It should come as no surprise that the IRS has authority to assess FBAR civil penalties. However, what might come as a surprise is that an FBAR violation doesn’t automatically mean that a penalty will be asserted. Why not? Examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted. For example, the examiner may determine that the facts do not justify asserting a penalty. In that case, the examiner will issue an FBAR warning letter, Letter 3800.

According to IRM 4.26.16.4, the sole purpose of the FBAR penalty is to promote compliance with the FBAR reporting and recordkeeping requirements. In exercising their discretion, examiners should consider whether issuing a warning letter and securing delinquent Read More