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Updated Foreign Bank and Financial Accounts Report (FBAR) Penalties

May 5, 2020
Weisberg Kainen Mark, PL

Any U.S. person who has an interest in or some type of authority over a foreign financial account or accounts worth $10,000 or more at any point during a calendar year must submit an FBAR to the U.S. Treasury Department. Specifically, you must send it to the department’s Financial Crimes Enforcement Network (FinCEN). This program is aimed at reducing tax evasion and includes foreign accounts owned by non-citizens and business entities that were formed in the U.S.

If you are already aware of this rule, you should be aware of the new penalty amount that applies to any FBAR-associated penalties incurred on or after Feb. 19, 2020. This new amount, as with other increases, are set in accordance with inflation. 

Civil Penalties for Non-Willful Violations

The first tier of penalties applies to violations of the FBAR program that are not willful in nature. The IRS, unfortunately, does not have a concrete definition of what constitutes willful and non-willful violations. By and large, a violation is considered non-willful if the offender was unaware of the FBAR requirement based on the specific facts of his or her case. Aspects of your particular case that can impact whether you are designated as a willful or non-willful violator include:

  • The number of years you have been filing tax returns with the IRS
  • The types of foreign financial accounts you have, and how long you have had them
  • Whether or not you have other unreported income
  • Whether or not you used tax professionals to file your taxes

If you are found to have non-willfully violated the FBAR procedures on or after Feb. 19 of this year, the most you will be penalized is now $13,481.  Prior to the increase, the non-will penalty was up to $10,000.

Civil Penalties for Willful Violations

FinCEN takes willful violations of the FBAR program much more seriously, and this is reflected in the penalty amount. The willful penalty for an FBAR violation was previously the greater of 50% of the highest value in the foreign account in the calendar year or $100,000.  Adjusted for inflation, the minimum amount for a willful FBAR violation is now $134,806. Again, whether you are recognized as a willful or non-willful FBAR violator will heavily depend on the specific facts and circumstances of your case. Notably, willful does not always mean that you knew exactly what is required of you but declined to stay in compliance. Sometimes, it can simply mean that you acted with “reckless disregard” in not filing an FBAR. 

Conclusion

Though much of the world’s activities have been disrupted, your FBAR is still required for 2019. You may be able to wait until Oct. 15, 2020 to file your FBAR; otherwise, you can speak with Weisberg Kainen Mark to see how we can help you get back in compliance with the IRS. Call us today at 305-374-5544 to discuss your options with us.

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Weisberg Kainen Mark, PL

As experienced trial lawyers with a passion for justice, our firm provides clients with compelling advocacy, attorney availability, and creative solutions to your tax or criminal law matters.

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