FBAR Violations - Golding & Golding | IRS FBAR Violation Penalty

FBAR Violations – Golding & Golding | IRS FBAR Violation Penalty (Board Certified Tax Specialist)

FBAR Violations – What is an IRS FBAR Violation Penalty?

FBAR Violations:  An FBAR Violation occurs when a person has undeclared foreign accounts that they have not reported to the IRS and FinCEN — which may result in an FBAR Violation Penalty.

FBAR Late filing penalties vary extensively (see below). And, while the IRS may (and does) issue fines and penalties for FBAR non-compliance — you have several Tax Amnesty options available to you.

FBAR Violations

Before understanding FBAR Violations, here’s a quick summary on FBAR.

What is FBAR Filing Deadline?

The FBAR is due in April, the same time your taxes are due. Currently, the FBAR is on automatic extension until October. That means you do not need to request and extension or file any forms to receive the extension (these rules are subject to change).

Learn what happens if you miss the FBAR Filing Deadline and have to file late.

FBAR – What is it?

An FBAR is the annual reporting of foreign accounts on an “FBAR” (Report of Foreign Bank and Financial Account Form aka FinCEN 114). It is filed online, electronically, with the Department of Treasury.

Who has to file an FBAR?

Any U,S, Person who meets the filing requirements – whether they reside in the U.S. or abroad, and whether they have to file a Tax Return or not.

FBAR Violation Attorneys – Golding & Golding (Board-Certified Tax Law Specialist)

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.

FBAR Violation Penalty

The penalties can range from a civil penalty waiver, all the way up to a 100% willful, multi-year penalty — in addition to possible criminal penalties. An FBAR Violation is when a person either does not file an FBAR, files the FBAR late, or files an incomplete FBAR.

FBAR Penalties are broken down into categories:

Non-Willful FBAR Violation 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.

Civil Violation of Filing the FBAR

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.

You may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. 

Assertion of penalties depends on facts and circumstances. Civil penalty maximums must be adjusted annually for inflation. 

Current FBAR Violation maximums are as follows:

U.S. Code citationCivil Monetary Penalty DescriptionCurrent 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 TransactionGreater 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

Criminal Violation of Filing the FBAR

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 factions for criminal investigation and possible prosecution. These are not very common, but unfortunately they are on the rise.

Willful FBAR Violation Penalties

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. 

U.S. Code citationCriminal Violation & DescriptionCriminal Penalty
31 C.F.R. §103.59(b) Willful – Failure to File FBAR or retain records of accountUp 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 lawsUp 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 StatutesSee Statutes

A few important considerations:

Who is Subject to an FBAR Violation?

Any person who is considered a U.S. person can become subject to an FBAR Violation.

Can you Avoid FBAR Violation Penalties?

Yes, you can generally use one of the approved IRS Offshore Account Amnesty programs to avoid FBAR Violations.

Everyone makes mistakes. If at some point you discover that you should have been reporting your foreign income, accounts, assets or investments, the prudent and least costly (but most effective) method for getting compliance is through one of the approved IRS offshore voluntary disclosure programs.

FBAR Violation Statute of Limitations

Section 5321 is the basis for FBAR Penalties.

Time for Assessment & Commencement of Civil Actions

When it comes to FBAR  penalties, there are two main aspects to it:

Assessment of FBAR Penalty

The time the Secretary of Treasury has to actually assesses you have penalty for not properly filing the Form.

Civil Action FBAR Penalty

The time the Secretary has to commence the civil action against you, which is essentially filing the court case to enforce penalties that have been assessed, but not paid.

(1) Assessments.— The Secretary of the Treasury may assess a civil penalty under subsection (a) at any time before the end of the 6-year period beginning on the date of the transaction with respect to which the penalty is assessed.

(2) Civil actions.—The Secretary may commence a civil action to recover a civil penalty assessed under subsection (a) at any time before the end of the 2-year period beginning on the later of—

– the date the penalty was assessed; or

– the date any judgment becomes final in any criminal action under section 5322 in connection with the same transaction with respect to which the penalty is assessed.

What is a Transaction?

Unfortunately, the IRS has not pinned down specifically what the definition of a transaction is – but, it is generally considered as the time in which the filing is supposed to be made. In other words the time to assess is based on the date of the transaction and the date of the transaction would be the date of filing is due — so that the IRS has 6 Years from when the filing was due to assess penalties.

What Can You Do?

The best thing you can do to avoid monstrous FBAR penalties is to safely get into compliance before the IRS finds you.  The IRS has various programs available, which are referred to as amnesty programs or voluntary disclosure programs, which you can use to safely get into compliance.

Depending on the facts and circumstances of your situation, you may be able to minimize become a limit and even avoid penalties altogether.

International Tax Lawyers - Golding & Golding, A PLC

International Tax Lawyers - Golding & Golding, A PLC

Golding & Golding: Our international tax lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70+ different countries. Managing Partner Sean M. Golding is a Board-Certified Tax Law Specialist Attorney (a designation earned by < 1% of attorneys nationwide.). He leads a full-service offshore disclosure & tax law firm. Sean and his team have represented thousands of clients nationwide & worldwide in all aspects of IRS offshore & voluntary disclosure and compliance during his 20-year career as an Attorney.

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.
International Tax Lawyers - Golding & Golding, A PLC

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