As a general matter, the FBAR is not a difficult tax form to prepare, at least for most taxpayers and their tax professionals. At its very basics, it merely asks for identifying information regarding the taxpayer and certain basic information regarding foreign accounts held outside the United States. Thus, one would suspect that the failure to timely file this seemingly innocuous information return should not result in significant penalties.
However, tax professionals know better. Under Title 31, a taxpayer’s willful failure to file a timely and accurate FBAR can result in penalties of up to 50% of the foreign account balances, a penalty that can be applied over multiple years. And because federal courts and the IRS view certain reckless behavior as constituting “willfulness,” the bar for willful FBAR penalties can be a seemingly low one.