When people first hear what foreign account penalties can run to, the most common reaction isn’t fear — it’s disbelief. Penalties bigger than the account? For paperwork? The numbers sound like a scare tactic, so they get dismissed as one.
So this article does nothing but the arithmetic. Three scenarios, all composites — no real taxpayers, just the penalty formulas applied to ordinary fact patterns — using the current inflation-adjusted maximums. The mechanics behind the formulas are explained in Willful vs. Non-Willful: The Two-Tier System Behind Every FBAR Penalty; this is what they produce.
One framing note before the math: these are statutory maximums. Real outcomes are routinely lower — examiners have mitigation guidelines, reasonable cause exists, and the voluntary programs can collapse these numbers to little or nothing. The maximums matter because they define the exposure you’re carrying while you wait, and the negotiating landscape if you’re found.
Scenario one: the honest mistake, and why one court case halved… no — quartered it
A US citizen has lived in Canada for years with four foreign accounts — checking, savings, a retirement account, and an old joint account. Total across them: around $80,000. They never knew the FBAR existed. Six years pass.
The non-willful maximum is currently $16,536 per violation. The entire question is what counts as one violation.
Under the per-account reading the government used for years: 4 accounts × 6 years = 24 violations × $16,536 = $396,864 maximum — on $80,000 of accounts, for a failure the IRS itself classes as innocent.
After the Supreme Court’s Bittner ruling, non-willful violations count per missed annual report: 6 years × $16,536 = $99,216 maximum. Per Form, Not Per Account: How One Supreme Court Case Redrew Non-Willful Penalty Math tells that story.
Still bigger than most people’s guess for an honest mistake — and here’s the punchline that matters more than either number: this exact fact pattern, brought forward voluntarily before IRS contact, typically resolves through the delinquent procedures or Streamlined for little to nothing. The six-figure maximum and the near-zero outcome are the same facts. The difference is entirely who moved first. The Three Ways Back: Catch-Up Paths for Missed Foreign Account Filings, Compared maps the routes.
Scenario two: the willful tier, where the floor does the damage
Now the willfulness line gets crossed — not by a villain, but by the recklessness standard: years of returns with the foreign-accounts question answered “no,” a preparer never told, a record that reads as should have known and didn’t want to. One account, holding $150,000, three years.
The willful penalty is the greater of $165,353 or 50% of the account balance — per account, per year. Half of $150,000 is $75,000, which is less than the floor, so the floor applies: $165,353 × 3 years = $496,059 maximum. On a $150,000 account. Roughly 3.3 times the money that was ever in it.
That’s the detail the “greater of” structure hides: for mid-sized accounts, the six-figure floor — not the 50% — drives the number, and it doesn’t scale down with the balance. Smaller account, same floor.
Scenario three: scale, where 50% takes over
Same willful facts, but the account holds $1,000,000. Now 50% ($500,000) beats the floor, so: $500,000 × 3 years = $1,500,000 maximum — one and a half times the account.
If that still sounds theoretical, it isn’t. In the most prominent recent litigation, the assessed FBAR penalties started at $35.4 million and, even after a constitutional excessive-fines challenge succeeded in trimming them, landed at $13.7 million. The courts’ willingness to trim is real — The $12 Million Paperwork Penalty: What the Schwarzbaum Case Means for Anyone With Foreign Accounts covers it — and it took years of litigation to get a number that was still ruinous.
What the three scenarios say together
Line them up and the pattern is hard to miss. The variable that moved the outcome was never the size of the accounts, the number of forms, or even the number of years. It was two things: which tier the conduct landed in, and who moved first. Non-willful and voluntary rounds toward zero. Willful and discovered compounds past the balances. Every other fact is detail.
Which is why the productive response to this arithmetic isn’t dread — it’s sequencing. The evidence that decides your tier is largely written before anyone looks (What the IRS Reads as Willfulness: The Patterns That Turn a Mistake Into Concealment), and the voluntary doors close at IRS contact. The full side-by-side of fixing this versus carrying it sits in The Math Nobody Runs: What Compliance Costs vs. What Non-Compliance Costs. If your own numbers started running in your head two scenarios ago, that’s the conversation to have with a cross-border professional — while the math above is still hypothetical.
This article is general educational information, not tax or legal advice. All scenarios are illustrative composites, not real cases, and show statutory maximums rather than typical outcomes. Before acting on anything here, speak with a qualified cross-border tax professional about your specific circumstances.