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Foreign Bank & Financial Account: Penalties Can Apply To Each Account

WHAT IS A VIOLATION OF THE FBAR RULES?

Most people assume the violation is not filing the FBAR each year.

In a recent case, a district court held that the IRS could assess a penalty on each account that a taxpayer failed to report on a FBAR form, rather than on each FBAR filing she failed to make. (Boyd v. U.S., 2019 PTC 161 (C.D. Calif. 2019).) The IRS assessed 13 separate FBAR penalties and treated each account that was not listed on a timely filed FBAR as a separate non-willful violation.

The amount of each FBAR penalty was computed based on the highest balance contained in the relevant account during 2010. For accounts containing $50,000 or more, the IRS asserted a $5,000 penalty. For accounts containing less than $50,000, the IRS asserted a penalty equal to 10 percent of the highest balance in the account

Who Needs to File a FBAR?

U.S. persons (including businesses) are required to file an Foreign Bank Account Report (FBAR) if:

(1) the U.S. person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

(2) the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.

 Civil penalties for a non-willful violation can range up to $12,921 ($10k penalty is now inflation indexed) per violation, and civil penalties for a willful violation can range up to the greater of $129,210 or 50% of the amount in the account at the time of the violation.

To schedule a consultation regarding your international tax reporting obligations contact me today.

Richard Pon CPA, CFP