FBAR Penalty Applied Per Form Not Account

The US District Court US v. Kaufman recently found the $10,000 penalty for non-willful failure to file the FBAR form applies per FBAR form, not per the number of bank or financial accounts required to be reported on the form. Two district courts have reached the same conclusion, with only one district court reaching the opposite conclusion.

The penalty amount for violating the FBAR requirement depends on the violation being nonwillful or willful. The maximum penalty amount for a non-willful violation of the FBAR requirements is $10,000.

Before the recent case, one district court in US v. Boyd had held the penalty for a non-willful FBAR violation applied to each of the 13 accounts required to be reflected on the FBAR for a maximum aggregate penalty of $130,000. But another district court came to the opposite conclusion and found that the $10,000 non-willful penalty applied to the FBAR form itself for a single maximum penalty of $10,000.

In this recent case, the taxpayer had 17 foreign accounts, the balance of which, in aggregate, exceeded $10,000. The taxpayer was required to file an FBAR, but he did not do so. The IRS imposed a maximum penalty of $170,000 ($10,000 per account). The taxpayer argued that the penalty should be capped at $10,000 (for failure to file the FBAR form). In this case, the district court found the non-willful FBAR penalty applied per form, not per account, and capped the penalty at $10,000.

If you need assistance with any income tax or penalty issues, please contact your tax attorney at 937-223-1130 or Jsenney@pselaw.com

References: § 5321(a)(5) & 31 USC section 5314(a), every US person that has a financial interest in, or signature or other authority over, a financial account in a foreign country must report the account to IRS annually on a FinCEN Report 114 “Report of Foreign Bank and Financial Accounts” (FBAR) if the aggregate value of all such accounts exceeds $10,000 at any time during the calendar year one FBAR is used to report multiple foreign financial accounts.

AUTHOR: Jeff Senney

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