People often ask us if anyone in Israel has ever received an FBAR penalty. The answer isn’t only yes, but it is shocking how far it goes!

We assume tax penalties are buried with the taxpayer. However, based on recent cases, while “Nothing is certain but death and taxes”, not even death can cancel out the other. 

Key Takeaways

• Courts have ruled that FBAR liabilities remain enforceable against a taxpayer’s estate.
• If your combined foreign balances exceed $10,000 at any time in the year, you must file an FBAR, even if accounts are inactive.

A federal judge in United States v. Hendler decided on September 17th, 2024, that FBAR liabilities crystallize when an untimely report is due. This occurs well before the IRS gets around to assessing them. In this case, the assessment occurred four months after the taxpayer’s death. Yet, the court ruled that his estate was still responsible for paying. This ruling serves as a wake-up call for every U.S. citizen in Israel who might consider dismissing an overdue FBAR.

When David Benishai failed to file FBARs for seven years related to his Israeli accounts, he believed that a late filing and a few extension agreements would be enough to keep the IRS from pursuing penalties. He passed away in January 2021. 

However, the IRS continued its efforts and initially asserted a penalty of $250,000. Later, this amount was reduced to $70,000 following the Supreme Court’s Bittner decision, which clarified that non-willful FBAR penalties should be applied per report rather than per account. 

By September 2024, accrued interest increased the government’s judgment to approximately $86,700. Benishai’s wife and daughter contended that the debt should be nullified upon death. They argued that the penalty infringed upon the Constitution’s Excessive Fines Clause. Judge Dale Ho disagreed, concluding that FBAR penalties are remedial, not punitive. As a result, the government’s claim remained enforceable against the estate.

Why does this matter if you live abroad? 

The FBAR threshold is set at a modest $10,000 in combined foreign balances at any point during the calendar year. This requirement applies whether your accounts generate income, remain unused, or never remit funds back to the U.S. Once the deadline of April 15th passes, with an automatic extension to October 15th, any unfiled FBAR becomes a legal liability. 

The IRS has the authority to wait years before taking action, and your heirs might ultimately be held accountable. Extension to the statute of limitations only applies when delinquent reports have been filed. If the FBAR is never submitted, the statute of limitations never begins.

What can you do?

The most practical approach is simple. Examine each of your foreign accounts, whether personal, joint, business-related, or where you have signatory authority, throughout the entire year.

If the highest combined balance exceeds $10,000, you should file the FBAR and Form 8938, if applicable. Keep copies of bank statements and financial summaries in a single, organized location. Coordinating your Israeli and U.S. filings is essential to ensure they present a consistent picture. Doing so can transform a potentially costly estate issue into a straightforward compliance process.

We have assisted thousands of American taxpayers living in Israel with international tax matters, including FBAR, FATCA, and estate compliance across borders. Too often, we have seen preventable errors escalate into expensive legal conflicts. The Hendler decision highlights the need to proactively address FBAR responsibilities, as neglecting them can lead to lasting consequences that may impact your family.

If you need assistance catching up on your tax returns or FBARs, get in touch with us.