
FBAR penalty procedures under Title 31 are similar to federal tax penalty procedures under Title 26. Under both Title 31 and Title 26, the IRS must make a timely assessment of the penalty prior to initiating collection action. However, the two procedures diverge somewhat with respect to collection remedies available to the government. This article discusses FBAR penalty collection procedures and provides some insights on issues that tax professionals should consider when representing taxpayers who have FBAR penalty assessments.
FBAR Collection Procedures
Prior to beginning a discussion of the FBAR collection procedures, it is important to remember that the IRS has six (6) years to make a timely FBAR assessment. This six-year period begins on the date in which the FBAR should have been filed and runs regardless of whether an FBAR has been filed at all.
Because FBAR penalties are located in Title 31, provisions therein govern collection. Under Title 31, the government may collect FBAR penalty assessments through various means including: (i) administrative (or tax refund) offset (collectively, “administrative offset”); (ii) wage garnishment; and/or (iii) litigation.[i]
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