IRS examiners have discretion when assessing both willful and non-willful FBAR penalties. You could receive higher or lower FBAR penalties depending on the specific facts and circumstances of your case.
Key Insights We Will Discuss:
- The general penalty assessed for willful and non-willful FBAR violations.
- Facts that could increase or decrease your penalty assessment.
- How the mitigation guidelines are used o lower FBAR penalties.
Non-Willful FBAR Penalties
The maximum non-willful FBAR penalty is $10,000. But what if you have multiple account and multiple years of FBAR violations? Does each account and violation receive a separate penalty assessment?
It depends. The Internal Revenue Manual (IRM) states that examiners should recommend only one penalty per year, regardless of the number of unreported accounts “in most cases.” However, the examiner still has the discretion to assert a separate penalty for each unreported account.
A similar standard applies when there are several years of violations. The examiner has the discretion to assess one penalty or a separate penalty for each year, but the maximum penalty can’t exceed 50% of the highest aggregate account balance during the years under examination.
Willful FBAR Violations
The maximum penalty for willful FBAR violations is up to $100,000 or 50% of the highest aggregate account balance. Once again, the examiner has discretion to recommend a separate penalty for each year. However, the maximum penalty for all years can’t exceed 100% of the highest aggregate account balance during the years under examination.
The mitigation guidelines should be used for both willful and non-willful penalties. You must meet four threshold conditions to qualify for the mitigation guidelines:
- You must have no history of criminal tax or Bank Secrecy Act violations in the past ten years and no previous FBAR penalty assessments.
- None of the money in your foreign accounts was used for a criminal purpose or from an illegal source.
- The IRS did not assess a civil fraud penalty against you for an underpayment related to income in the foreign accounts.
If you meet all of these conditions, your penalties could be significantly reduced. Lower penalty amounts are assigned in tiers based on the amount of money in the foreign accounts.
Contact an Attorney
Get help with FBAR penalties by calling Ayar Law at 800-571-7175 to get free, no-obligation tax advice from a tax attorney.
– Non-willful FBAR penalties can be up to $10,000 per violation and willful FBAR penalties can be up to $100,000 or 50% of your foreign account balance.
– IRS examiners have discretion to assess higher or lower penalties depending on many different factors, including your past history of tax compliance and your cooperation during the examination process
– Contact Ayar Law to get free, no-obligation tax advice at 800.571.7175