What Every CPA Should Know About FBAR Reporting Requirements

By Stephen Speiser, Esq.

The Report of Foreign Bank and Financial Accounts (FBAR) is a requirement for U.S. persons with a financial interest in or signature authority over foreign financial accounts. This includes citizens, residents, corporations, partnerships, limited liability companies, trusts, and estates. The FBAR must be filed if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.  The report should be filed electronically through the Financial Crimes Enforcement Network’s BSA E-Filing System (“FinCEN”).

U.S. persons, such as citizens, Green Card holders, resident aliens, and dual citizens, are required to file an FBAR if the combined balance of all their foreign financial accounts exceeds $10,000 at any time during the year.  This includes not only bank accounts but also other types of financial accounts, such as retirement and pension accounts held outside the U.S.  The FBAR is an annual filing requirement.  There report can be filed electronically and there is no need to register. However, if an FBAR is being filed by a CPA, attorney, or agent on behalf of a client, they must register as a BSA E-Filer.

What Is the Deadline for Filing FBAR

The deadline for filing an FBAR Report is April 15 following the calendar year being reported. However, there is an automatic extension to October 15 if the filer fails to meet the April 15 deadline.

Late Filing Penalty

The penalty for filing an FBAR Report late can be significant.  It’s important to note, however, that the IRS will generally not impose a penalty if the individual properly reported the foreign accounts on their U.S. tax returns and paid all taxes due.

Willful vs. Non-Willful FBAR Violations

The difference between willful and non-willful violations of the reporting requirement lies in the individual’s state of mind.  A willful violation occurs when a person has a conscious choice not to file the FBAR, regardless of intent.  This can include intentional disregard or reckless behavior.  On the other hand, a non-willful violation occurs when there is no voluntary or intentional violation of a known legal duty.

Penalties For Non-Willful FBAR Violations

The penalties for non-willful violations of the Report of Foreign Bank and Financial Accounts (FBAR) are as follows:

  1. The maximum civil penalty for a non-willful violation is $10,000 per violation.
  2. The penalty is limited to $10,000 per violation, regardless of the number of accounts.
  3. No penalty will be imposed if the violation was due to reasonable cause.

While penalties for non-willful violations can be steep, the maximum penalty is $10,000 per violation regardless of the number of accounts, and no penalty will be imposed if the violation was due to reasonable cause.

Penalties For Willful FBAR Violations

The penalties for willful violations are significantly higher than those for non-willful violations. Willful violations can result in penalties of up to $100,000 or 50% of the account balance per violation.  In some cases, willful violations can also carry criminal penalties, including the possibility of a prison sentence.

Civil vs. Criminal FBAR Violations

In summary, the difference between civil and criminal penalties for FBAR violations is as follows:

  • Criminal Penalties:  Criminal charges for willful FBAR violations can lead to significant monetary penalties and even imprisonment.  However, it’s important to note that in most cases, a violation of FBAR filing will result in civil, non-willful penalties, and criminal penalties are rare and typically only arise in situations where other crimes have been committed, such as money laundering or tax evasion.
  • Civil Penalties: Civil penalties are focused on monetary fines or warning letters without the risk of criminal investigation or prosecution.  For non-willful violations, the maximum civil penalty is $10,000 per violation.  For willful violations, the penalty can be the greater of $100,000 or 50% of the account’s balance for each year that an FBAR wasn’t filed.

In summary, civil penalties are primarily monetary, while criminal penalties can involve both monetary fines and the possibility of imprisonment.

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