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FBAR Non-Willful Penalties Are Real



DARLENE HART

While there has been no official change to the current FBAR penalty rules we laid out in 2015, it should be noted there was a recent court case which has reached an unfavorable result for FBAR Penaltiestaxpayers with regard to potential FBAR non-willful penalties.

In an April 2019 California District Court case (U.S. vs Boyd), the court ruled that while the penalty rules for non-willful failure to comply with FBAR reporting requirements are ambiguous, it agreed with the IRS that it is more appropriate to impose the penalty ($10,000 max for the years dealt with in the Boyd case) on unreported accounts, on an account by account basis rather than per a calendar year penalty. So, rather than a maximum $10,000 penalty for all unreported accounts in a given year, in Boyd, the taxpayer was assessed a $10,000 per account penalty per year of non-compliance.

It should be noted in cases where there is a joint account that was required to be reported on separate FBAR forms, assuming both taxpayers were noncompliant, they IRS can assess a penalty on each taxpayer’s compliance failure, doubling the penalty on a single account.

Of course, this was a decision by a district court, which is the lowest level of courts and therefore, it may not represent what the final outcome may be. However, it does highlight the potential aggressive position of the IRS and just how high the penalties can be.

Have questions? Contact Darlene Hart.

One thought on “FBAR Non-Willful Penalties Are Real

  1. Thanks very much for this post – one more in the history of FBAR penalties. I think it’s worth noting that the victim in this case had (1) entered the OVDP and (2) subsequently opted out. By entering into the OVDP in the first place the individual essentially was informing the IRS that he/she was guilty of significant misconduct. Although this should not change the situation logically it does change the situation contextually. I suspect that this was part of the “sub-text” to this rather unfair and draconian decision. See the full text of the decision here:

    https://src.bna.com/HBe

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