Missing any deadline is stressful. But missing a tax deadline is more so. Per the Bank Secrecy Act (Title 31 of the U.S. Code), certain taxpayers must file so-called FBARs (currently FinCEN Form 114)[i] with the government each year if they meet the filing requirements. Taxpayers who fail to file a timely and proper FBAR can be held liable for significant civil penalties. However, there are options to regain compliance, provided the taxpayer meets certain eligibility requirements and acts before the IRS discovers the non-filing.
When is the FBAR Filing Deadline?
Generally, as it stands now, the FBAR filing deadline is October 15 of the year after the year in which a taxpayer meets the following requirements:[ii] (1) the taxpayer is a U.S. citizen; (2) the taxpayer had a financial account or accounts during the tax year; (3) the financial account is located in a foreign country; (4) the taxpayer had a financial interest in the account or signature or other specified authority over the financial account; and (5) the aggregate amount of the value of the account or accounts in U.S. dollars exceeded $10,000 at any point during the calendar year. If a taxpayer meets all of these requirements, subject to some exceptions, the taxpayer must timely and properly file an FBAR with FinCEN (i.e., the FBAR is not filed with an income tax return).
Prior to the 2016 tax year, the FBAR was required to be filed on or before June 30 of the year following the calendar year at issue. However, starting with the 2016 tax year, the FBAR filing deadline was moved to April 15, with an automatic 6-month extension until October 15 available.[iii] But in late 2016, FinCEN announced that extension for FBARs would be granted automatically without any required extension form.[iv] In certain instances, FinCEN has extended the date further for certain taxpayers, such as those impacted by natural disasters including hurricanes.
Are There Penalties for Filing the FBAR Late?
Regrettably, there can be significant civil penalties imposed for the late filing of an FBAR. The amount of the civil penalty generally depends on whether the late filing was willful or non-willful. For willful penalties, the IRS may assess by statute up to 50% of the account balance in the foreign account or $100,000 (adjusted for inflation), whichever is greater. So, for example, if a taxpayer had $500,000 in a foreign account located in France and failed to timely file an FBAR reporting such amount, the IRS could seek to impose willful FBAR penalties of $250,000—if the conduct was willful. Taxpayers should be aware that the term willful is a bit of a misnomer. It includes both intentional non-filing and also certain reckless behavior resulting in the non-filing.
Conversely, if the late filing was non-willful, the penalties are generally much lower. Specifically, the IRS may impose non-willful FBAR penalties in the amount of $10,000 (also adjusted for inflation) “per violation,” the latter of which is an issue currently before the United States Supreme Court. The IRS currently takes the position that “per violation” means per bank account, per year.
Does the IRS Offer Any Amnesty Programs for Filing a Late FBAR?
There are numerous programs offered by the IRS to regain compliance with late or non-filed FBARs and other tax issues. These include: (1) the Voluntary Disclosure Program; (2) the IRS Streamlined Filing Compliance Procedures; and (3) the IRS Delinquent FBAR Submission Procedures. Prior to entering into any of these IRS programs, taxpayers should consult with a tax professional who has experience with each program. Each program is different and comes with its own benefits and risks.
Freeman Law’s tax attorneys have significant experience with each one of these IRS programs, and we have represented clients throughout the United States and, in fact, the globe. We have also provided countless presentations to tax professionals across the United States on these various programs; some of our more widely-circulated articles include:
- U.S. Government Continues to Crack Down on Unreported Offshore Bank Accounts, Forbes
- A Primer on the IRS’s New Voluntary Disclosure Practice: A Taxpayer’s Secret Weapon, Cover Story of Today’s CPA, January and February 2021 Edition.
- The IRS’s Voluntary Disclosure Practice (VDP): IRS Revises Form 14457, JD Supra (Feb. 17, 2022).
- Flint Demonstrates the Risks in Trying to Make a Willful IRS Streamlined Filing Non-Willfull, Mondaq (Sept. 1, 2022).
- IRS Goes After Holocaust Survivor for Willful FBAR Penalty, JD Supra (Mar. 15, 2022).
If you have FBAR questions, please contact the writer or another attorney at Freeman Law, PLLC for a free consultation. Our tax attorneys have been named to U.S. News and World Report’s Best Lawyer’s in America, have been recognized by Chambers & Partners as among the leading tax and litigation attorneys in the United States, and have been recognized as “Leading Tax Controversy Litigation Attorney of the Year” by the State of Texas. Our attorneys also include a former IRS trial attorney, a former law clerk to the Chief Judge of the United States Tax Court, dual-credentialed attorneys/CPAs, tax law professors, and attorneys with advanced LL.M. tax degrees from prestigious tax programs including N.Y.U.
FBAR Penalty Defense Attorneys
FBAR penalty defense requires a proactive representation and a deep knowledge of the nuances of FBAR compliance and its defenses. Freeman Law represents clients with offshore tax compliance disputes involving FBAR penalties and international information return penalties. Failing to file an FBAR can give rise to significant penalties, including a non-willful penalty and willful FBAR penalty. The risks of tax and reporting non-compliance have never been more real and the threat of international penalties, particularly FBAR penalties, has never been more clear. Schedule a consultation or call (214) 984-3000 to discuss your FBAR penalty concerns or questions.
[i] Prior to January 2014, the appropriate FBAR form was TD F 90-22.1.
[ii] Prior to the 2016 tax year, the FBAR was required to be filed on or before June 30 of the year following the calendar year at issue. However, starting with the 2016 tax year, the FBAR filing deadline was moved to April 15, with an automatic 6-month extension until October 15 available. Pub. L. No. 114-41, § 2006(b)(11). In late 2016, FinCEN announced that extensions for FBAR would be granted automatically. FinCEN, New Due Date for FBARs (Dec. 16, 2016). In certain instances, FinCEN has granted further extensions of time to file the FBAR—for example, if the taxpayer is the victim of a natural disaster such as a hurricane.
[iii] Pub. L. No. 114-41, § 2006(b)(11).
[iv] FinCEN, New Due Date for FBARs (Dec. 16, 2016).
