The new mandatory e-filing for all FBARs, including late FBARs, just came into effect yesterday, July 1.  One question that arises is whether penalties may be automatically generated by the computer?

The BSA E-Filing agency has stated it cannot discuss policies about penalties.  As my blog followers are well aware, penalties can be charged whenever an FBAR is filed late (negligent failures can attract a penalty of $10,000 per account that should have been listed on the FBAR, per year). However if there is “reasonable cause” for late filing, such penalties may be waived.  It would follow that if penalties were automatically assessed by the computer, then common sense indicates they should be cancelled upon a proper showing of “reasonable cause”. The electronic filing system does not ask why an FBAR is being filed late.  It seems that now practitioners are concerned there may be a considerable risk that “the computer” might generate penalties automatically even when there is “reasonable cause” for the late filing. No one knows what will happen. We have to let time go by and wait to see the policy the BSA will ultimately adopt.

Currently the e-filing system does not support the capacity to attach a letter or statement explaining why the FBAR is being filed late. This capacity may become active later on. The BSA agent I spoke to said they are advising taxpayers to keep all supporting documentation on file because normally the IRS will come back to the taxpayer and ask for it.  Read More