FBAR Penalties – IRS Foreign Account Penalty | We Specialize in FBAR
- 1 FBAR Penalties
- 2 IRS Foreign Account (FBAR) Penalty
- 3 We Specialize in FBAR Penalty Mitigation
- 4 FBAR Penalty Calculation
- 5 What is the Penalty for Not Filing the FBAR?
- 6 Civil FBAR Penalties
- 7 Criminal FBAR Penalties
- 8 Additional Questions we Receive about FBAR Penalties
- 9 Options Available U.S. Taxpayers & Undisclosed Foreign Financial Assets
- 10 How to Find Experienced & Reputable Offshore Voluntary Disclosure Counsel
- 11 Beware of Copycat Law Firms
- 12 How to Retain Experienced Counsel?
FBAR Penalties – IRS Foreign Account Penalty | We Specialize in FBAR
FBAR Penalties: When a U.S. Person misses the FBAR filing deadline, and has not reported foreign accounts (or reported late), the Taxpayer may be subject to FBAR Penalties.
The IRS can issue an FBAR penalty for not reporting foreign bank accounts or filing them late. While the non willful FBAR Penalty is the most common penalty issued, the IRS has big leeway in making its FBAR Penalty Calculation — which will vary based on willful vs. non-willful, and civil vs. criminal.
IRS Foreign Account (FBAR) Penalty
There are various different types of foreign bank account penalties. The most common type of IRS FBAR Penalties is a non-willful FBAR penalty. Whether the FBAR is non-filed or late-filed, the penalties are usually the same.
The IRS has big leeway to assess penalties for the FBAR. Once you miss the FBAR Filing Deadline, the IRS sees you as “fair game.” Our Attorneys will explain what are your risks, and what you can do to minimize your FBAR Penalty Risk.
We Specialize in FBAR Penalty Mitigation
Sean M. Golding, JD, LL.M., EA (Board Certified Tax Law Specialist)
Our Managing Partner, Sean M. Golding, JD, LLM, EA earned an LL.M. (Master’s in Tax Law) from the University of Denver and is also an Enrolled Agent (the highest credential awarded by the IRS, and authorizes him to represent clients nationwide.)
Mr. Golding and his team have successfully handled several hundred IRS Offshore/Voluntary Disclosure Procedure cases. Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.
He is frequently called upon to lecture and write on issues involving IRS Voluntary Disclosure.
Less than 1% of Tax Attorneys Nationwide are Board Certified Tax Law Specialists
The Board Certified Tax Law Specialist exam is offered in many states, and is widely regarded as one of (if not) the hardest tax exam given in the United States for practicing Attorneys. Certification also requires the completion of significant ethics and experience requirements.
In California alone, out of more than 200,000 practicing attorneys (with thousands of attorneys practicing in some area of tax law), less than 350 attorneys are Board Certified Tax Law Specialists.
FBAR Penalty Calculation
FBAR calculations for foreign account penalties will depend on the type of penalty that the IRS issues.
FBAR penalties can be broken down into 4 categories:
- Willful FBAR
- Non-Willful FBAR
- Civil FBAR
- Criminal FBAR
What is the Penalty for Not Filing the FBAR?
Not all FBAR Penalties are the same. Sometimes, the IRS penalties for unfiled or late FBARs are bad, and sometimes, well…they’re not so bad. You may even receive a Warning Letter in Lieu of Penalty. It jut depends on the different facts and circumstances of your situation.
Civil FBAR Penalties
FBAR Penalties can be Civil FBAR Penalties or Criminal. They can then be broken down further, but the threshold question, is whether the IRS will get you for Civil (money) or Criminal (money, and worse).
Civil FBAR Penalties are limited to monetary penalties. A civil FBAR Penalty is a penalty that is focused on monetary fines or warning letters (waivers) — without any risk of criminal investigation or prosecution.
|U.S. Code citation||Civil Monetary Penalty Description||Current Maximum|
|31 U.S.C. 5321(a)(5)(B)(i)||Foreign Financial Agency Transaction – Non-Willful Violation of Transaction||$12,921|
|31 U.S.C. 5321(a)(5)(C)||Foreign Financial Agency Transaction – Willful Violation of Transaction||Greater of $129,210, or 50% of the amount per 31 U.S.C.5321(a)(5)(D)|
|31 U.S.C. 5321(a)(6)(A)||Negligent Violation by Financial Institution or Non-Financial Trade or Business||$1,118|
|31 U.S.C. 5321(a)(6)(B)||Pattern of Negligent Activity by Financial Institution or Non-Financial Trade or Business||$86,976|
Penalties for Civil FBAR can be Broken down into two (2) categories:
- Willful FBAR Penalties
- Non-Willful FBAR Penalties
Non-Willful FBAR Penalties
These FBAR Penalties are typically the least severe penalties. An FBAR non-willful penalty is a “lower-level” penalty for not filing the FBAR. The non-willful penalties can be high, BUT, typically they are not as high as willful penalties.
Willful FBAR Penalties and (Reduced) Willfulness
The Willful FBAR Penalty is typically more severe. An FBAR Willful Penalty is penalty for acting willful, willfully blind, or with reckless disregard in not filing the FBAR. We have provided detailed explanations and analyses in our free International Tax Law library about these different terms, and what they mean.
Criminal FBAR Penalties
Criminal FBAR Penalties may include monetary penalties and incarceration. This is when the IRS refers the matter to the Department of Justice (DOJ) or other 3 letter government faction for criminal investigation and possible prosecution. These are not very common, but unfortunately they are on the rise.
|U.S. Code citation||Criminal Violation & Description||Criminal Penalty|
|31 C.F.R. §103.59(b)||Willful – Failure to File FBAR or retain records of account||Up to $250,000 or 5 years or both|
|31 C.F.R. §103.59(c)||Willful – Failure to File FBAR or retain records of account while violating certain other laws||Up to $500,000 or 10 years or both|
|31 C.F.R. §103.59(c)||Knowingly and Willfully Filing False FBAR||$10,000 or 5 years or both|
|Civil and Criminal Penalties may be imposed together. 31 U.S.C. § 5321(d).||See Statutes||See Statutes|
A few important considerations:
- Most courts have held that the maximum annual FBAR willful penalty is not limited to $100,000.
- If the court believes you acted with Reckless Disregard, they can still penalize you full Willful FBAR Penalties.
- If the court believes you acted with Willful Blindness, they can still penalize you full Willful FBAR Penalties.
- Even in a non-willful setting, the court can issue $10,000 per account, per year penalty
Additional Questions we Receive about FBAR Penalties
Here are some more of the common questions we receive about FBAR Penalties.
FBAR Penalties 2018 & FBAR Penalties 2019
There has been increased enforcement, with three very important updates:
- Courts are holding that willful penalties are not limited to $100,000 per year.
- Courts are holding that non-willful penalties are not limited to $10,000 per year; and
- There has been an increase in willful penalties and criminal investigations.
What is the FBAR Late Filing Penalty?
Technically, there is no “late filing penalty.’ Rather, the IRS can penalize you for not filing the FBAR at the time it is due. In other words, it is not a “Late Filing Penalty,” because you cannot file the FBAR late, unless you submit using one of the programs. Each program has its own associated FBAR penalty structure or waiver.
How does FBAR Penalty Collection Work?
Generally, the IRS will issue the FBAR penalty or penalties against you. Then, the IRS will give you a certain amount of time to pay, before the IRS sues you, to reduce the FBAR penalty to a civil judgment.
Is there an Amended FBAR Penalty?
Technically, no. Rather, once the FBAR is not filed timely, the FBAR Penalty kicks in, and it is up to you to try to limit the penalties by using one of the approved amnesty or offshore disclosure methods.
Options Available U.S. Taxpayers & Undisclosed Foreign Financial Assets
There are 5 main versions of the program. In addition, there is an “illegal” version of Voluntary Disclosure as well, which is referred to as “Quiet Disclosure” or “Silent Disclosure.”
Here are the 5 Main Options:
(New) Updated Traditional IRS Voluntary Disclosure Program
When OVDP (Offshore Voluntary Disclosure Program) ended back in September 2018, the Internal Revenue Service was unclear as to whether a New “Offshore” Voluntary Disclosure Program would be introduced. Instead of a “new program,” the traditional voluntary disclosure program was expanded.
You can use the disclosure program to submit FBARs for your Foreign Bank Accounts, FATCA, PFIC, along with your Domestic Income
SFCP – IRS Streamlined Filing Compliance Procedures
IRS Streamlined Filing Compliance Procedures are a stand-alone “streamlined” version of the traditional OVDP. The “stand-alone” streamlined filing procedures were created in 2014 by the Internal Revenue Service.
The purpose of the procedures are to assist taxpayers who were noncompliant with offshore reporting requirements – but were also non-willful.
If the Taxpayer can certify under penalty of perjury of being non-willful, the IRS reduces the penalty structure, and even waives the penalty for applicants who qualify as foreign residents.
SDOP – IRS Streamlined Domestic Offshore Procedures
SDOP is the Streamlined Domestic Offshore Procedures, and it is the program designed for for U.S. persons residing in the United States (or do not meet the technical “Foreign Resident Test”)
SFOP – IRS Streamlined Foreign Offshore Procedures
SFOP is the Streamlined Foreign Offshore Procedures. These are the Procedures for U.S. persons residing outside the United States is referred to as the Streamlined Foreign Offshore Procedures.
DIRP – Delinquency Procedures for Offshore & Foreign Accounts and Assets
If you do not have any unreported income resulting in having to amend your tax returns — and all you have is unreported foreign assets, accounts or investments with no unreported income, you may be in luck. In these instances, in which you do not otherwise need to file for traditional offshore disclosure or the Streamlined Filing Compliance Procedures — you may qualify for the Delinquency Procedures and avoid any penalties.
RC – Reasonable Cause for Offshore & Foreign Accounts and Assets
Reasonable Cause may be an option for some taxpayers. Specifically, if you were completely non-willful in your failure to disclosure, and were unaware that there was any reporting requirement, then the thought of paying any penalty may sound absurd.
Fixing Lesser Experienced Law Firm mistakes.
IRS Voluntary Disclosure is complex enough for experienced practitioners who focus exclusively in the area of law, never mind relative newcomers who are trying to handle more than just offshore voluntary disclosure as part of their everyday tax practice.
We know, because those cases usually end up on our door-step.
How to Find Experienced & Reputable Offshore Voluntary Disclosure Counsel
Nearly all the experienced Attorneys in this field will have 5 Main Attributes:
- Board Certified Tax Law Specialist
- Master’s of Tax Law (aka LL.M.)
- Dually Licensed as an Enrolled Agent or CPA
- Around 20-Years of Private Practice experience
- Extensive Litigation, Trial and related high-stakes experience.
Beware of Copycat Law Firms
Unlike other attorneys who call themselves specialists or experts in Voluntary Disclosure but are not “Board Certified,” handle 5-10 different areas of tax law, purchase multiple keyword specific domain names, and even practice outside of tax, we are absolutely dedicated to Offshore Voluntary Disclosure.
How to Retain Experienced Counsel?
Our clients have asked up to prepare an Offshore Disclosure Attorney Fee Summary Guide for you to help separate fact from fiction when selecting an attorney.
Contact Us Today; Let us Help You.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)