How Can FBAR Non-Willful Penalties Reach into the Multi-Millions?
If you do not file the FBAR timely, you may end up in trouble with the U.S. Government.
We can help.
Multi-Million FBAR Non-Willful Penalty
In a recent case, the IRS hit a Taxpayer, with $3M in non-willful FBAR penalties.
While this is an anomaly (and beyond absurd) — one important question, is simply “how” can the IRS do this, especially in light of the fact that Taxpayer owed less than $1,000 in tax?
Non-Willfulness and the FBAR
When a person is non-willful, they may be subject to non-willful FBAR Penalties.
For purposes of this exercise, we will presume that Taxpayer is non-willful. If you want to review the differences between willful vs. non-willful, we have many other resources available on our website.
There are 4 types of non-willful FBAR penalties:
- Penalty Waiver
- One $10,000 Penalty for the total non-compliance
- One $10,000 Penalty per year, for the non-compliance period
- One $10,000 Penalty per account, per year, for the non-compliance period
*For reference, the FBAR penalty increases incrementally for inflation. The current penalty is +$12,000. The maximum penalty for a willful failure to report has increased to +$129,200.
$10,000 Per Account, Per Year is Not Common
Generally, presuming a person does not qualify for a waiver (or other mitigating factors) — and had not submitted to the Streamlined Program or a successful Reasonable Cause submission– the non-willful FBAR Penalty will fall into category 2 or 3 above — with the total non-willful FBAR penalty usually averaging between $10,000 – $60,000.
Multi-Million Dollar Non-Willful FBAR Penalty?
A $3MM Non-Willful FBAR penalty is ludicrous — and demonstrates the importance of making a timely voluntary disclosure using tax amnesty.
Of special note is that in this case Taxpayer had upwards of 50 accounts per year. Therefore, if he was hit with a $10,000 penalty, per account, per year, that would reach in the vicinity of $50,000 per year.
When multiplied by 6 Years, that is roughly $3M dollars.
While this is not common, it is plausible under the FBAR non-willful rules and regulations.
Importance of Tax Amnesty
If the IRS finds a Taxpayer before the Taxpayer has a chance to submit to Voluntary Disclosure/Tax Amnesty, the follwing may occur:
- The IRS gets wind of peters situation and issues in audit/examination notice. As a result, Taxpayer is disqualified from submitting to IRS tax amnesty/voluntary disclosure.
- The IRS launches a special agent investigation to dig deeper into Taxpayer’s finances.
- The IRS refers the matter to the Department of Justice for its own investigation.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.