FBAR Penalties Explained for US Expats in NZ: Non-Willful vs Willful, With Real Dollar Figures

If you are a US citizen living in New Zealand and your ASB, ANZ, BNZ, Westpac or Kiwibank accounts ever crossed US$10,000 combined, you almost certainly owed an FBAR — and missing it carries a penalty. The good news: for a genuinely non-willful expat, the headline numbers you read about almost never apply, and the right disclosure route usually drops the penalty to zero. This guide shows the real figures.

What an FBAR actually is (and why NZ accounts trigger it)

The FBAR — FinCEN Form 114, Report of Foreign Bank and Financial Accounts — is not a tax form. It is an information report filed with the US Treasury's Financial Crimes Enforcement Network, separate from your Form 1040. You must file it for any calendar year in which the aggregate value of all your foreign financial accounts exceeded US$10,000 at any point during the year — even for a single day, even if no account on its own crossed the line (IRS — Report of Foreign Bank and Financial Accounts).

For US citizens in New Zealand this threshold is genuinely easy to trip. A single term deposit, a transactional account, and a KiwiSaver scheme together routinely clear NZ$17,000–ish (roughly US$10,000 at a 0.60 exchange rate). KiwiSaver, NZ bank accounts, and most NZ-domiciled managed funds are reportable. The threshold is in US dollars, so you convert each account's year-end (or peak) NZD balance using the Treasury year-end rate. The takeaway: most US expats in NZ have an FBAR obligation, and many discover it years late.

The two penalty regimes: non-willful vs willful

Civil FBAR penalties live in 31 U.S.C. § 5321(a)(5), and they split into two completely different worlds depending on a single word: willful. The gap between them is enormous — often a factor of ten or more — so understanding which side of the line you are on is the whole game.

Non-willful penalties (the per-report rule after Bittner)

The statute caps a non-willful penalty at $10,000 per violation (31 U.S.C. § 5321(a)(5)). That base figure is adjusted annually for inflation; as of 2026 the inflation-adjusted maximum is roughly US$16,536 per violation (the figure is reset each year under the Treasury's annual Civil Monetary Penalty Inflation Adjustment — always check the current year before relying on it).

The pivotal question used to be: is that cap per account or per report? The IRS argued per account, which for someone with dozens of NZ accounts could multiply the penalty grotesquely. In Bittner v. United States (Feb 28, 2023, decided 5–4), the Supreme Court held the non-willful penalty accrues per FBAR report, not per account (Supreme Court opinion 21-1195). In Bittner's own case that turned a $2.72 million per-account assessment (272 accounts across five years) into a $50,000 per-report assessment ($10,000 × 5 years). This is the single most important development for over-banked expats — and most US citizens in NZ hold multiple accounts.

Willful penalties (the punishing tier)

A willful violation is a different universe. The penalty is the greater of (a) $100,000 (base, inflation-adjusted to roughly US$165,353 for 2026) or (b) 50% of the account balance at the time of the violation (31 U.S.C. § 5321(a)(5)(C)). And unlike the non-willful tier, the reasonable-cause exception does not apply to willful violations. In aggressive cases the IRS has stacked the 50% penalty across multiple years (subject to limits some courts have imposed), so a willful determination on a substantial NZ portfolio can exceed the value of the accounts themselves.

Figures verified against 31 U.S.C. § 5321 and the 2026 Treasury inflation adjustment. Inflation-adjusted figures change every year — confirm the current amount before relying on it.

Worked example: four unfiled years on a $40,000 NZ account

The lesson Daniel's case teaches every US expat in NZ: the scary numbers in news articles are willful, contested-litigation ceilings. For a non-willful filer who reported their income, the practical penalty through the right channel is usually zero. The danger is not the size of the penalty — it is choosing the wrong disclosure route, or doing nothing and letting the case drift toward a willful characterisation.

How to get to a $0 penalty: the two clean-up routes

For honest expats, two official programs reduce penalties to zero. Which one fits depends on whether you also have unreported income.

1. Delinquent FBAR Submission Procedures (income was reported)

This is Daniel's path. If you reported and paid US tax on all the income from your NZ accounts and have not been contacted about an exam or delinquent return, you simply e-file the late FBARs with a reason and an explanation, and no penalty is imposed (IRS). This is the simplest, cleanest fix and covers a large share of US-citizens-in-NZ who just never knew about the form.

2. Streamlined Foreign Offshore Procedures (income was also missed)

If you also under-reported income — common with NZ KiwiSaver and PIE/managed funds, where the FIF rules generate US-taxable amounts that catch people out — the Delinquent FBAR route alone isn't enough. Instead, qualifying non-resident filers use the Streamlined Foreign Offshore Procedures, certifying non-willful conduct on Form 14653. For taxpayers who meet the non-residency test (most US citizens living full-time in NZ do), the Streamlined Foreign Offshore Procedures impose no Title 26 miscellaneous offshore penalty — a 0% penalty (the 5% penalty only applies to the Domestic version for US-resident filers). See IRS — Streamlined filing compliance procedures.

What pushes the IRS toward "willful"

Since the willful tier is roughly 10× the cost and has no reasonable-cause escape hatch, avoiding a willful characterisation is everything. Willfulness in the FBAR context includes not just intentional concealment but "willful blindness" and reckless disregard. The single most dangerous fact pattern for an expat is this:

• Signing a US return that ticks "No" to the foreign-accounts question on Schedule B. Schedule B, Part III asks directly whether you had a financial interest in or signature authority over a foreign account. If you signed returns answering "No" while holding NZ accounts, the IRS can argue you had notice and answered falsely — a classic springboard to a willful finding.
• Filing FBARs for some years but not others once you clearly knew of the obligation.
• Moving money to avoid reporting, using nominee structures, or telling an adviser to keep accounts off the radar.
• Continuing to ignore the obligation after being put on notice (e.g., by a bank's FATCA letter).

By contrast, a true non-willful profile looks like Daniel: never knew the form existed, reported the income honestly, came forward voluntarily before any contact. If your Schedule B history is clean and you act before the IRS reaches you, you are firmly in the non-willful world — which is where the $0 outcomes live.

Statute of limitations: why old NZ accounts still matter

The IRS has six years to assess a civil FBAR penalty, running from the FBAR's due date — regardless of whether or when you actually filed it (31 U.S.C. § 5321(b)(1); see also IRM 8.11.6, FBAR Penalties). Two consequences flow from this for NZ-based filers:

• Old years are not automatically "safe." A 2021 FBAR was due in 2022, so the assessment window runs into 2028. Accounts you held five years ago can still generate a penalty today.
• But the window also closes. Years that fall outside the six-year period drop off — which is why disclosures are usually scoped to the open years (the Streamlined program looks at the most recent years that are still open). The clock does not erase the obligation, but it does limit how far back the IRS can reach for civil penalties.

Practically: the six-year clock is a reason to act sooner rather than later, but it is also why a well-scoped voluntary disclosure is finite — you are not exposed forever.

Frequently asked questions