FBAR Streamlined Penalty
FBAR Streamlined Penalty: In International Tax, “Streamlined” refers to the Streamlined Filing Compliance Procedures. When a Taxpayer submits to the Streamlined Domestic Offshore Program, they have to pay a 5% penalty (aka Title 26 Miscellaneous Offshore Penalty) In general, the procedures help taxpayers who are non-willful (and meet other requirements as well) to safely 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).
Golding & Golding Streamlined FBAR Penalty Example
The following is an example developed by Golding & Golding to help bring some clarity to FBAR penalties and Streamlined. Note: Other reportable assets beyond the FBAR are also included in the penalty computation.
Form 14654 Penalty Example How to Calculate Practice Pointer Step 1: Evaluate your Accounts & Assets There are many different accounts and assets that may be included in the computation. Two of the most common are assets and accounts involving FATCA (Foreign Account Tax Compliance Act) and FBAR (Report of Foreign Bank and Financial Account Form) *Some assets and accounts may be excluded from the penalty-base. Be sure your foreign assets and accounts are not excluded from the penalty base Step 2: Compile 12/31 Year-End Balances Compile the 12/31 balances on your Foreign Accounts, Insurance Policies and other 8938/FBAR qualified accounts for each year within the compliance period. The use of the December 31st helps avoid double-counting Step 3: Select an annual exchange rate Determine the proper exchange rate for each year. There are various exchange rates you can use, such as the IRS exchange rates and Department of Treasury exchange rates. Practice Pointer: Stay consistent with the source of exchange rates you used. Step 4: Aggregate the 12/31 balances Total the 12/31 balances on your previously unreported Foreign Accounts, Insurance Policies and other 8938/FBAR qualified accounts (Value of Real Estate is not included for the Streamlined Program). Be sure to only include accounts and assets that comprise the penalty base. Step 5: Select the highest 12/31 aggregate balance Pick the one-year that has the highest 12/31 balance (not highest max year balance, which is the standard for Traditional Voluntary Disclosure). The 5% Penalty is not on every year -- just the highest year. Step 6: Multiply the aggregate balance by 5% Example: Michael's highest year 12/31 aggregate balance in the six (6) year compliance period is 2017. In 2017 his 12/31 balances totaled $2,600,000. His penalty would be $130,000. Multiple by .05 -- not .50
Recent FBAR Penalty Updates
- 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: About our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.