Streamlined FBAR – Offshore Accounts | IRS Streamlined FBAR (Golding & Golding)

Streamlined FBAR – Offshore Accounts | IRS Streamlined FBAR (Golding & Golding)

What is the FBAR Penalty for Streamlined

FBAR Streamlined Penalty:The FBAR Streamlined Penalty is 5% of the penalty base. The IRS developed the stand-alone streamlined procedure back in 2014. When a person qualifies as a U.S. person (and non-willful) , they qualify for the streamlined domestic offshore procedures. The procedures help taxpayers get into foreign accounts compliance, and side-step more aggressive penalties. The streamlined procedures are part of the bigger amnesty procedures, referred to as offshore voluntary disclosure.

Streamlined Offshore Penalty Framework

The Streamlined FBAR penalty refers to the Title 26 Miscellaneous Penalty portion of the Streamlined Domestic Offshore Procedures. That is because the Streamlined Domestic Offshore Procedures (SDOP) requires the payment of a 5% penalty, on the highest year-end, annual aggregate total balance within the 6-years compliance period (discussed below).

What is an FBAR?

FBAR is the Report of Foreign bank and Financial Account form. It is one of the most common IRS international tax forms, because it has a relatively low threshold requirement, and is a very broad form, encompassing many different types of foreign accounts.

Important FBAR Definitions

Foreign

Outside of the United States. No same-country exception for reporting.

Account

Account includes much more than just “Bank Accounts.” See below for an expanded summary.

Reporting

Means the filing of the FBAR form, online on the FinCEN website.

FBAR

Report of Foreign Bank and Financial Account Form.

TD 90.22-1

TD stands for Treasury Department and is another way to identify the form.

FinCEN Form 114

FinCEN is a financial crimes enforcement network. FinCEN created the form initially back in the 1970s, but now the IRS enforces penalties.

BSA

The Bank Secrecy Act

What is an FBAR Penalty?

When a person fails to properly file an annual FBAR statement, and the IRS discovers or uncovers the non-filing, the U.S. Government has the right to penalize the individual for failing to properly file the 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.

Golding & Golding is an International Tax Law Firm. Our Team is led by a Board Certified Tax Lawyer Specialist, and our FBAR Lawyers have worked with thousands of clients.

Civil FBAR Penalties

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 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

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 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:

Additional Questions we Receive about FBAR Penalties

Here are some more of the common questions we receive about FBAR Penalties.

FBAR Penalties 2018 & FBAR Penalties 2019

There has been increased enforcement, with three very important updates:

  • Courts are holding that willful penalties are not limited to $100,000 per year.
  • Courts are holding that non-willful penalties are not limited to $10,000 per year; and
  • There has been an increase in willful penalties and criminal investigations.

What is the FBAR Late Filing Penalty?

Technically, there is no “late filing penalty.’ Rather, the IRS can penalize you for not filing the FBAR at the time it is due. In other words, it is not a “Late Filing Penalty,” because you cannot file the FBAR late, unless you submit using one of the programs. Each program has its own associated FBAR penalty structure or waiver.

How does FBAR 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.

 

Comments are closed