By Usman Mohammad and Michael Gelb
The CPA Journal, Tax Practice & Procedure Column
December 2021 Issue
Failing to report foreign bank accounts on a Report of Foreign Bank and Financial Accounts (FBAR) form can carry severe financial consequences. The civil penalty for non-willful violations of the FBAR reporting requirement is $10,000. The civil penalty for willful violations of the FBAR reporting requirement is the greater of $100,000 or 50% of the account balance. In order to properly advise taxpayers regarding those consequences, tax professionals should be aware of recent court developments regarding FBAR penalties.
Recent Developments Regarding Non-Willful FBAR Penalties
Tax professionals should be aware that even non-willful violations of the FBAR reporting requirement may result in substantial penalties if the taxpayer has multiple foreign accounts and resides in a jurisdiction that applies the non-willful penalty on a per-account basis.
The federal courts are currently split on the issue of whether the non-willful FBAR penalty applies to each unfiled FBAR form or to each unreported foreign account. This distinction is significant—if the penalty applies on a per form basis, then the penalty is capped at $10,000 per year, because only one FBAR form is required to be filed each year, no matter the number of foreign accounts to be reported. If, however, the penalty applies on a per account basis, then a taxpayer with multiple accounts can be liable for multiple $10,000 non-willful FBAR penalties in a single year.
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Published with permission from The CPA Journal, a publication of the NYSSCPA.