IRS Increases FBAR Penalty
The FBAR is one of the most common forms in international tax, and one with the most notorious penalties. These penalties are adjusted yearly for inflation. The maximum civil penalty that can be assessed for failure to file an FBAR (Report of Foreign Bank and Financial Accounts), FinCen Form 114, has increased from to $12,921 for non-willful failures per account per year. The maximum civil penalty for a willful failure to file an FBAR has also increased to $129,210 or 50% of the balance in the account at the time of the violation. For willful violations, this can increase to an overall penalty of 100% of the balance of the account. The maximum for these civil penalties can be adjusted for inflation year to year and so they are likely only to increase. It should be noted that while the IRS is still claiming a policy of “per account, per year,” on the non-willful penalty there is a recent court case that has won on appeal and is likely to limit this to one yearly penalty.
Under the Bank Secrecy Act, a United States person, including citizens, residents, corporations, partnerships, LLCs, trust and estates must file a FBAR to report a financial interest in or any signature authority over any foreign financial account(s) if the aggregate value of those foreign financial account(s) exceeds $10,000 at any time during the calendar year. One has an FBAR filing requirement even if they have one foreign bank account that hits over $10,000 for a day- or a minute. Keep in mind that the definition says aggregate, so you still have a filing requirement if one foreign account has $3,001 and another has $7,000.
The FBAR is an annual report and must be filed by April 15th of the following year, but you receive an automatic extension until October 15th without needing to request an extension if you miss that April 15 deadline. The FBAR is not filed with your tax return, it must be filed electronically through the BSA E-Filing System, and you can authorize someone to file your FBAR on your behalf by using FinCen Report 114a.
Failing to file a FBAR or filing an FBAR late can subject you to severe civil and possibly criminal penalties. To minimize your exposure to these penalties, it is important to reach out to a tax attorney that is well versed in this area. There are programs that you can enter into to resolve your FBAR filing non-compliance and the tax attorneys here at Hone Maxwell LLP can discuss your options with you.