Posts

2025 FBAR Civil Penalties | FBAR International Tax Lawyer & Attorney

/in , , /by

This article is an update of the 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 2025 FBAR Civil Penalties.

2025 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. There are four categories of FBAR penalties: 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 case, 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 are for a willful failure to file an FBAR. The IRS imposes these penalties in a very harsh manner 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 apply to a non-willful failure to file an FBAR or a filing of an incorrect FBAR. This means that the IRS can impose these penalties on US persons who do not even know that FBAR exists.

Finally, with respect to business entities, the IRS can assess a penalty 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. The Reasonable Cause Exception can a very important tool for fighting 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.

2025 FBAR Civil Penalties: Penalties Prior to November 2 2015

Prior to November 2, 2015, the US government never adjusted FBAR penalties for inflation. Rather, the penalties stayed flat at the same levels as the Congress originally mandated them. 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.

2025 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 the Congress now required federal agencies to update all of these penalties from the time of their enactment (or the last year the 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 Congress only gave one limitation this increase: the catch-up adjustment could not exceed 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.

2025 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.

2025 FBAR Civil Penalties: Penalties Assessed On or After January 17, 2025

Now that we understand the history of FBAR penalties, we can specifically discuss the 2025 FBAR Civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 17, 2025; prior to that date, the 2024 FBAR civil penalties were still effective.

The 2025 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $165,353 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 2025 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $16,536 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 2025 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,430; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $111,308.

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!

Miami FBAR Attorney | International Tax Lawyer Florida

/in , /by

If you reside in Miami, Florida and have unreported foreign bank and financial accounts, you may be looking for a Miami FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs. Let’s explore the main reasons for it.

Miami FBAR Attorney is an International Tax Lawyer

From the outset, it is very important to understand that, by looking for Miami 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 search for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.

Miami FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures

When retaining Miami 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.

Miami 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 Miami, Florida. On the contrary, consider international tax attorneys who reside in other states and help Miami residents with their FBAR compliance.  The most important consideration is developing the trust in your attorney’s knowledge, professionalism and ability to resolve your FBAR compliance issues. Remember that US international tax law (including FBAR compliance) is federal law.  Hence, the resident of your international tax attorney is not important.

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

FBAR Financial Accounts Definition | International Tax Lawyer & Attorney

/in , , /by

In the realm of US international tax compliance, few topics are as crucial as the reporting of foreign financial accounts, particularly The Foreign Bank and Financial Accounts Report (FBAR). This article focuses on one specific aspect of FBAR compliance: what accounts need to be disclosed on FBAR.  In particular, we will delve into the intricacies of the scope of the FBAR financial accounts definition.

Please, note that this article is an upgrade of an article that I published almost fifteen years ago.

FBAR Financial Accounts Definition: FBAR Background Information

FBAR is one of the most important US international tax compliance forms.  All US persons must file an FBAR if they have a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year (31 USC. § 5314; 31 C.F.R. § 1010.350).

FBAR filing is separate from income tax filing and has its own distinct requirements and deadlines. Also, a taxpayer must comply with his FBAR reporting obligations even if he already reported the same foreign financial accounts elsewhere (such as Form 8621 or Form 8938). US filers must file their FBARs (officially FinCEN Forms 114a) electronically through FinCEN’s BSA E-Filing System.

Additionally, FBAR has its own unique and very severe penalty system for noncompliance, including criminal penalties. This is why it is so important to understand what type of accounts should be disclosed on FBAR.

FBAR Financial Accounts Definition: Determining Reportable Accounts

When assessing whether an account qualifies as an FBAR foreign financial account, one should consider:

1. The account’s location. The account must be outside the United States – there is special definition for FBAR purposes for what this means.  I will not discuss the definition of “foreign accounts” in this article; instead I will only focus on what type of accounts need to be disclosed.

2. The account type. The main issue is whether this particular foreign asset falls within the definition of a “financial account” – this is the main topic of this article.

3. Your relationship to the account. In other words, do you have a financial interest in or signature authority over the foreign accounts in question.

4. The aggregate value of all foreign financial accounts. Generally, the accounts must exceed $10,000 in the aggregate at any point in the year. I will discuss in another article how this is calculated.

FBAR Financial Accounts Definition: Broad Scope

The definition of “financial account” for FBAR purposes is very broad. It is very important to understand that it is so broad that many taxpayers would not even normally consider certain arrangements as financial accounts.  

In general, if there is a value maintained as part of a fiduciary relationship with a financial institution, it is likely to be a reportable account on FBAR. See 75 Fed. Reg. at 8846. The IRS, however,has stated “an account is not established simply by conducting transactions such as wiring money or purchasing a money order where no relationship has otherwise been established.” Id.

FBAR Financial Accounts Definition: Bank, Securities and Investment Accounts

For the FBAR purposes, financial accounts include all checking, savings, brokerage and securities accounts. 75 Fed. Reg. 8846 defines “securities account” as “an account maintained with a person in the business of buying, selling, holding, or trading stock or other securities.” Id. Securities derivatives and other similar financial instruments held with a financial institution all fall within the definition of a reportable account. However, paper bonds, notes and stock certificates that are not held through a financial institutions are not considered as “financial accounts.”

The  FBAR financial accounts definition also applies to all demand, deposit and time deposit accounts (in other words, CD accounts and their equivalents).

FBAR Financial Accounts Definition: Debit Cards and Prepaid Credit Cards

31 C.F.R. § 1010.350(c) further expands the definition of “account” to foreign debit cards and prepaid credit cards. This definition of an account is an interesting one as even a slight overpayment of a credit card would make it a reportable account for FBAR purposes.

FBAR Financial Accounts Definition: Other Financial Accounts

31 C.F.R. § 1010.350(c)(3) introduces four additional categories of accounts that a filer must include on his FBARs:

  • Accounts with persons accepting deposits as a financial agency;
  • Insurance policies with cash value or annuity policies (for example, this definition includes Assurance Vie accounts in France, LIC policies in India and Prudential Life Insurance policies in Hong Kong);
  • Accounts with commodity futures or options brokers; and
  • Accounts with mutual funds or similar pooled investments (e.g. mutual funds owned through individual folios in India).

FBAR Financial Accounts Definition: Retirement Plans

Reporting retirement accounts on FBAR probably presents the biggest challenge to US taxpayers. Generally, all foreign retirement accounts would be need to be disclosed on FBAR unless they fall under an exception.

For example, certain US retirement plans (under IRC sections 401(a), 403(a), 403(b), 408, or 408A) are exempt from FBAR reporting. However, US filers need to disclose on their FBARs all of their Canadian RRSP accounts, Singaporean CPF accounts, Australian Superannuation accounts, Israeli retirement accounts and many other types of foreign retirement accounts that these filers may have.

As a separate note, the greatest difficulty concerning foreign retirement accounts is not even FBAR reporting, but potential other requirements as such Form 8938 and, most importantly, Form 3520 and even Form 3520-A.  The latter forms (Forms 3520 and 3520-A) are triggered if the foreign accounts are considered to be “foreign trusts”.  However, this decision to treat foreign accounts as trusts should be done with great care.

FBAR Financial Accounts Definition: Exceptions

Finally, certain categories of foreign financial accounts are exempt from FBAR reporting:

  1. Accounts in US military banking facilities serving US government installations abroad;
  2. Accounts over which most bank officers or employees have only signature authority (unless they have a personal financial interest); and
  3. Accounts over which officers or employees of publicly traded or large privately held US corporations have only signature authority, subject to specific conditions (31 C.F.R. § 1010.350(f)).

Contact Sherayzen Law Office for Professional FBAR Help

FBAR noncompliance is one of the most common and one of the most fearsome problems facing US individual taxpayers with respect to their US international tax compliance. Sherayzen Law Office can help you resolve past FBAR noncompliance and bring your US tax affairs into full compliance with US tax laws.

We are a leading US international tax compliance and FBAR compliance firm.  This is our core specialty in which we have profound knowledge and extensive experience.

Contact us today to discuss your specific FBAR and international tax compliance needs with an experienced tax attorney!

Amato Case: 5-Years in Prison for Secret Russian Bank Accounts | FBAR News

/in , /by

Failure to file FBARs for secret Russian bank accounts and income tax evasion led to the imposition of a five-year prison sentence on a New Jersey chiropractor. This is the essence of the new IRS victory in the Amato case. Let’s explore this case in more detail, because the case demonstrates the long reach of the FBAR requirement even in unusual jurisdictions, like Russia.

The Amato Case: Factual Background

Mr. Amato is a US citizen. He was a chiropractor who resided and worked in New Jersey. He practiced medicine through two corporate entities: Chiropractic Care Consultations, Inc. (“Chiropractic Care”) and Accident Recovery Physical Therapy, Inc. (“Accident Recovery”).

It appears that, between January 1, 2013 and December 7, 2016, Mr. Amato over-billed at least six insurance companies. In many cases, he was simply billing for services that he never actually rendered. For these crimes, he was separately charged by the US Department of Justice. On April 9, 2018, in his guilty plea, Mr. Amato admitted that his over-billings were over $1 million.

In order to hide these illegal proceeds, sometime between January 1, 2013 and December 7, 2016, Mr. Amato opened bank accounts in Russia and wired over $1.5 million to these accounts.

On September 14, 2015, Mr. Amato filed his 2014 tax return, stating that he had no taxable income and he owed no taxes. In reality, his 2014 taxable income was about $561,258.

At about the same time, Mr. Amato also deposited checks from his businesses into accounts owned by his minor children. He never disclosed these checks as part of his earnings on his US tax returns. Additionally, there were more funds deposited in his corporate accounts which he also never disclosed on his personal and corporate tax returns.

The Amato Case: IRS investigation and Criminal Prosecution

It appears that the 2014 return was the trigger and huge contributing factor to the commencement of the subsequent IRS investigation of Mr. Amato’s dealings. In 2018, the US Department of Justice (the “DOJ”) filed criminal charges against Mr. Amato with respect to two different types of violations.

The first charge was tax evasion pursuant to 26 USC 7201. It was directly tied to his 2014 tax return, stating that Mr. Amato knowing and willfully attempted to evade his income taxes due.

The second charge was made under 31 USC 5314 & 5322(b) – these are FBAR criminal penalties. Again, the DOJ chose to focus only on 2014 FBAR.

The Amato Case: Tax Evasion and FBAR Criminal Sentence

As part of his deal with the DOJ, Mr. Amato pleaded guilty to both counts. On May 7, 2019, as a result of his failure to pay a large amount in taxes and failure to file FBARs, the New Jersey federal court sentenced him to five years in prison.

Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts

The Amato case is one more reminder of the legal dangers that US taxpayers with undisclosed foreign accounts face. You do not want to be in Mr. Amato’s position.

This is why you need to contact Sherayzen Law Office for professional help with the reporting of your undisclosed foreign bank and financial accounts. We have helped hundreds of US taxpayers with the voluntary disclosure of their foreign assets and foreign income, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!