FBAR penalties

What triggers this penalty

• Failing to file an FBAR when a U.S. person meets the foreign account reporting requirements.
• Omitting reportable accounts or providing inaccurate information.
• Missing reporting for covered signature authority even when the taxpayer does not own the funds.

Potential amount

• Non-willful civil penalties are subject to an inflation-adjusted maximum; under the Supreme Court’s Bittner decision, the non-willful reporting violation is generally measured per annual report, not per account.
• Willful civil penalties can be based on the greater of an inflation-adjusted statutory dollar amount or 50% of the account balance at the time of the violation.
• The applicable limits depend on the relevant adjustment rules and assessment timing; do not use an old dollar cap or assume every omitted account produces the same penalty.

Common situations

• A U.S. resident has foreign bank accounts but has never filed an FBAR.
• A taxpayer reports foreign interest on Form 1040 but omits the separate FBAR.
• A business officer overlooks reportable signature authority over a foreign account.

FBAR is not an income tax return

FBAR is filed electronically with FinCEN, separately from an income tax return. The general filing threshold is more than $10,000 in aggregate foreign financial account value at any time during the calendar year. Reporting income or filing Form 8938 does not replace it.

Willfulness needs careful legal analysis

Willfulness is not limited to an admission that someone deliberately hid an account; civil cases may involve recklessness. Do not assume that a lack of tax due proves non-willfulness. Where intentional conduct or criminal exposure may be involved, obtain legal advice before making statements or choosing a disclosure route.

Choose a correction route before filing

Delinquent FBAR procedures and streamlined procedures have different eligibility conditions. Prior IRS contact, unreported income and conduct can affect available options. A late filing alone does not guarantee protection from penalties, so coordinate account reporting with any required income tax corrections and retain the supporting records.

What to do after receiving a notice

• Read every page of the notice, identify the form, tax period and legal basis, and record the response deadline immediately. Do not ignore the notice while you investigate whether the assessment is correct.
• Gather the filed return, attachments, extension requests, delivery confirmations and correspondence. Compare the IRS calculation with your records before accepting the amount or disputing it; a filing error and an IRS processing error require different explanations.
• Respond through the address or method stated in the notice, keep a complete copy and proof of timely delivery, and review any appeal rights. Do not assume that a telephone call or a pending relief request suspends another deadline.

Is penalty relief available?

• Relief may be available depending on the facts. Identify the specific penalty and the applicable relief standard before choosing a procedure; eligibility for one type of relief does not establish eligibility for another.
• If reasonable cause is relevant, prepare a truthful, dated account of what prevented compliance, what steps you took to comply, and how quickly you corrected the problem. Support the explanation with records rather than a generic claim that you did not know the rule.
• Chirino USA can review the filing history, notice and supporting evidence to help evaluate correction and response options. Filing the missing information does not itself cancel an assessed penalty or guarantee that the IRS will accept a relief request.