Reasonable Cause: An Alternative to Streamlined for Some Filers
A reasonable cause alternative to the streamlined filing compliance procedures can still work for genuinely non-wilful US-UK dual filers. Still, the ground shifted in July 2026 when the IRS quietly removed the page describing its Delinquent FBAR Submission Procedures, taking the guaranteed no-penalty safe harbor with it. What remains is a statutory defense that still protects taxpayers, just with considerably more risk attached.
By the TaxYork Cross-Border Tax Team — reviewed by a US-UK dual-qualified adviser (CPA / Enrolled Agent).
What changed with the IRS reasonable cause alternative in July 2026?
Between 30 June and 1 July 2026, the IRS removed the Delinquent FBAR Submission Procedures page from IRS.gov without any formal announcement, a development first reported by Forbes tax contributor Virginia La Torre Jeker. That page had offered a specific, named pathway promising no penalty for late FBARs where the underlying income was properly reported and tax was paid, provided the filer attached a reasonable-cause statement. Its disappearance does not repeal the underlying law, but it does remove the reassurance of a clearly signposted, IRS-branded route.
Practitioners first flagged the removal in early July 2026, and there has been no IRS confirmation, transition guidance, or replacement page since. Wealthy dual filers who were quietly relying on that named procedure as their fallback now need to understand that any reasonable-cause filing is argued case-by-case, against an examiner, with no guaranteed outcome. This is precisely why the reasonable cause alternative now demands far more careful preparation than it did a year ago.
Why does the page removal matter, even though the law has not changed
The statutory reasonable-cause exception at 31 U.S.C. §5321(a)(5)(B)(ii) still exists and has not been touched by Congress or the Treasury. What has gone is the IRS's own signposted description of how to use it for delinquent FBARs specifically, along with the psychological comfort of a named, published pathway. Filers must now build their case directly from the statute, from IRM guidance, and from the IRS LB&I practice unit on reasonable cause and good faith, rather than following a step-by-step page built for exactly this scenario.
What is a reasonable cause for an FBAR penalty?
Reasonable cause under 31 U.S.C. §5321(a)(5)(B)(ii) means the FBAR violation happened despite the taxpayer exercising ordinary business care and prudence, and the underlying foreign account balance was properly reported on a return or otherwise correctly accounted for. It is a facts-and-circumstances test, not a checklist, and the IRS weighs each case on its own record, applying the same general standard set out in its guidance on penalty relief for reasonable cause.
The IRS's own LB&I practice unit on reasonable cause and good faith sets out the kind of evidence examiners expect: reliance on a competent adviser who was given complete and accurate information, genuine misunderstanding of a complex filing obligation, or circumstances such as serious illness that prevented timely compliance. Weak or generic excuses, such as simply not knowing about the Report of Foreign Bank and Financial Accounts, rarely succeed on their own.
Ordinary business care and prudence, explained.
This standard asks whether a reasonably prudent person, applying normal care to their financial affairs, would still have missed the filing. A dual filer who asked their accountant directly about foreign account reporting and received incorrect advice has a stronger case than one who never asked at all. Documentation of that reliance, dated correspondence, and a credible explanation of the sequence of events all strengthen a reasonable-cause statement considerably.
What is the difference between reasonable cause and streamlined filing?
Streamlined filing under the streamlined filing compliance procedures requires the taxpayer to certify, under penalty of perjury, that their prior non-compliance was non-wilful. It applies a known, fixed outcome: zero penalty for SFOP if non-residency is met, or a flat 5% miscellaneous offshore penalty for SDOP on the single highest year-end aggregate balance across the six-year FBAR lookback. A reasonable-cause filing, in contrast, argues affirmatively that no penalty should apply at all. Still, the outcome is not guaranteed, and the IRS can reject the statement and assess a penalty.
Streamlined is essentially a negotiated middle ground built for a large population of filers who were unaware of their obligations. The reasonable cause alternative targets a narrower group: filers who genuinely believe they exercised ordinary care and were let down by specific, documentable circumstances, and who are willing to accept assessment risk in pursuit of a zero-penalty outcome.
Comparing the two routes side by side
Feature
Streamlined (SFOP/SDOP)
Reasonable cause
Certification standard
Non-wilful (lower bar)
Ordinary business care and prudence (higher bar)
Outcome certainty
Fixed: 0% (SFOP) or 5% (SDOP)
Uncertain: full relief or full penalty assessed
Governing form
Form 14653 or Form 14654
Written statement citing §5321(a)(5)(B)(ii)
Look-back period
3 years returns, 6 years FBARs
Case-specific, often broader
Post-July 2026 status
Unaffected, still active
No dedicated FBAR page; argued from statute directly
Can I choose reasonable cause instead of the streamlined procedures?
Yes, a taxpayer can choose a reasonable cause filing instead of the streamlined filing compliance procedures, but only where the facts genuinely support ordinary business care and prudence rather than simple unawareness. Someone who never considered their foreign account reportable at all is usually a better fit for streamlined, since non-wilfulness is an easier standard to certify honestly than reasonable cause is to prove.
The Delinquent International Information Return Submission Procedures, covering Form 3520, Form 3520-A, Form 5471, Form 8865, and Form 8938, remain a live and unaffected IRS program separate from the FBAR page that was pulled. For Form 3520 and Form 3520-A specifically, the IRS states it will consider the reasonable-cause statement before assessing a penalty, provided the filer writes "Reasonable Cause Statement attached" at the top of page one. For most other delinquent information returns, penalties may be assessed first, leaving the taxpayer to respond afterward and argue for abatement, which is another reason a well-prepared reasonable cause alternative statement matters at the outset rather than after the fact.
When reasonable cause suits wealthy dual filers better than streamlined
A dual filer who took specific, documented steps to comply, such as instructing a UK accountant unfamiliar with US obligations, or who missed a single year due to a medical emergency backed by records, often has a stronger reasonable-cause case than a blanket streamlined certification would suggest. Streamlined's 5% SDOP penalty on the highest aggregate balance can also be a meaningful sum for filers holding substantial UK pensions, ISAs, or investment accounts, making a genuinely strong reasonable-cause argument financially worth pursuing despite the added risk.
Is reasonable cause riskier than streamlined filing?
Yes, reasonable cause carries materially more risk than streamlined because there is no guaranteed cap on the penalty if the IRS rejects the statement. Under streamlined, the worst outcome is a known 5% SDOP penalty; under reasonable cause, rejection can expose the filer to the full non-wilful FBAR penalty, now $16,536 per violation for 2026, or in the worst cases, the wilful penalty of $165,353 or 50% of the account balance if the IRS reclassifies the conduct as wilful.
The Supreme Court's 2023 decision in Bittner v. United States confirmed that non-willful FBAR penalties apply per form, not per account, thereby narrowing exposure somewhat for filers with multiple accounts. Still, the removal of the delinquent FBAR page means there is no longer an IRS-published assurance that a properly supported reasonable-cause statement will be accepted without scrutiny. This is why the case for the reasonable cause alternative needs to be built with real documentary evidence rather than a general assertion of good faith.
What a rejected reasonable cause statement can trigger.
If an examiner rejects the statement, the case typically proceeds to a formal FBAR penalty assessment, which the taxpayer can then contest through the IRS Office of Appeals or, in some circumstances, in federal court. That process is slower, more adversarial, and more expensive than accepting a known streamlined penalty upfront, so filers need realistic expectations before committing to the reasonable-cause path.
Does the IRS still offer delinquent FBAR submission procedures?
No, the IRS removed the dedicated "Delinquent FBAR Submission Procedures" page from IRS.gov between 30 June and 1 July 2026, and as of this writing, there has been no formal replacement, transition guidance, or public statement explaining the change. The underlying statutory reasonable-cause defense under 31 U.S.C. §5321(a)(5)(B)(ii) remains fully valid in law. Still, filers no longer have a named IRS procedure to cite when submitting a late FBAR with a reasonable cause explanation.
Filers should treat this as a fast-moving development. Advisers are watching for any formal IRS guidance that might reinstate a similar page or clarify how examiners will handle these submissions going forward, and any strategy built today should be reassessed if the IRS issues new instructions.
Case study: a UK-based dual filer weighing reasonable cause against streamlined
A client the TaxYork team advised in mid-2026, a US citizen living in Manchester with combined UK pension and investment balances peaking at roughly £310,000, had filed US returns every year but had never been told by two successive UK accountants that FBAR applied to her accounts. She had asked both firms directly about US reporting obligations and received written assurance, since proven inaccurate, that no separate US filing was needed. Given the documented reliance on professional advice and her consistent record of otherwise compliant returns, our team concluded that a reasonable-cause statement was a stronger fit than SDOP, since the alternative would have meant a 5% penalty on the full six-year highest balance, a materially larger sum than the risk-adjusted cost of arguing reasonable cause with strong supporting correspondence.
How does reasonable cause interact with other US-UK filing obligations?
A reasonable-cause approach to FBARs does not automatically extend to every other filing obligation a dual filer might have outstanding, so each form needs its own analysis. Someone catching up on FBARs through reasonable cause may still need to separately address the streamlined filing compliance procedures for their income tax returns or use the delinquent international information return program for entity-related forms.
Wealthy filers with UK pensions drawing income, or those drawing on a 401(k) or SIPP abroad, often discover FBAR gaps only when reviewing their full compliance picture, which is why we recommend working through your full US compliance checklist before choosing between reasonable cause and streamlined. Filers also weighing the Foreign Earned Income Exclusion, where the 2026 maximum exclusion under Rev. Proc. 2025-32 rises to $132,900 per qualifying person, should read our guide to claiming the Foreign Earned Income Exclusion alongside any reasonable cause alternative or streamlined decision, since the two questions are often reviewed together during a full catch-up.
Estate and gift exposure alongside FBAR catch-up
Filers correcting historic FBAR non-compliance often have related exposure on Form 3520 for foreign gifts or trust distributions, and on worldwide estate tax planning given the 2026 unified estate tax exclusion of $15,000,000 per person under the One Big Beautiful Bill Act. Anyone catching up on delinquent FBARs ahead of selling a US asset from the UK should also review worldwide estate tax exposure at the same time, since a full compliance review is more efficient than addressing each form in isolation.
What happens if the IRS rejects my reasonable cause statement?
If the reasonable-cause statement does not persuade the IRS, it will typically move to formally assess the FBAR penalty, at which point the taxpayer can request reconsideration, escalate to the IRS Office of Appeals, or, in limited circumstances, pursue judicial review. A rejected statement does not necessarily mean the wilful penalty applies; most rejections still fall within the non-wilful penalty framework unless the IRS specifically finds evidence of wilfulness.
Because the outcome is genuinely uncertain post-July 2026, we recommend that filers considering the reasonable cause alternative assemble their full evidentiary file, including adviser correspondence, medical records where relevant, and a clear timeline, before submission rather than after a rejection. A well-documented file submitted the first time is far more persuasive than a reactive appeal built after the fact.
Talk to TaxYork before you choose between reasonable cause and streamlined.
Choosing between a reasonable cause statement and the streamlined filing compliance procedures is not a decision to make from a blog post alone, particularly now that the IRS has removed its dedicated delinquent FBAR page without explanation. Our cross-border tax team reviews the full facts of each case, weighs the realistic penalty exposure under both routes, and prepares the documentary evidence needed to give a reasonable-cause statement the best possible chance of acceptance. Contact us at hello@taxyork.com or call 020 3488 8606, or visit taxyork.com to arrange a confidential review of your position.