in Switzerland. When the bank told him his U.S. investment earnings had to be reported, he refused the disclosure form and told the bank to avoid U.S. securities instead. He disclosed the account on a mortgage application, and nowhere else. As the Eleventh Circuit put it, "he reported the account only when beneficial to him." The court's summary was blunt. "In sum, the evidence was overwhelming that Rum sought to hide his overseas accounts from the United States government. Repeatedly he took steps to conceal the accounts and not report his income to the government." The penalty was 50% of the balance for a single year, on an account that exceeded $1 million, affirmed on summary judgment with no trial needed.

Eugene Niksich went a step further. "His AKB account was under the alias “Misty,” Niksich’s dog." He paid a mail-hold fee, hid the account from his wife and from a potential creditor, and left the Schedule B question blank for six straight years after answering "no" once. The IRS assessed $2,286,954 for 2006 to 2012, and the Eleventh Circuit affirmed willfulness in 2026, again without a trial. The court did send the excessiveness question back for a separate look, so the amount is an assessment, not a finished judgment. The full story, including the settlement the IRS signed and then walked away from, is in the account in the dog's name.

Then there is the Florida jury verdict. In 2014 Carl Zwerner, a Coral Gables man in his late eighties, tried his willfulness case to a Miami federal jury, one of the few taxpayers ever to do so. The jury found his failures willful for 2004, 2005, and 2006, though not for 2007. The penalties upheld came to $2,241,809 against an account whose highest balance was $1,691,054, about 133% of the most money the account ever held. He settled for $1,764,956.38 while a constitutional challenge to the penalty was still waiting to be heard, so the question of whether a penalty larger than the account violates the Excessive Fines Clause was never decided in his case. The Justice Department announced the verdict the same day with a warning from the head of its Tax Division that reads like the moral of this whole page. "As this jury verdict shows, the cost of not coming forward and fully disclosing a secret offshore bank account to the IRS can be quite high," she said, and "Those who still think they can hide their assets offshore need to rethink their strategy." The government will stack willful penalties past the value of the account itself. Florida's federal appeals court now reviews such penalties under the Eighth Amendment, but in the case that established the rule it rescued only $300,000 out of more than $12.5 million.

The Facts That Stay Non-Willful

Now the other side of the line, where most people who land on this page belong. You inherited the account and never touched it. You moved to the United States with accounts back home and no idea an American form applied to them. You reported the foreign income on your return but did not know a separate report existed. Or you told your advisor everything and got the wrong answer. Each of these, kept clean, is the profile the streamlined programs were built for.

But each has a catch, and the cases mark exactly where the catch sits. Inheritance protects no one by itself. Kimble inherited her account and still lost, because the secrecy continued on her watch. Monica Toth inherited several million dollars in a Swiss account from her father, who had fled Germany in the 1930s and kept the money there as a refuge. Justice Gorsuch, dissenting from the Supreme Court's refusal to hear her case, told her story with evident sympathy, writing that "Ms. Toth, now in her eighties and an American citizen, followed her father’s advice." A dissent from a denial of certiorari is one Justice's opinion, not law, and the $2,173,703 willful penalty against her stood. What separates the innocent inheritance cases from these is conduct after the inheritance, and above all whether the account stayed secret from the person preparing your returns.

Bad advice is the other pattern with a fault line through it, and Arthur Bedrosian's long arc is the cautionary middle. He did the thing the non-willful cases reward, telling his accountant about his Swiss account, and the advice he got back was spectacularly bad. In the Third Circuit's words, "Handelman told Bedrosian that he had been breaking the law every year he did not report the Swiss account to the IRS. Handelman also told him that his estate could deal with the consequences after he was dead. With this advice, Bedrosian continued not to report his UBS account when he filed his annual tax returns." Years later a new accountant filed a report disclosing his smaller account, roughly $240,000, while omitting the roughly $2 million one, and Bedrosian signed without reviewing. A judge who heard his testimony found him not willful. The appeals court did not reverse that finding outright. It sent the case back with the objective recklessness test, and on remand the same judge, applying the right standard to the same record, found that he "recklessly disregarded the risk that his FBAR was inaccurate." The appeals court affirmed in 2022, closing its opinion with six words. "Arthur Bedrosian willfully filed an inaccurate FBAR." Full disclosure to an advisor genuinely helps, but it stops helping the moment the facts show you knew, or plainly should have known, that the advice was wrong.

Even Schwarzbaum's disaster of a case shows the non-willful side working. The trial court found his 2006 violation non-willful, and the Eleventh Circuit recounted the finding that "The district court found that Schwarzbaum maintained these accounts because they were in places outside of the United States where he resided, not with the intention of evading United States tax reporting requirements." His CPAs had told him foreign assets needed no reporting unless they had a "U.S. connection", advice the court dismissed in four words. "This was bad advice." What turned his later years willful was that he read the FBAR instructions himself in 2007 and kept relying on advice he now had every reason to doubt. Courts sort year from year and fact from fact, and clean facts stay in the capped lane.

How the Willfulness Fight Plays Out in Court

When the line is litigated, the government carries the burden of proof, but the burden is lighter than most people assume. Courts around the country require only a preponderance of the evidence, meaning more likely than not, rather than the heavier clear-and-convincing standard that governs civil tax fraud. A Connecticut federal court surveyed the field in the Garrity case and found the answer unanimous, writing that "every court that has answered the question before me has held that the preponderance of the evidence standard governs suits by the government to recover civil FBAR penalties," and holding that "the Government must prove the elements of its claim for a judgment under 31 U.S.C. § 5321(a)(5) by a preponderance of the evidence and that proof of reckless conduct will satisfy the Government's burden on the element of willfulness." The Third Circuit reached the same standard in Bedrosian. There is an irony in Garrity's footnotes, where the IRS's own lawyers had predicted in a 2006 internal memo that courts would demand clear and convincing evidence, and every court has gone the other way, in the government's favor. In Florida, the point is illustrated by the Zwerner trial itself, where each willfulness question put to the Miami jury was governed by a more-likely-than-not standard.

The second reality is where these cases end. Not at trial. Zwerner's jury was the exception, and most taxpayers lose on summary judgment, the procedure where a court rules on the papers because no reasonable jury could disagree. Rum, Horowitz, Kimble, Niksich, and Reyes were all resolved that way, willfulness decided as a matter of law from returns, bank forms, and deposition answers. When the record holds a false Schedule B answer, a paid mail hold, or an undisclosed preparer relationship, the objective standard leaves little for a jury to weigh, because no one has to decide what was in the filer's heart.

The third reality is the one that turns a civil problem criminal. The streamlined programs require a sworn certification that your conduct was non-willful, defined in the program's terms as "due to negligence, inadvertence, or mistake" or "a good-faith misunderstanding of the requirements of the law." Certify falsely and the certification itself becomes the crime. Mark Gyetvay, a financial executive with tens of millions of dollars in Swiss accounts, entered the streamlined program certifying that his "delay in filing U.S. tax returns [was] not due to any willfulness, but rather the result of [his] reasonable attempts to comply with increasingly difficult administrative requirements." The record showed his bank had recorded the reason for his departure as his not being tax compliant, and that he had then moved the accounts to another bank with his wife listed as their owner. A jury convicted him of making a false statement in that certification, and in 2025 the Eleventh Circuit affirmed that conviction along with a conviction for failing to file a compliant FBAR, while reversing two failure-to-file tax return counts as time-barred and sending the case back for resentencing. The court also stated the baseline plainly. "Willful failure to file an FBAR is a felony under 31 U.S.C. § 5322(a)." The certification is a one-way, sworn bet. It should never be signed on hope.

What the Willfulness Call Decides

Every practical decision in an offshore cleanup flows downstream from this one call. If the facts are genuinely non-willful, the streamlined procedures resolve the problem for 5% of the highest year-end balance for U.S. residents, or for nothing at all for qualifying filers abroad. Once our screen confirms that lane is safe, the submission itself is return preparation, and we refer it to an international tax preparer who does that work every day. If the foreign income was all reported and only the form was missed, the delinquent FBAR lane may still resolve it with no penalty, though the IRS quietly removed that named program's page in 2026, so the route now needs care.

If the facts carry willful exposure, the answer is the IRS Voluntary Disclosure Practice, the track built to take criminal prosecution off the table, and that work is handled at this firm from preclearance through the closing agreement. Timing presses on every lane at once, because the programs close the moment the IRS makes first contact, and the assessment clock runs on its own schedule, covered in our FBAR statute of limitations guide. If you are still inside the current filing window, the cheapest fix of all is simply filing on time, and the FBAR deadline guide has the dates. Choosing the wrong lane is expensive in both directions. A willful person in streamlined has signed a false certification, and a genuinely innocent person pushed into voluntary disclosure can pay far more than the law ever required.

How We Screen Willfulness Before Anything Is Filed

The screen is legal work, and it belongs with a lawyer for a reason that has nothing to do with turf. The conversation where you lay out the worst facts, the "no" answers, the account nobody knew about, the advice you half-followed, is protected by attorney-client privilege when you have it with us. The same conversation with an accountant is not protected if the matter ever turns criminal. The whole point of the screen is to learn whether your facts could support a willfulness finding, so the exploration itself should be privileged before anyone commits to a story in a sworn filing.

What we actually do is walk your facts against the hallmarks the courts have already ruled on. Your Schedule B answers for every year the account existed. What your preparer was told, and when. How the account was held, in whose name, and where the mail went. What happened after you first learned the duty existed, because the cases treat conduct after knowledge as the sharpest evidence of all. Then we give you a straight answer about which lane the facts support and what it will realistically cost. If that answer is non-willful, the streamlined referral goes out and we stay available for the legal questions the certification raises. If it is willful, we handle the disclosure ourselves. Either way, the work is done remotely for clients across Florida and abroad, and nothing is filed until the call is made.

Frequently Asked Questions

Common Situations

The account handled in the open. A Sarasota woman inherits a Frankfurt bank account from her mother. She tells her CPA about it the first spring, reports the interest income on her return every year, and simply never learns that a separate report exists. Her Schedule B answers were prepared honestly from what she disclosed. The screen comes back cleanly non-willful, the streamlined referral resolves it, and the exposure ends at a fraction of what fear had priced it at.

The lawsuit-era account. A retired contractor moved several hundred thousand dollars to an overseas account during ugly litigation twenty years ago, kept the statements at the bank, and has answered "no" to the foreign-account question ever since. He thinks of himself as an honest man who made one defensive move long ago. The hallmarks say otherwise, and no honest screen could support a non-willfulness certification. The voluntary disclosure track costs real money and removes the criminal risk, which is the trade his facts require.

The couple with split facts. A husband managed an account abroad that his wife signed returns without knowing about. After a bank letter arrives, they want to file one joint cleanup quietly and move on. The screen shows two different cases wearing one address, with his facts carrying willful hallmarks and hers genuinely clean. Routing them separately, and in the right order, protects her lane instead of burning it, which no quiet joint filing would have done.

Sources of Law

• Penalty statute: 31 U.S.C. §5321(a)(5) (non-willful cap at (B); willful greater-of penalty at (C) to (D)); filing duty, 31 U.S.C. §5314; criminal penalty, 31 U.S.C. §5322. Inflation-adjusted maximums (non-willful $16,536; willful floor $165,353) for assessments on or after January 17, 2025: 31 C.F.R. §1010.821.
• Willfulness standard: Safeco Ins. Co. of America v. Burr, 551 U.S. 47 (2007) (civil willfulness includes recklessness; objective standard); United States v. Said Rum, 995 F.3d 882 (11th Cir. 2021), cert. denied Dec. 6, 2021 (controlling in Florida; recklessness suffices; summary judgment affirmed); United States v. Niksich, No. 24-12882 (11th Cir. June 4, 2026) (no reporter citation yet; willfulness affirmed; Eighth Amendment excessiveness remanded, so the assessment is not final); United States v. Reyes, 164 F.4th 78 (2d Cir. 2026) (recklessness; civil versus criminal contrast, quoting United States v. Gentges, 531 F. Supp. 3d 731 (S.D.N.Y. 2021)).
• The recklessness test and its lineage: Bedrosian v. United States, 912 F.3d 144 (3d Cir. 2018) (the three-part objective test; preponderance burden; remanded) and No. 21-1583 (3d Cir. July 22, 2022) (reported at 42 F.4th 174 per secondary sources; willfulness on remand affirmed); United States v. Horowitz, 978 F.3d 80 (4th Cir. 2020) (published; adopts the test; summary judgment affirmed); Kimble v. United States, 991 F.3d 1238 (Fed. Cir. 2021).
• Schedule B and constructive knowledge: United States v. Williams, 489 F. App'x 655 (4th Cir. 2012) (unpublished and non-binding by its own terms; decided 2 to 1; its rule later adopted in the published Horowitz); United States v. McBride, 908 F. Supp. 2d 1186 (D. Utah 2012) (district court; McBride's penalties arose under the pre-2004 statute, since amended).
• Burden of proof: United States v. Garrity, No. 3:15-cv-243 (D. Conn. Apr. 3, 2018) (preponderance; reported at 304 F. Supp. 3d 267 per secondary sources); Bedrosian, 912 F.3d 144; United States v. Zwerner, No. 1:13-cv-22082-CMA (S.D. Fla. jury verdict May 28, 2014) (Doc. 77) (jury interrogatories on a preponderance standard; willful for 2004 to 2006, not 2007; $2,241,809 upheld against a $1,691,054 peak balance; settled for $1,764,956.38 while an Excessive Fines hearing was pending; no opinion issued). Verdict announcement quotes: US Dep't of Justice press release, "Jury Finds Miami Man Owes Civil Penalties for Failing to Report Swiss Bank Account" (May 28, 2014) (statement of Assistant Attorney General Kathryn Keneally, Tax Division; the release has since been removed from justice.gov and is not archived there, so its text is preserved as reproduced in a contemporaneous practitioner reprint, retrieved 2026-08-18).
• Per-form non-willful cap: Bittner v. United States, 598 U.S. 85 (2023). Excessive Fines review of willful penalties in Florida's circuit: United States v. Schwarzbaum, 24 F.4th 1355 (11th Cir. 2022) (willfulness affirmed; penalty calculation remanded to the IRS) and 127 F.4th 259 (11th Cir. 2025) (Excessive Fines Clause applies; $300,000 struck; judgment of $12,255,813). Contra: United States v. Toth, 33 F.4th 1 (1st Cir. 2022), cert. denied, 143 S. Ct. 552 (2023) (Gorsuch, J., dissenting from denial of certiorari); the circuits are split.
• The certification trap: United States v. Gyetvay, Nos. 23-13254, 23-13383 (11th Cir. Aug. 7, 2025) (slip; false-statement conviction on the streamlined certification under 18 U.S.C. §1001 and the 2014 FBAR count affirmed; the two §7203 failure-to-file counts reversed as time-barred; sentence and restitution vacated and remanded).
• All quotations on this page were verified against the official slip opinions, CourtListener opinion text, or official court records as retrieved on August 18, 2026, and are from published decisions in other parties' cases, not clients of this firm. They predict nothing about any reader's case. No citator service has been run on these citations; currency is as of the retrieval date stated.

Updated on August 18, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about US law, not legal or tax advice, and does not create an attorney-client relationship. The cases discussed are published decisions in other parties' matters, not clients of this firm, and they predict nothing about your situation. Offshore compliance is specialized; streamlined submissions and return preparation are referred to an international tax preparer, while the willfulness screen and voluntary disclosure are handled here. Penalty figures are inflation-adjusted and may change. Your result depends on your specific facts.