What are FBAR late-filing penalties?
With the FBAR (Form TD F 90-22.1) due on June 30th, many would-be filers are panicked about what the penalties there are for a late-filed FBAR forms. The great news is that there is no such penalty for filing an FBAR late. The bad news, is that the penalties for not filing an FBAR can be some of the most draconian penalties in world.
Confused? Hopefully this article can help you through the strange rules of foreign bank account reporting with the IRS and US Treasury.
The FBAR is not part of the tax code: 131 USC § 5321 civil penalties
The first thing to understand is that the FBAR is not part of the tax code. That’s right. As we mentioned in our FBAR webinar (now on replay) the US tax code is located in Title 26 of the US code. Meanwhile, the FBAR stems from the Bank Secrecy Act of 1970 which is located in Title 31. So all the IRS penalties for late filing of tax forms do not apply; we must look to Title 31 to see what late filing, more specifically, 31 USC 5321 to see what the penalties are for filing an FBAR late.
And what do we find in Title 31? for late FBAR penalties?
The relevant section of 131 USC § 5321 of the is at the end of this article.
So then what is the big deal about FBAR penalties?
The big deal is that there are massive penalties for not filing FBARs. And that because there is a due date, June 30th, we suppose any FBAR form filed one day late could be subject to the penalty scheme above.
This is unlike the penalties for tax returns. For tax returns, there is both a penalty for not filing (Section 6651), and a penalty for late-filing (if a tax was due).
So what are your risks for a late-filed FBAR?
There is so much to this, we strong recommend that you watch our FBAR webinar that is now on reply: Go right here to sign up. FBAR Attorney Amy Holbrook and I really get into the history, and the context of the FBAR form so that you have the information to take whatever action is necessary to to put your fears to rest.
And remember, FBARs are due in on June 30th, not postmarked June 30th
Here is an article on FBAR filing requirements. And also, if you want to file your FBAR online, this is a valuable new tool FinCEN has. It has made our own FBAR filing season the smoothest it has even been even though we have exponentially more offshore clients than we have had in the past.
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Relevant section of 131 USC § 5321
(5) Foreign financial agency transaction violation.—
(A) Penalty authorized.— The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.
(B) Amount of penalty.—
(i) In general.— Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.
(ii) Reasonable cause exception.— No penalty shall be imposed under subparagraph (A) with respect to any violation if—
(I) such violation was due to reasonable cause, and
(II) the amount of the transaction or the balance in the account at the time of the transaction was properly reported.
(C) Willful violations.— In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314—
(i) the maximum penalty under subparagraph (B)(i) shall be increased to the greater of—
(I) $100,000, or
(II) 50 percent of the amount determined under subparagraph (D), and
(ii) subparagraph (B)(ii) shall not apply.
(D) Amount.— The amount determined under this subparagraph is—
(i) in the case of a violation involving a transaction, the amount of the transaction, or
(ii) in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.