U.S. citizens and Green Card holders must remain compliant with U.S. tax and reporting obligations regardless of where they live. When a taxpayer fails to meet these obligations, the IRS may impose civil penalties. The type and amount of the penalty depend on the nature of the issue: late filing, underpayment, inaccurate reporting, or missing required international information returns, such as FBAR, FATCA (Form 8938), and Forms 5471, 3520, 3520-A, or 8865.

In most cases, penalties and interest are calculated based on the amount of tax owed. However, some penalties apply even when no tax is due, particularly for missing information returns.

This penalty applies when a tax return is filed after the deadline (including extensions). It accrues from the filing due date to the date the return is actually filed.

The penalty is 5% of the unpaid tax (less any tax paid on time (estimated tax payments) and available refundable credits) per month or partial month the return is late, up to a maximum of 25%. For example, if $10,000 is owed and the return is filed four months late, the penalty can reach about $2,000. If the return is more than 60 days late, a minimum penalty of $510 or 100% of the unpaid tax (whichever is less) applies.

Interest on the penalty accrues on top of this starting from the due date of the amount you owe (the return due date or the extended return due date if an extension is filed) and continues to accrue until the balance is paid in full. See IRS Failure-to-file penalties.

This penalty applies when tax owed is not paid by April 15 (even for U.S. taxpayers living abroad). Unpaid tax is the total tax required to be shown on your return minus amounts paid through withholding, estimated tax payments, and allowed refundable credits.

The penalty is 0.5% of the unpaid tax per month, up to a maximum of 25%. If both the failure-to-file and failure-to-pay penalties apply for the same month, the combined penalty is limited to 5% per month.

Interest on the penalty accrues on the unpaid balance from the due date of the amount you owe (the date the IRS sent you a notice or assessed the penalty) until the balance is paid in full. See IRS Failure-to-pay penalties.

This penalty is common among self-employed individuals, freelancers, and expats with foreign income. It applies when insufficient tax is paid throughout the year via withholding or quarterly estimated payments. You are required to pay most of your tax during the year quaterly, as you receive income, rather than paying at the end of the year.

The IRS calculates this penalty based on:

Interest on the penalty accrues on top of this starting from the due date of the amount you owe (the date the IRS sent you a notice or assessed the penalty) until the balance is paid in full. See IRS Underpayment of estimated tax by individuals.

This penalty applies when a taxpayer significantly understates tax liability, generally by more than 10% of the tax required to be shown on a tax return or $5,000, whichever is greater.

The penalty equals 20% of the underpaid tax.

Interest on the penalty accrues on top of this starting on the due date of the amount you owe (the return due date or the extended return due date if an extension is filed) and continues to accrue until the balance is paid in full. See IRS Accuracy-related penalties.

These penalties are among the most severe and often apply even when no tax is owed.

FBAR (Form FinCEN 114) is required when the total value of foreign financial accounts exceeds $10,000 at any time during the year. The penalty applies when you don't file a complete and correct FBAR by October 15.

FBAR penalties depend on whether the IRS determines your failure was willful or non-willful:

Interest on the penalty accrues until the balance is paid in full. See IRS International information reporting penalties.

FATCA (Form 8938) is required when combined foreign financial assets exceed specified thresholds. For example, $50,000+ on the last day of the tax year for single filers living in the U.S. or $200,000+ for single filers living abroad, etc. The penalty applies when you don't file a complete and correct Form 8938 by the due date.

The penalty starts at $10,000 per form, increasing by $10,000 every 30 days after an IRS notice, up to $50,000.

Interest on the penalty accrues until the balance is paid in full. See IRS International information reporting penalties.

The penalty starts at $10,000 per form, increasing by $10,000 every 30 days after an IRS notice, up to $50,000.

Interest accrues until the balance is paid in full. See IRS International information reporting penalties.

Corporations must report certain transactions with a foreign or domestic party. The penalty applies when you don't file a complete and correct Form 5472 by the due date.

The penalty starts at $25,000 per form, increasing by $25,000 every 30 days after an IRS notice. There is no maximum penalty amount.

Interest accrues until the balance is paid in full. See IRS International information reporting penalties.

U.S. persons owning interests in a foreign partnership must report certain activities of controlled foreign partnerships, including transfers, acquisitions, dispositions, and changes in foreign partnership interests. The penalty applies when you don't file a complete and correct Form 8865 by the due date.

The penalty starts at $10,000 per form, increasing by $10,000 every 30 days after an IRS notice, up to $50,000. Additional penalties may apply, including reductions to the foreign tax credit or penalties of up to 10% of the fair market value of the property at the time of the contribution of that property to a foreign partnership in exchange for an interest in the partnership, capped at $100,000.

Interest accrues until the balance is paid in full. See IRS International information reporting penalties.

U.S. persons must report:

The penalty applies when you don't file a complete and correct Form 3520 by the due date.

Penalties vary depending on the violation and may be based on a percentage of contributions, distributions, trust assets, or gifts received. These penalties often range from 5% to 35% of the unreported amount, with escalating penalties after an IRS notice.

Penalty computation:

Interest accrues until the balance is paid in full. See IRS International information reporting penalties.

Foreign trusts with at least one U.S. owner under the grantor trust rules or the U.S. owner must report information about the trust, its U.S. beneficiaries, and any U.S. person who is treated as an owner of any portion of the foreign trust. The penalty applies when you don't file a complete and correct Form 3520-A by the due date.

The penalty starts at $10,000 per form, or 5% of the gross value of your assets in the trust at the close of the tax year, increasing by $10,000 every 30 days after an IRS notice. Cannot exceed the value of your assets in the trust.

Interest accrues until the balance is paid in full. See IRS International information reporting penalties.

If the IRS determines that an underpayment or failure to file was intentional, a civil fraud penalty of 75% of the underpaid tax may apply.

Interest accrues daily on unpaid tax and penalties until the balance is paid in full. Rates change quarterly and are calculated as the federal short-term rate plus 3%.

Check the official IRS quarterly interest rates page for the most up-to-date information.

In extreme cases involving tax evasion, false statements, or intentional concealment, criminal prosecution may apply, potentially resulting in fines and imprisonment.

In many cases, IRS penalties and interest can be reduced or even eliminated, especially when issues are addressed proactively. Resolving compliance gaps before the IRS contacts you leads to significantly better outcomes.

The IRS may grant penalty relief when a taxpayer can demonstrate reasonable cause, non-willful behavior, or eligibility for specific relief programs. Depending on the situation, taxpayers may qualify for first-time penalty abatement or participate in IRS amnesty and disclosure programs, such as:

The IRS offers penalty abatement and penalty waivers if a taxpayer demonstrates that their failure to file was non-willful and provides adequate proof. Please note that penalty abatement does not remove the obligation to file delinquent or amended returns, and IRS approval is never guaranteed. However, many taxpayers have successfully reduced or avoided penalties by properly documenting non-willful conduct and using the Streamlined procedures or other applicable relief options.

U.S. taxpayers living abroad may qualify for penalty relief in situations involving foreign tax complexities. For example, reasonable-cause arguments related to reliance on the Foreign Earned Income Exclusion or foreign tax credits can sometimes support relief from late-filing or late-payment penalties.

For U.S. taxpayers overseas, the greatest risks are often not unpaid tax, but missing international reporting requirements, like FBAR and FATCA filings. If you are unsure whether you are fully compliant or eligible for penalty relief, it is strongly recommended to review your situation with a qualified tax professional before submitting anything to the IRS.