What is FBAR? What are the FBARs penalties? Per the recent IRS audit statement, post-assessment FBARs penalty cases are considered priority cases and should be processed expeditiously. Moreover, these cases must be completed and approved within 60 days of assignment.
What is FBAR?
The history of the FBARs goes back to the Bank Secrecy Act of 1970 and Title 31 of the United States Tax Code. However, eventually the enforcement procedure and authority has been delegated to the Department of Treasury and the IRS. On April 8, 2003 IRS was granted an authority to assess and collect FBARs civil penalties.
How FBARs penalties are determined?
FBARs penalties are assessed per account, not per unfiled FBAR, for each person required to file. Moreover, penalties apply for each year of each violation. For example, you own 3 accounts that have not been reported for 3 years so you should expect 9 separate assessed penalties.
Also, if there is more than one account holder or if a person other than the account owner has signature authority over the foreign account, then each person can be liable for the full amount of the penalty.
What kind of FBARs penalties can be assessed?
Failure to file FBARs may potentially result in civil penalties, criminal penalties or both.
What is FBAR review process? While IRS reviews each case, they advise their agents to review whether a failure to file FBARs was willful or non-willful. The penalty for failure to file the FBAR are the following:
FBAR Non-Willful Violation
· Up to $10,000 for each negligent violation
· No Criminal Prosecution
FBAR Willful Violation
· Up to the greater of $100,000 or 50% of the amount in the account at the time of the violation
· Penalties of up to $250,000 or 5 years in jail or both
FBAR Willful Violation While Breaking Certain Other Laws
· Up to the greater of $100,000 or 50% of the amount in the account at the time of the violation
· Penalties of up to $500,000 or 10 years in jail or both
What should you do?
It is important that a US expatriate completes an expatriate tax return correctly and files the FBARs timely to avoid any penalties. If you need any help with US tax preparation, seek help of a CPA that provides international tax services.