$100,000 or 50% of the Balance: Why You Should Take Your FBAR Filing Seriously

receiving a tax auditThe filing date for the Foreign Bank and Financial Accounts (FBAR) report is coming right up.  While filing on time allows you to fulfill your responsibilities as an American taxpayer, it also helps you avoid the sizeable penalties you can incur for failure to file.


A United States person, or entity that owns or has part ownership in an offshore tax interest or other foreign account that is valued at or over $10,000 US at any time during a calendar year, must file an FBAR.  It is important to remember that the FBAR requirement is triggered “at any time” that an account reaches or exceeds the magic $10,000 mark—not just at the end of the reporting year.


Penalties for failing to file an FBAR are adjusted upward each year due to inflation.  At present, the civil penalty for a non-willful, or accidental failure to file your FBAR is a $10,000.  If the IRS is able to prove you did not file your FBAR on purpose, the penalty can be as high as 50 percent of the asset or account that was not reported—or $100,000—whichever is the higher value figure. 


The FBAR is not a new compliance tool—it has been around for decades.  In recent years, the IRS has turned up the heat, and the penalties, for individuals who fail to take the requirement seriously.  While taxpayers in the past may have successfully argued they failed to file the regulatory report accidentally, the IRS is now racking up wins against taxpayers for willful violation of FBAR rules.


As the IRS continues to scrape along on a diminishing budget, higher ticket matters, such as forfeiture of offshore monies, become a more lucrative area of interest for the IRS. Because the IRS has conducted information campaigns and been lenient for years with taxpayers unaware of the FBAR rule, time has run out on the easy excuses for non-filing.


For those who are notified by an IRS agent that they are subject to a fine for willfully failing to file their FBAR, speak with a tax attorney experienced with IRS civil tax audits and criminal tax investigations.  You, or your attorney, can request a copy of your administrative file for review before deciding whether to pursue an appeal with the IRS Office of Appeals.


With courts continuing to support federal FBAR penalties, the Appeals Office may be less inclined to overturn IRS findings on penalties.  Instead of planning on what you can do in the event you are flagged on your FBAR status, make sure you are compliant with your FBAR report in the first place.  Work with a trusted tax professional or tax lawyer to ensure your FBAR report is correctly filed the first time.


Work with a knowledgeable IRS tax lawyer in Cleveland

The law offices of Robert J. Fedor, Esq., LLC provide experienced guidance on tax audits, criminal tax fraud, and other tax controversy.  When you become aware you are under investigation, or receive a letter from the IRS, contact us online or call us at 800-579-0997.


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