2024 FBAR Civil Penalties | FBAR International Tax Lawyer & Attorney

This article is an update of prior articles on the FBAR Civil Penalties. Since the US Congress mandated the IRS to adjust FBAR civil penalties for inflation on an annual basis, this article discusses the year 2024 FBAR Civil Penalties.

2024 FBAR Civil Penalties: Overview of the FBAR Penalty System

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”), has always had a very complex, multi-layered system of penalties, which has grown even more complicated over the years. These penalties can be grouped into four categories: criminal, willful, non-willful and negligent.

Of course, the most dreaded penalties are FBAR criminal penalties. Not only is there a criminal fine of up to $500,000, but, in some cases, a person can be sentenced to 10 years in prison for FBAR violations (and these two criminal penalties can be imposed simultaneously). Since the focus of this article is on FBAR civil penalties.

The next category of penalties are FBAR civil penalties imposed for the willful failure to file an FBAR. These penalties are imposed per each violation – i.e. on each account per year, potentially going back six years (the FBAR statute of limitations is six years).

The third category of penalties are FBAR penalties imposed for a non-willful failure to file an FBAR or a filing of an incorrect FBAR. These penalties can be imposed on US persons who do not even know that FBAR exists.

Finally, with respect to business entities, a penalty can be imposed for a negligent failure to file an FBAR or a filing of an incorrect FBAR.

It is important to note that FBAR has its own reasonable cause exception that may be used to fight the assessment of any of the aforementioned civil penalties. Moreover, each of these penalty categories has numerous levels of penalty mitigation that a tax attorney may utilize to lower his client’s FBAR civil penalties.

2024 FBAR Civil Penalties: Penalties Prior to November 2 2015

Prior to November 2, 2015, FBAR penalties were not adjusted for inflation and stayed flat at the levels mandated by Congress. Let’s go over each category of penalties prior to inflation adjustment.

As of November 1, 2015, Willful FBAR penalties were up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. Again, a violation meant a failure to correctly report an account in any year. Non-willful FBAR penalties were up to $10,000 per violation per year; per US Supreme Court’s decision last year, the penalty should have been imposed on a per form (not per account) basis. Finally, FBAR penalties for negligence were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.

2024 FBAR Civil Penalties: Inflation Adjustment

The situation changed dramatically in 2015. As a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”), Congress mandated federal agents to: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. The inflation adjustment applied only to civil penalties.

The “catch-up” adjustment meant a huge increase in penalties, because federal agencies were required to update all of these penalties from the time of their enactment (or the last year Congress adjusted the penalties) through November of 2015. This meant that, in 2015, the penalties jumped to account for all accumulated multi-year inflation. The catch-up adjustment was limited to two and a half times of the original penalty.

Fortunately, the Congress adjusted FBAR penalties in 2004 and the “catch-up” adjustment did not have to go back to the 1970s. It still meant a very large (about 25%) increase in FBAR civil penalties, but it was not as dramatic as some other federal penalties.

2024 FBAR Civil Penalties: Bifurcation of FBAR Penalty System

The biggest problem with the inflation adjustment, however, was the fact that it further complicated the already dense multi-layered FBAR system of civil penalties – FBAR penalties became dependent on the timing of a violation and IRS penalty assessment. In essence, the 2015 Inflation Adjustment Act split the FBAR penalty into two distinct parts.

The first part applies to FBAR violations that occurred on or before November 2, 2015. The old pre-2015 FBAR penalties described above applies to these violations irrespective of when the IRS actually assesses the penalties for these violations. The last FBAR violations definitely eligible for the old statutory penalties are those that were made concerning 2014 FBAR which was due on June 30, 2015. The statute of limitations for the 2014 FBAR ran out on June 30, 2021.

The second part applies to all FBAR violations that occurred after November 2, 2015. For all of these violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. In other words, if an FBAR violation occurred on October 15, 2017 and the IRS assessed FBAR penalties June 17, 2021, the IRS would use the inflation-adjusted FBAR penalties as of the year 2021, not October 15, 2017.

2024 FBAR Civil Penalties: Penalties Assessed On or After January 25, 2024

Now that we understand the history of FBAR penalties, we can specifically discuss the 2024 FBAR Civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 25, 2024; prior to that date, the 2023 FBAR civil penalties were still effective.

The 2024 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $161,166 per violation. Per last year’s court decisions, the term “violation” in the context of willful FBAR penalties means on a “per account for each year” basis described above.

The 2024 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $16,117 per violation. The term “violation” in the context of non-willful FBAR penalties at this point has been settled to mean “per form” (rather than per-account) basis.

The 2024 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,394; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $108,489.

Contact Sherayzen Law Office for Professional Help With Your Prior FBAR Noncompliance

Sherayzen Law Office is a leader in US international tax law and FBAR compliance. We have successfully helped hundreds of clients from over eighty countries resolve their prior FBAR noncompliance, including through various voluntary disclosure programs (such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, et cetera). We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Denver FBAR Tax Attorney | International Tax Lawyer Colorado

If you reside in Denver, Colorado, and have unreported foreign bank and financial accounts, you may be looking for a Denver FBAR Tax Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.

Denver FBAR Tax Attorney: International Tax Lawyer

First of all, it is very important to understand that, by looking for Denver FBAR Tax Attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.

The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.

Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.

Denver FBAR Tax Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures

When retaining a Denver FBAR Tax Attorney, consider the fact that such an attorney’s work is not limited to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.

Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.

Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures)SFOP (Streamlined Foreign Offshore Procedures)DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.

Denver FBAR Tax Attorney: Out-Of-State International Tax Lawyer

Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Denver, Colorado. On the contrary, consider international tax attorneys who reside in other states and help Denver residents with their FBAR compliance.

Contact Sherayzen Law Office for Professional FBAR Help

Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Denver, Colorado.

Thus, if you are looking for a Denver FBAR Tax Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

Third Quarter 2024 IRS Interest Rates on Overpayment & Underpayment of Tax

On May 9, 2024, the IRS announced that the Third Quarter 2024 IRS interest rates on overpayment and underpayment of tax will remain the same as in the Second Quarter of 2024.

This means that, the Third Quarter 2024 IRS interest rates will be as follows:

  • eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
  • eight (8) percent for underpayments;
  • ten (10) percent for large corporate underpayments; and
  • five and a half (5.5) of a percent for the portion of a corporate overpayment exceeding $10,000.

Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.

Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

Pursuant to the IRC §6621(b)(1), the Third Quarter 2024 IRS interest rates were computed based on federal short-term rates in January of 2024. 

It is important to note that the Third Quarter 2024 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Third, these rates will determine the interest a taxpayer will get on any IRS refunds.

Third ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.

Finally, the Third Quarter 2024 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.

We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Third Quarter 2024 IRS interest rates.

High Income Non-Filer IRS Compliance Campaign Update: Notice CP-59 With International Tax Compliance Focus

On February 29, 2024, the IRS announced a major update to one of its compliance campaigns that focuses on high income non-filer taxpayers.  Let’s discuss this major update to the High Income Non-filer IRS Campaign in more detail.

High Income Non-Filer IRS Campaign: Background Information

As part of its extensive tax enforcement planning in the mid-2010s, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.

The first thirteen campaigns were announced by LB&I on January 13, 2017. Since then, there have been numerous campaigns announced by the IRS with a focus on various priority topics. The most recent wave (during the years 2023 and 2024) of the IRS campaigns is due to the additional funding that the Congress allocated to the IRS as part of the Inflation Reduction Act.

This very much applies to High Income Non-Filer Campaign. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that did not allow to properly work on these cases. With the new Inflation Reduction Act funding available, the IRS has now upgraded and essentially re-launched this campaign.

High Income Non-Filer IRS Campaign: Focus on US international Tax Compliance

Even if you did not read the description of the IRS campaign, the very fact that the Director of the Withholding & International Individual Compliance Practice Area is in charge of this campaign gives away the focus on US international tax compliance.  Moreover, the emphasis is on individuals with potentially high income, not businesses.   

Indeed, High Income Non-Filer IRS Campaign focuses on individuals who have not filed their US tax returns even though they have received high (including foreign-source) income in the past. The very first phrase of the campaign’s description states: “U.S. citizens and resident aliens are subject to tax on worldwide income”.  The campaign, however, applies to all high-income non-filers, not just those who did not report their foreign income.

High Income Non-Filer IRS Campaign: IRS Targets 125,000 Noncompliant Taxpayers

It is very interesting to note that this campaign begins with direct targeting of known individuals — the IRS already identified 125,000 taxpayers that the agency wishes to contact.  In other words, this is a well-planned campaign with the IRS already knowing who it wants to target.

Where did the IRS get the information about these taxpayers? Mostly, IRS has received third-party information – such as through Forms W-2 and 1099s – indicating these people received high income. Additional information the IRS received from foreign banks and other sources.

High Income Non-Filer IRS Campaign: CP-59 Notice

The IRS has launched the new compliance effort with the IRS CP-59 Notice letters.  The letters already started to go out focusing on taxpayers who have not filed their tax returns since 2017. The mailings include more than 25,000 notices to taxpayers with more than $1 million in income and over 100,000 notices to taxpayers with incomes between $400,000 and $1 million between tax years 2017 and 2021.

Not all letters will go out at the same time. The IRS plans to mail anywhere between 20,000 to 40,000 letters each week, beginning with the filers in the highest-income categories. The IRS noted that some of these non-filers have multiple years included in the case count so the number of taxpayers receiving letters will be smaller than the actual number of notices going out.

High Income Non-Filer IRS Campaign: FBAR Noncompliance Is Also Targeted

This campaign has one very unpleasant side-effect.  In many cases, behind income tax noncompliance, there are likely unreported foreign accounts that needed to be disclosed on FBARs and perhaps even Form 8938. This circumstance can turn the case into something a lot more serious beyond just income tax noncompliance.

High Income Non-Filer IRS Campaign: What to Do If You Receive CP-59 Notice

The first thing to do is not to panic and not to procrastinate. You should take the next step very fast in order to avoid follow-up notices and a full audit with potentially severe consequences.

The second step is to contact immediately Sherayzen Law Office for professional help, especially if your noncompliance involves large amounts of income and US international information returns, such as FBAR or Form 8938. We will analyze the facts of your case, estimate your potential IRS penalty exposure and advise on the way to move forward to deal with the situation.

High Income Non-Filer IRS Campaign: IRS Actions Escalate If Tax Returns Are Not Filed

Taxpayers who fail to respond to the IRS notices will first receive additional notices.  If still no response, the IRS enforcement efforts will escalate to an audit, filing of an unfavorable Substitute for Return (SFR) (without any proper deductions or exemptions), collection actions, a petition to Tax Court and even potentially criminal prosecution.

Contact Sherayzen Law Office if Your Receive Notice CP-59 Concerning Unfiled Returns

If you are a taxpayer who has not filed his tax returns and you receive an IRS Notice CP-59, contact Sherayzen Law Office for professional help.  We have helped high-net-worth individuals with their US domestic and US international tax compliance as well as audits of their US tax returns. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!

Garland FBAR Attorney | International Tax Lawyer Texas

If you reside in Garland, Texas and have unreported foreign bank and financial accounts, you may be looking for a Garland FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, consider us in your search. Let’s understand why this is the case.

Garland FBAR Attorney: International Tax Lawyer

First of all, it is very important to understand that, by looking for Garland FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.

The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.

Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.

Garland FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures

When retaining Garland FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.

Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.

Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures)SFOP (Streamlined Foreign Offshore Procedures)DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.

Garland FBAR Attorney: Out-Of-State International Tax Lawyer

Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Garland, Texas. On the contrary, consider international tax attorneys who reside in other states and help Garland residents with their FBAR compliance.

Contact Sherayzen Law Office for Professional FBAR Help

Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Garland, Texas.

Thus, if you are looking for a Garland FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!