FBAR Amnesty – Offshore FBAR Account Penalty | IRS Amnesty FBAR
FBAR Amnesty – Offshore FBAR Account Penalty | IRS Amnesty FBAR
FBAR Amnesty: Using FBAR Amnesty for unreported foreign accounts is the process of trying to reduce or avoid stiff IRS penalties and FinCEN 114 Penalties associated with the non-filing or late filing of an FBAR aka FinCen 114 aka (“Form 114”)
Here is a quick summary about prior year FBAR Amnesty Programs.
FBAR Amnesty 2019
FBAR Amnesty 2019 has changed, due to the ending of the traditional OVDP program, and updated new procedures for both domestic and offshore submissions.
FBAR Amnesty 2018
If you are seeking FBAR Amnesty 2018 for prior year FBAR non-compliance, you can use this article to assist you with getting into compliance for 2019 and prior years.
FBAR Amnesty 2017
If you are seeking FBAR Amnesty 2017 for prior year FBAR non-compliance, you can use this article to assist you with getting into compliance for 2019 and prior years.
FBAR Amnesty 2016
If you are seeking FBAR Amnesty 2016 for prior year FBAR non-compliance, you can use this article to assist you with getting into compliance for 2019 and prior years.
FBAR Amnesty 2015
If you are seeking FBAR Amnesty 2015 or prior year FBAR non-compliance, you can use this article to assist you with getting into compliance for 2019 and prior years.
Foreign Account Amnesty Programs
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.
FBAR Amnesty to Reduce Penalties for 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
FBAR Penalties can be Civil 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 Fines & 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 Fines & 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, A PLC
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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.