Supreme Court Decision in Bittner v. United States: What It Means for FBAR Penalties

2025-08-12 14:30:33

On February 28, 2023, the Supreme Court ruled in favor of Bittner, limiting non-willful FBAR penalties to per form, not per account. Learn how this impacts expats.

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The Supreme Court Just Ruled — and It’s a Win for Non-Willful FBAR Filers

Imagine being penalized $2.72 million for accidentally forgetting to file your foreign bank account report for five years—even if you had simply neglected to file on time, without any intent to hide assets. That was the situation faced by Alexandru Bittner—until February 28, 2023, when the U.S. Supreme Court issued a landmark 5–4 decision in Bittner v. United States, limiting penalties for non-willful FBAR violations to a maximum of $10,000 per annual form, not per unreported account Massachusetts Bar Association+15Wikipedia+15Greenberg Traurig+15IRS+10Taft Law+10twrblog.com+10.

This ruling dramatically shifts the compliance landscape for individuals who file late or make inadvertent errors but did not intentionally conceal foreign accounts. It's especially significant for U.S. citizens abroad who might hold multiple accounts yet lacked the intent or knowledge to report in previous years.

A Timeline of Important Events

• November 2, 2022: The U.S. Supreme Court hears oral arguments in Bittner v. U.S. (Docket No. 21‑1195) faegredrinker.com+5Wikipedia+5winston.com+5.
  
  

• February 28, 2023: The Court issues its 5–4 decision holding that non-willful FBAR penalties apply per form (per year), not per account aaro.org+15Wikipedia+15Taft Law+15.
  
  

• March–April 2023: Numerous law firms and tax advisories publish summaries and guidance following the ruling, clarifying how taxpayers and practitioners should adjust FBAR penalty expectations Doeren MayhewGreenberg Traurig.
  
  

The Case That Set the Precedent

Alexandru Bittner, a Romanian-American businessman and dual citizen, had foreign accounts in multiple countries totaling hundreds of accounts over five years. He filed late FBARs voluntarily and did not earn untaxed income—but the IRS tried to penalize him $2.72 million ($10,000 × 272 accounts) under the argument that penalties could apply per account, even for non-willful violations.

Bittner's legal team argued each non-willful failure to file an FBAR should count as a single violation per year, regardless of how many individual accounts were not reported. Lower courts had split: the Fifth Circuit ruled for the IRS, while the Ninth Circuit had earlier sided with the taxpayer.

Ultimately, the Supreme Court resolved the split by siding with Bittner and taxpayers: non-willful FBAR penalties are limited to one $10,000 penalty per annual FBAR form, not per account IRS+9Wikipedia+9Massachusetts Bar Association+9Taft Law.

What the Ruling Means: Key Takeaways

1. Non-Willful Penalties Are Capped at $10,000 per Year

That means if someone had multiple foreign accounts and simply missed filing or filed late without intent, the worst-case penalty now is $10,000 per year—not multiplied by the number of accounts. Under Bittner’s 5-year example, that cap would be $50,000 total, not millions.

2. Willful Violations Still Carry Per-Account Penalties

The decision did not change penalties for willful failures. If the IRS determines you knowingly concealed an account or misrepresented facts, you can still face penalties up to 50% of the account balance per year or $100,000, whichever is greater.

3. The Statutory Language Matters

Justice Gorsuch’s majority opinion concluded the statutory text of the Bank Secrecy Act (BSA) treats each missing report as a single violation—not each account. Because Congress did not clearly authorize per-account fines for non-willful cases, the IRS's previous interpretation was rejected WikipediaSupreme Courtwinston.com.

4. A Variable Ideological Outcome

The Court’s alignment was unusual: Justice Gorsuch wrote for the majority, joined by both conservative and liberal justices. The dissent came from a cross-ideological lineup as well Wikipedia.

How This Affects Routine Filers

For Late Filers with Honest Mistakes

If someone filed late but didn't conceal assets, they should no longer fear a massive civil penalty—even if they missed dozens of accounts. Filing one FBAR per year (cleaning up past omissions) caps each year’s liability at $10,000.

 For Practitioners

Review past and current FBAR notices. Some IRS letters may assert per-account penalties—those should now be challengeable in light of Bittner. And for incoming clients, emphasize the importance of demonstrating non-willful intent to qualify for the capped penalty benefit.

 For Those Considered Willful

If behavior indicates concealment—such as moving assets under shell entities or misrepresenting on Schedule B—the full potential per-account penalty still applies. The ruling limits only non-willful infractions.

What’s Next: IRS Guidance and Appeals Practice

Following the decision, the IRS issued Interim Guidance to its Appeals office, instructing employees to assess non-willful FBAR penalties on a per-report basis during resolution conversations or negotiated settlements IRS.

Tax professionals are also updating analysis frameworks: rather than treating each account as separate offense, they now focus on that calendar year’s form. Multiple experts confirm courts will now have a new standard for reasonable cause, mitigation, and abatement arguments in non-willful cases.

FAQs About Bittner and FBAR Compliance

Q: Does this affect penalties on other forms, like Form 8938?
No. The decision applies only to FBAR penalties under the Bank Secrecy Act. Other penalties (like failure-to-file Form 8938) follow different statutes.

Q: Is $10,000 still the max per year?
Technically yes, although the penalty amount is adjusted annually for inflation. However, the cap remains $10,000 per missed non-willful report as defined by law.

Q: What if I filed multiple amended FBARs for one year?
Only one penalty applies per original filing year. Amending an FBAR to include missing accounts does not create new violations.

Q: Will this ruling ever expand to reduce willful penalties?
Unlikely. Bittner does not address willful failures, and Congress explicitly authorized harsher penalties for them. Any further restriction would need legislative change or a separate case based on constitutional grounds.

Conclusion: Bittner Offers Real Relief — but Needs Correct Application

Alexandru Bittner’s case was not minor—it had the potential to quietly cost taxpayers millions for simple errors. Now, with the Supreme Court's ruling, honest mistakes are less likely to be ruinsome, provided taxpayers correct them proactively.

As a trusted adviser or a conscientious taxpayer, your path forward is clear:

• Always strive to file FBARs correctly and on time.
  
  

• If you have missed filings, file them and document the non-willful direction.
  
  

• If facing IRS assessments of per-account penalties, use Bittner as grounds for appeal.
  
  

• Watch for future regulatory changes or constitutional challenges, but rely on Bittner as the current law.

M.Daniyal