U.S. Citizens who have a financial interest in or signature authority over foreign bank accounts…
IRS FBAR Penalties Are Now Unmitigated
The Internal Revenue Service will no longer reduce the penalty for taxpayers who non willfully fail to file Reports of Foreign Bank and Financial Accounts (FBAR or FinCen 114), according to recent Internal Revenue Service (IRS) internal guidance.
The IRS will no longer routinely reduce the penalty for non-willful failure to file Reports of Foreign Bank and Financial Accounts (FBAR) following a major Supreme Court decision. The news is probably a result of the recent Supreme Court ruling in Bittner, whereby the RS is limited in the amount of non-willful penalties that it can issue (from per account(s) to per year).
The maximum penalty typically will be a $10,000 penalty per year. These references are specifically to non-willful penalties and do not refer to willfulness, in which the penalty is still 50% of the maximum value for each unreported account per year.
While the IRS can no longer attempt to apply FBAR fines by account instead of by annual form, it is eliminating its pre-existing mitigation provisions for future non-willful violations.
The IRS had regulatory procedures for reducing fines for smaller accounts, provided the violations were non-willful. The new IRS guidance states it “should no longer be considered in calculating penalties for non-willful violations.”
In most cases now, the penalties will not be mitigated (decreased) and will be the maximum permitted under law. It is now more important than ever to ensure US persons are fully FBAR compliant.
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