2021 FBAR Civil Penalties Updated Inflation Adjustments
Each year, certain values of Internal Revenue Code penalties and reporting thresholds will vary based on changes due to inflation — which in turn, impacts both the reporting requirements and the potential penalties assessed by the IRS. This generally means that each year the values of different penalties will increase in order to account for inflation adjustments – and the FBAR is no different. Heading into 2022, it is important to be aware of the increased values as follows:
As provided by the Federal Register
In order to improve the effectiveness of civil monetary penalties (“CMPs”) and to maintain their deterrent effect, the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended, 28 U.S.C. 2461 note (the “Act”), requires Federal agencies to adjust each CMP provided by law within the jurisdiction of the agency.
The Act requires agencies to adjust the level of CMPs with an initial “catch-up” adjustment through an interim final rulemaking and to make subsequent annual adjustments for inflation, without needing to provide notice and the opportunity for public comment otherwise required by 5 U.S.C. 553.
The Act provides that any increase in a CMP shall apply to CMPs that are assessed after the date the increase takes effect, regardless of whether the underlying violation predated such increase.
Method of Calculation
The method of calculating CMP adjustments applied in this final rule is required by the Act. Under the Act and the Office of Management and Budget (“OMB”) guidance required by the Act, annual inflation adjustments subsequent to the initial catch-up adjustment are to be based on the percent change between the Consumer Price Index for all Urban Consumers (“CPI-U”) for the October preceding the date of the adjustment and the prior year’s October CPI-U.
As set forth in OMB Memorandum M-21-10 of December 23, 2020, the adjustment multiplier for 2021 is 1.01182. In order to complete the 2021 annual adjustment, each current CMP is multiplied by the 2021 adjustment multiplier. Under the Act, any increase in CMP must be rounded to the nearest multiple of $1.
ADMINISTRATIVE PROCEDURE ACT
Section 4(b) of the Act requires agencies, beginning in 2017, to make annual adjustments for inflation to CMPs without needing to provide notice and the opportunity for public comment required by 5 U.S.C. 553. Additionally, the methodology used for adjusting CMPs for inflation, effective 2017, is Start Printed Page 7349 provided by statute, with no discretion provided to agencies regarding the substance of the adjustments for inflation to CMPs.
FinCEN is charged only with performing ministerial computations to determine the dollar amount of adjustments for inflation to CMPs. Accordingly, prior public notice and an opportunity for public comment and a delayed effective date are not required for this rule.
REGULATORY FLEXIBILITY ACT
Because no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply.
EXECUTIVE ORDER 12866 AND 13771
This rule is not a significant regulatory action as defined in section 3(f) of Executive Order 12866, and, as a result, this rule is not considered a regulatory action under Executive Order 13771.
PAPERWORK REDUCTION ACT
List of Subjects in 31 CFR Part 1010
Authority delegations (Government agencies)
Administrative practice and procedure
Reporting and recordkeeping requirements
31 USC 5321 Non-Willful Civil FBAR Penalties
As of January 28th 2021, the non-willful civil FBAR penalty was increased to $13,640.
31 U.S.C. 5321(a)(5)(C)(i)(I)
As of January 28th 2021, the willful civil FBAR penalty was increased to $136,399
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.