A failure to file FBARs and Form 8938 can result in numerous civil tax penalties. Criminal penalties are also a possibility, which could result in jail time.
FBAR Civil Penalties
The FBAR civil penalties have two tiers, depending on whether your conduct was willful or non-willful:
- Willful penalties can result in a penalty of $100,000 or 50% of the aggregate foreign account balance
- Non-willful penalties can result in a penalty of up to $10,000 per violation
These penalties can be assessed for each account and for each year a FBAR should have been filed, but wasn’t. So a taxpayer with 5 foreign accounts and 5 years of unfiled FBARs could have 25 FBAR violations. In practice, examiners may recommend only one penalty per year and may even recommend a single penalty for multiple years of violations.
FBAR Criminal Penalties
Criminal FBAR penalties are even more severe. The criminal penalty for a willful failure-to-file an FBAR is up to $250,000 in fines and/or 5 years in prison.
If you willfully failed to file an FBAR while violating another U.S. law or as a pattern of illegal activity involving more than $100,000 in a 12 month period, you could face up to $500,000 in fines and/or up to ten years in jail.
Taxpayers who are concerned about criminal FBAR penalties should learn more about the new Offshore Disclosure Program.
Penalties for Failing to File Form 8938
If you failed to file your FBARs, you may have also failed to file Form 8938. The reporting requirements are slightly different, so it’s possible you weren’t required to file Form 8938 even if you had an FBAR filing requirement for your foreign bank accounts.
The penalty for failing to file Form 8938 starts at $10,000. If the IRS notifies you of your non-compliance and you still don’t file this form, you can be charged an additional $10,000 for each 30-day period, up to a maximum of $60,000.
You could also face other penalties if you failed to report foreign income and pay taxes on it. Undisclosed foreign accounts expose you to the risk of severe civil tax penalties and possibly criminal penalties. Contact a tax attorney to discuss the best risk management strategy for your foreign accounts.
Contact an Attorney
Talk to an IRS tax resolution attorney about getting into foreign account tax compliance by calling Ayar Law at 800.571.7175 today. We offer free, no-obligation tax advice.
Executive Summary:
- Failure to file FBARs and Form 8938 can result in civil and/or criminal penalties
- FBAR civil penalties have two tiers, depending on whether conduct was willful or non-willful
- Willful penalties can amount to $100,000 or 50% of the aggregate foreign balance
- Non-willful penalties can result in a penalty of $10,000 per violation
- Criminal FBAR penalties are even more severe
- Penalty for willful violations is up to $250,000 in fines and/or 5 years in prison
- Willfully neglecting to file an FBAR while violating another U.S. law or pattern of illegal activity involving more than $100,000 in a 12-month period could result in up to $500,000 in fines and/or up to ten years in jail
- The Offshore Disclosure Program could help those taxpayers involved in criminal FBAR penalties
- Failure to file Form 8938 results in penalties starting at $10,000
- Contact an attorney if you need to get in compliance with foreign account taxes
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