Our firm has written extensively on FBAR penalties. For example, see here, here, here, and here. As a quick summary, Title 31 of the United States Code authorizes the United States to impose civil penalties against taxpayers who fail to properly disclose their interests in foreign accounts and certain foreign assets on a timely filed FBAR. The amount of the penalty depends on whether the conduct at issue was “willful” or “non-willful,” with willful penalties being the harshest—i.e., up to 50% of the highest account balances of the foreign accounts that were not properly disclosed for each year of the non-disclosure.
Without doubt, FBAR penalties, particularly those due to willful conduct, are extremely harsh and punitive in nature. Thus, I am not surprised when clients ask me from time to time what could happen after the United States obtains a lawful judgment for the FBAR penalties against them? The simple answer: if payment or payment arrangements are not made, the United States will use all of its expansive resources to collect the penalty through involuntary means, such as seizures of property, garnishment, and other methods.
Indeed, the recent decision in Schwarzbaum shows just how far the United States will go to collect on an FBAR penalty judgment against a taxpayer.