Missed Prior Year FBAR Filing (IRS Summary 2020)
Missed Prior Year FBAR Filing: When a U.S. person missed a prior year FBAR filing, they have many IRS options to available to resolve the issue. Otherwise, the filer may become subject to offshore Penalties for FBAR violations, in addition to various other penalties. The IRS has very strict deadlines when it comes to filing the FBAR. In 2017, the IRS updated the FBAR (FinCEN Form 114) due date to coincide with your tax return. If a person misses the FBAR reporting due date, the IRS may issue fines and penalties. The penalties can range from the relative benign (warning letter) all the way up to willful civil and criminal penalties. These penalties may be reduced, avoided or abated with FBAR Amnesty, And, as of 2019, the FBAR is on automatic extension.
Missed Prior Year FBAR Filing
If you have missed a prior year FBAR filing (or multiple FBARs) you should consider your compliance options.The IRS has procedures for filers who miss the deadline for filing FBAR. The IRS has developed several Amnesty Programs. The programs allow U.S. Account Holder to use FBAR Filing procedures in order to file FBAR for previous years. The programs go by many names, including: FBAR Amnesty, Streamlined Filing, FATCA Amnesty, IRS Voluntary Disclosure, and IRS Tax Amnesty.
Penalties for Not Reporting Foreign Accounts?
Penalties can be broken down into 4 categories:
- Willful FBAR
- Non-Willful FBAR
- Civil FBAR
- Criminal FBAR
Civil Foreign Account Violations
Not all FBAR Penalties are the same. Sometimes, the IRS penalties for unfiled or untimely 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 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|
Fines for Civil FBAR can be Broken down into two (2) categories:
- Willful FBAR Penalties
- Non-Willful FBAR Penalties
Criminal Foreign Account Violations
Criminal FBAR Violations 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
Common Q&A About Missing Prior FBAR Filings
Here are some more of the common questions we receive about FBAR Penalties.
Are there Penalties for Missing the FBAR Filing Date?
Technically, there is no “missed filing penalty.’ Rather, the IRS can penalize you for not filing the FBAR at the time it is due. In other words, unless you submit using one of the programs. Each program has its own associated FBAR penalty structure or waiver.
How does Foreign Account 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.
Golding & Golding (Board-Certified Tax Lawyer Specialist)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
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We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
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Recent Golding & Golding Case Highlights
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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.