By: Caroline Rule
Journal of Tax Practice & Procedure
Summer 2020 Edition
Recent litigation has focused on the government’s new position that the $10,000 non-willful civil FBAR penalty applies per account listed on an non-willfully untimely-filed annual FBAR—a Report of Foreign Bank or Financial Accounts that must be filed by a U.S. person “who has a financial interest in or signature authority over foreign financial accounts” if the aggregate value of the accounts “exceeds $10,000 at any time during the calendar year.” The FBAR is filed in the following calendar year. Until recently, the rule recognized by courts has been that the non-willful civil penalty applies per single untimely filed FBAR form, not per account listed on that FBAR.
This issue, of first impression in an appellate court, is pending before the Ninth Circuit in J. Boyd. The same issue is currently before the Eastern District of Texas in Bittner, and the Central District of California in Patel, et al.
In Boyd, the taxpayer did not file timely FBARs reporting 13 foreign accounts, but was not willful. The government believes that it was proper when, “[i]n assessing the thirteen separate FBAR penalties against Boyd, the IRS treated each account that was not listed on a timely filed FBAR as a separate non-willful violation.” The District Court agreed, holding that: “Each non-willful FBAR violation relates to a foreign financial account, and the IRS may penalize each such violation with a penalty not to exceed $10,000.”