FBAR Penalties – Recent Developments Increase Risk for Taxpayers
United States citizens, residents, entities, trusts and estates with signature authority over or financial interest in foreign financial accounts with balances that exceed $10,000 at any time during the calendar year must file a FinCEN 114 form. Many taxpayers overlook their obligations to file FinCEN Form 114, “Foreign Bank Account Report,” which is often referred to as an FBAR.
A taxpayer who is required to file a FinCEN 114 form and fails to do so may be subject to civil and possibly criminal penalties.
Each non-willful violation carries a civil penalty of $10,000. If there is a reasonable cause for noncompliance, no penalty is imposed. According to the IRS, failure to learn about the requirements of operating a foreign account is “willful blindness” and a person found guilty may be liable for penalty.
Taxpayer who willingly fails to report the account information or intentionally misrepresents the figures is subject to a civil penalty of $100,000 or 50% of the balance in the account at each time of the violation. This penalty is in addition to interest, tax, and an accuracy penalty. Willful violations also are subject to criminal penalties, which include $250,000 and five years of imprisonment. If an FBAR violation occurs with another violation of tax law, the fines can be increased to $500,000.
The U.S. Supreme Court will hear the case of Bittner v. United States, 21-1195 and final opinion in this case will impact whether the U.S. taxpayer will be fined for each missed form or for each missed account. The final opinion in this case may cause far-reaching impacts depending on the results. Stay tuned for the final outcome of this case.
If you have any questions on whether you have signature authority over or financial interest in foreign financial accounts or need assistance, contact us.
