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.