Delinquent FBAR Submission Procedures: The IRS Delinquent FBAR Submission Procedures are a form of FBAR Amnesty. In recent years, the Internal Revenue Service has increased enforcement of foreign accounts compliance. In order to go back and report previously unreported offshore accounts, assets, and investments, the IRS has developed various amnesty programs, collectively referred to as offshore voluntary disclosure. The two most common programs are the Streamlined Program & Voluntary Disclosure. If a person qualified to avoid FBAR Penalties under delinquent procedures the IRS may waive all penalties.
In order to qualify the IRS requires the following:
- have not filed a required Report of Foreign Bank and Financial Accounts (FBAR)
- are not under a civil examination or a criminal investigation by the IRS, and
- have not already been contacted by the IRS about the delinquent FBARs
Delinquent FBAR Submission Procedures
The Delinquent FBAR Submission Procedures are a great option for non-willful taxpayers who do not have unreported income. There are various FBAR tax amnesty programs for clients who are delinquent on FBAR Reporting, as well as delinquent for the reporting of other international reporting forms.
How to Submit Delinquent FBARS
There are typically four types of IRS Voluntary Disclosure programs, for taxpayers to submit Delinquent FBARs.
- Traditional (IRM) IRS Voluntary Disclosure Program
- Streamlined Domestic Offshore Procedures (SDOP)
- Streamlined Foreign Offshore Procedures (SFOP)
- Reasonable Cause (RC)
*Reasonable Cause is a catch-all that includes delinquency procedures. In other words, FBAR delinquency procedures that do not require submission to the streamlined procedures or voluntary disclosure program fall under the larger umbrella of Reasonable Cause.
How Many Years Back Can You File?
Generally, when a person submits delinquent FBARs, they will go back and file (or amend) for up-to 6-years.
The concept of FBAR delinquency has several moving parts. For example:
- Was there unreported income along with unreported accounts?
- Was the non-compliance willful or non-willful?
- Are the penalties civil, criminal — or both?
4 Categories of FBAR Penalties
- Unfiled FBAR with no unreported income (non-willful)
- Unfiled FBAR with no unreported income (willful)
- Unfiled FBAR with unreported income (non-willful)
- Unfiled FBAR with unreported income (willful)
How to Prepare Delinquent FBARs
We have a separate article designed to show you how to prepare the FBAR.
What are the Penalties for Delinquent FBAR Filing?
FBAR Penalties can be Civil FBAR Penalties or Criminal. Civil penalties involve financial penalties, while criminal penalties involve money and possible loss of freedom.
Let’s start with the most common FBAR penalties — civil FBAR penalties.
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.
Golding & Golding (Board-Certified)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
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- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced FBAR Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
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. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.