FBAR Penalty Assessment and Enforcement

 

Patrick J. McCormickK&D associate, Patrick J. McCormick, authored the below article, “FBAR Penalty Assessment and Enforcement“. This article, published here with permission, will appear in the July 2017 issue of the Journal of International Taxation (Thomson Reuters/Checkpoint). Mr. McCormick specializes in the areas of international tax and tax compliance.

 

Introduction

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FBARFor a number of years, offshore disclosures have been a point of heightened emphasis by the Service, with significant penalties assessable for failures to comply with relevant requirements. In the offshore realm, the source of greatest consternation from a penalty perspective is FinCEN Form 114, more commonly referenced as the FBAR. Willful failures to file the FBAR can statutorily cause assessment of an annual penalty of $100,000 or 50% of the total balance of the foreign account per violation, whichever is greater. Nonwillful failures to file carry a penalty of $10,000 per violation under statute.

For both willful and nonwillful failures, a six-year statute of limitations exists for assessments based on failures to file required FBARS. Fear of these penalties (and others assessable for failures to meet requirements related to international holdings) has spurred tens of thousands of United States persons to make voluntary disclosures with the Service, with over $10 billion of revenue raised by the programs to date.