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FinCEN Form 114 Indian Financial Accounts Obligations | FBAR Attorney

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FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as  “FBAR”, is one of the most important requirements that Indian Americans face as part of their US tax compliance concerning their Indian Financial Accounts. This articles provides an overview of the  Indian American’s FBAR compliance requirements with the particular focus on the FinCEN Form 114 Indian Financial Accounts obligations.

FinCEN Form 114 Indian Financial Accounts: FBAR Background Information

FinCEN Form 114 is a critical requirement for any US person with financial accounts outside the United States. US citizens, residents, and even certain non-residents who have a financial interest or signature authority over foreign financial accounts must file an FBAR if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.

FBAR was introduced in the early 1970s as part of the Bank Secrecy Act.  Its original purpose was to combat money laundering, tax evasion, and other illicit activities involving undisclosed foreign financial assets. After the 9/11 terrorist attacks, however, Congress turned over the FBAR enforcement to the IRS, effectively turning FBAR into a tax form and one of the most formidable enforcement tools in the IRS arsenal.

What makes FinCEN Form 114 such a great US international tax enforcement weapon is the combination its broad scope of compliance, its low reporting threshold and, most importantly, its draconian noncompliance penalties.  FBAR penalties range from criminal penalties (i.e. a person can actually go to jail for FBAR noncompliance in certain limited circumstances) to horrendous civil willful penalties (imposed on a per account per year basis) to even non-willful penalties.  

While the Supreme court limited in 2023 the non-willful penalties to $10,000 (as adjusted for inflation) per form, FBAR has a statute of limitations of six years. This means that a non-willfulness penalty assessed after January 25, 2024 (until sometime at the end of the January of 2025) can still total $96,702 (inflation is accounted for in this number through the end of 2024).

FinCEN Form 114 Indian Financial Accounts: FBAR’s Broad Definition of “Account”

I mentioned above that the broad scope of FBAR compliance is one of the form’s characteristics that makes it so dangerous. The foundation for the far reach of the form stems from the FBAR’s broad definition of what constitutes a reportable “account” “Account” can be applied a huge variety of financial arrangements including but not limited to:

  • Bank accounts (such as savings and checking accounts)
  • Fixed-deposit accounts (each one individually is a separate account)
  • Mutual funds
  • Pension accounts (including the Indian PPF accounts)
  • Insurance policies with a cash-surrender value
  • Precious metal accounts
  • Retirement accounts

Basically, any type of a arrangement that involves a fiduciary relationship with a financial institution (which is itself a term of art with a broad definition) with respect to your assets immediately raises a possibility of additional FinCEN Form 114 compliance.  

It is crucial to note that the FBAR filing requirement applies not only to accounts where a US person is the sole owner but also to accounts where they have joint ownership or signature authority. Even accounts where a person only has signing authority, such as an employer’s account, are subject to the FinCEN Form 114 reporting requirement if the $10,000 threshold is met.

FinCEN Form 114 Indian Financial Accounts: Special Challenges in the Context of India

In the specific context of Indian Financial Accounts, such a broad definition of accounts for FinCEN Form 114 purposes leads to unique compliance challenges. Let’s discuss the three most common challenges. First of all, Indian FBAR filers tend to have a very large number of fixed-deposit and Indian mutual fund accounts as long-term savings financial vehicles. Many Indians think that they only have to report only main checking and savings bank accounts.  This is an important error. FBAR filers need to disclose each fixed-deposit and mutual fund account individually.

Second, Indian FinCEN Form 114 filers generally do not think of life insurance policies as something that they need to disclose.  Yet, the FBAR requires the disclosure of each life insurance policy individually.

Third, FBAR filers must disclose Public Provident Fund (“PPF”) accounts on their FBARs.  Many Indian Americans completely forget about these accounts.

I should also mention one more important point about these unique challenges – income tax compliance concerning all of these accounts that many Indian FBAR filers tend to overlook. India has a very different system of taxation from the United States and, usually, a failure to disclose accounts properly on FBAR is also a good indicator of potential US income tax noncompliance.

FinCEN Form 114 Indian Financial Accounts: Offshore Voluntary Disclosure

Now that we have identified the problem, let’s discuss how to best deal with FinCEN Form 114 noncompliance.  First of all, this is an issue that you should discuss with an international tax attorney who can advise on the best course of action based on the specific facts of your case.

One of the common advices that you will receive from your international tax attorney is to engage in an Offshore Voluntary Disclosure option. Offshore Voluntary Disclosure is a reflection of the fact that the IRS cannot possibly audit every single US income tax return. Hence, the IRS offers various offshore voluntary disclosure programs that allow noncompliant US taxpayers to come forward and report their unreported foreign financial accounts and other foreign assets in exchange for a more lenient treatment.

An offshore voluntary disclosure can be a highly-beneficial solution for prior noncompliance. At the same time, it is a highly-complex process that requires extensive knowledge of US tax laws.

Moreover, in the context of FinCEN Form 114 Indian Financial Accounts noncompliance, there are specific challenges that arise from the income tax treatment concerning Indian fixed-deposit accounts as well as Indian mutual fund investments (something that I alluded to above).

In these situations, working with an experienced international tax attorney who understands the intricacies of US tax reporting of Indian financial accounts is crucial. An attorney can help you navigate the voluntary disclosure process and minimize your exposure to penalties.

Contact Sherayzen Law Office for Professional Help with Your FinCEN Form 114 Indian Financial Accounts Compliance

Sherayzen Law Office is a premier US international tax law firm that specializes in FBAR compliance and offshore voluntary disclosures. We have an extensive experience with US tax reporting concerning Indian bank and financial accounts, including in the context of various offshore voluntary disclosure options such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Reasonable Cause disclosures, et cetera. By working with Sherayzen Law Office, you ensure that your compliance with US tax laws is handled thoroughly and professionally with the goal of protecting you from potential penalties.

Contact Sherayzen Law Office today to schedule your confidential consultation!

Tax Treaty Election FBAR Obligations | FBAR Lawyer & Attorney

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In my practice, I often receive calls from people who are confused about their FBAR obligations.  A recent call raised an important issue of whether a tax treaty election may affect one’s FBAR obligations.  In this brief article, I would like to address this issue of tax treaty election FBAR obligations.

Tax Treaty Election FBAR Obligations: What is FBAR ?

FinCEN Form 114, Report of Foreign Bank and Financial Accounts (used to be TD F 90-22.1) is commonly known as FBAR, the Report of Foreign Bank and Financial Accounts. This form is used by US persons to report to the IRS a financial interest in or signatory authority over foreign financial accounts.  This is one of the most important forms that US taxpayers need to file in order to comply with their US international tax law requirements. A failure to file an FBAR when required may result in an imposition of severe IRS penalties.

Tax Treaty Election FBAR Obligations: US Person

In another article, I already addressed in great detail the definition of a US Person.  Here, I will just briefly state the categories of persons who fall under the definition of a US Person for FBAR purposes:

(1) US citizens;

(2) residents of the United States;

(3) an entity, such as a corporation, partnership and a limited liability company, created or organized in the United States or under the laws of the United States;

(4) a trust formed under the laws of the United States; and

(5) an estate formed under the laws of the United States.

Tax Treaty Election FBAR Obligations: US Person & Tax Treaty Election

Now, we have come to the critical point and the main subject of this essay: would a tax treaty election to be treated as a resident of another country under a valid income tax treaty affect one’s FBAR obligations? In other words, can you elect out of being a US Person by making a tax treaty election?

The main general answer is no – a tax treaty does not and cannot affect FBAR filing obligations. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234 & 238 (Feb. 24, 2011); also, IRM 4.26.16.2.1.2(6) (11-06-15).  If a person meets the definition of a resident alien under IRC §7701(b) (i.e. he meets the FBAR definition of a US Person), even if he is not treated as a resident for income tax purposes due to an election under an income tax treaty, he will still be subject to FBAR.

The main exception to this rule would be an abandonment of US permanent residency through a tax treaty election, because it would affect the definition of a resident alien under IRC §7701(b).

Contact Sherayzen Law Office for Help with Your FBAR Compliance and FBAR Voluntary Disclosure

Sherayzen Law Office specializes in FBAR compliance and Offshore Voluntary Disclosures that involve prior FBAR noncompliance. We have helped hundreds of US taxpayers around the world with their FBAR issues, and we can hep you!

Contact Us Today to Schedule Your Confidential Consultation!

Form 114 US Person Definition | FBAR Tax Lawyer

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FinCEN Form 114 US Person definition is a highly important component of FBAR and US international tax compliance.  In this essay, I will discuss in detail the FinCEN Form 114 US Person definition and highlight some common issues that arise with respect to this definition.

Form 114 US Person Definition: What is Form 114 and What is its Relation to FBAR ?

FinCEN Form 114, Report of Foreign Bank and Financial Accounts (used to be TD F 90-22.1) is commonly known as FBAR, the Report of Foreign Bank and Financial Accounts. This form is used by US persons to report to the IRS a financial interest in or signatory authority over foreign financial accounts.  This is one of the most important forms that US taxpayers need to file in order to comply with their US international tax law requirements. A failure to file an FBAR when required may result in an imposition of severe IRS penalties.

Form 114 US Person Definition: Only US Persons are Required to File FBARs

It is important to understand that only “US Persons”, as defined by the IRS for the FBAR compliance purposes, are required to file FBARs.  What is the legal basis for this and where does this term “US Person” come from?

BSA (Bank Secrecy Act) §5314(a) states that the Secretary of the Treasury shall require a “resident or citizen of the United States or a person, in, and doing business in, the United States, to keep records, file reports”.  This seems like the FBAR requirement may apply a hugely broad group of people (far beyond US residents and citizens), especially if one takes into account that the “United States” is defined to include all 50 states, the District of Columbia, the territories, and insular possessions of the United States and the Indian lands as defined in the Indian Gaming Regulatory Act. 31 CFR §§1010.350(b) and 1010.100(hhh).  The territories and possessions of the United States include American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the US Virgin Islands (see BSA Electronic Filing Requirements for Report of Foreign Bank and Financial Accounts (FinCEN Form 114), p. 5.).

Despite this initial impression, the actual definition that we use today is much smaller than what is mandated by §5314(a) and it is thanks to BSA §5314(b).  BSA §5314(b) states that the IRS has the discretion to interpret what this provision actually means and who is exempt from the FBAR filing requirement.

Armed with this authority, on February 26, 2010, the IRS issued proposed regulations, which for the first time defined that only “US Persons” needed to file FBARs. This is why we discuss the definition of a US Person when we discuss who is required to file FBARs.

Form 114 US Person Definition: Who is a Person ?

Before we turn to the definition of a “US Person”, we need to discuss who is considered to be a “Person” for the Form 114 purposes. Under 31 CFR §1010.350(b), a “person” includes:  natural persons (US citizens and US residents) and entities, including but not limited to: corporations, partnerships, trusts, or limited liability companies formed under the laws of the United States.  This definition includes entities disregarded for tax purposes (as long as they are US persons).

Additionally, pension and welfare plans are also US entities that need to file FBARs. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234 (Feb. 24, 2011); IRM 4.26.16.2.1.3(3) (06-24-21).  Even though the regulations do not mention it, the Form 114 instructions expand the “person” definition to estates.  It is important to note that, according to page 6 of the FBAR electronic filing instructions, an executor of an estate has a fiduciary obligation to file FBAR on behalf of the estate and on behalf of the decedent in the year following the decedent’s death.

Form 114 US Person Definition: General Definition of a US Person

The definition of a US person includes the following categories of persons:

(1) US citizens;

(2) residents of the United States;

(3) an entity, such as a corporation, partnership and a limited liability company, created or organized in the United States or under the laws of the United States;

(4) a trust formed under the laws of the United States; and

(5) an estate formed under the laws of the United States.

Let’s analyze each of these categories in more detail.

Form 114 US Person Definition: US Citizens

All US citizens are subject to the FBAR filing requirement, even minor children.  The general definition of a US citizen is contained in 8 USC §1401.

Form 114 US Person Definition: US Residents

All US residents are subject to FBAR filing requirements.  Pursuant to 31 CFR §1010.350(b)(2), the definition of “US residents” follows the definition of a resident alien under §7701(b) with one modification – the definition of the “United States” still follows 1010.100(hhh) described above. Also, see IRM 4.26.16.2.1.2 (11-06-15).

There are three classes of US residents: (1) US permanent residents; (2) persons who satisfied the Substantial Presence Test; and (3) persons who elected to be treated as US residents.  Let’s discuss each of these classes of US residents in more detail.

1.  US Permanent Residents (the “Green Card Test”)

A person is considered a US person if at any time during the calendar year the person has been lawfully granted the privilege of residing permanently in the United States under the immigration laws and such status has not been revoked. 26 USC §§7701(b)(1)(A)(i) and 7701(b)(6).

One of the most common issues occurs when a person has been issued a green card and he has not yet physically entered the United States. In such cases, this person would not be considered as a resident alien until he actually physically enters the United States. 26 USC §7701(b)(2)(A)(ii).  Once he enters the country, however, he becomes a US permanent resident and continues to be one until the green card is revoked or considered abandoned either judicially or administratively. See 26 CFR §301.7701(b)-1(b)(2) and 26 CFR §301.7701(b)-1(b)(3).

2.  Substantial Presence Test

Even if a person is not a US permanent resident, he may still be considered a US Person if he meets the IRC §7701(b)(3) substantial presence test.  In reality, there are two substantial presence tests.

The first substantial presence test is met if a person is physically present in the United States for at least 183 days during the calendar year. 26 USC §7701(b)(3).  The second substantial presence test is met if two conditions are satisfied: (1) the person is present in the United States for at least 31 days during the calendar year; and (2) the sum of the days on which this person was present in the United States during the current and the two preceding calendar years (multiplied by the fractions found in §7701(b)(3)(A)(ii)) equals to or exceeds 183 days. 26 USC 7701(b)(3)(A).

Let’s focus on the mechanics of the second calculation.  The way to determine whether the 183-day test is met is to add: (a) all days present in the United States during the current calendar year (i.e. the year for which you are trying to determine whether the Substantial Presence Test is met) + (b) one-third of the days spent in the United States in the year immediately preceding the current year + (c) one-sixth of the days spent in the United States in the second year preceding the current calendar year. See 26 USC §7701(b)(3).

Note that the Internal Revenue Code (IRC) provides a number of important exceptions to the Substantial Presence Test.  In this article, I am just providing the general rule.

3.  Election to be Treated as a US Resident Alien

A person who makes the first-year election to be treated as a US resident alien pursuant to §7701(b)(4) is a US Person for FBAR purposes.   Note, however, that this rule applies only to elections made under this provision.  A nonresident alien spouse of a US person who makes an election under the IRC §§6013(g) and 6013(h) to be treated as a resident alien will not be considered as a US person for the FBAR compliance purposes.  This is an important divergence between the income tax and FBAR rules.

Form 114 US Person Definition: US Entities, Trusts & Estates

Entities (corporations, partnerships, limited liability companies, et cetera), trusts and estates created, organized or formed in the United States or under the laws of the United States are generally considered to be US Persons for FBAR purposes.

A foreign subsidiary of a US parent will not have any FBAR obligations as long as it is not formed, created or organized under the laws of the United States. However, the US parent company may be required to include the foreign accounts of its foreign subsidiary on its FBAR. 31 CFR §1010.350(e)(2)(ii).

Moreover, a foreign entity organized in and under the laws of a foreign country will not be subject to the FBAR requirements even if it elects to be treated as a US entity for US tax purposes. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234-238 (Feb. 24, 2011).

Contact Sherayzen Law Office for Professional Help with Your FBAR Compliance

If you need questions concerning your FBAR compliance or a voluntary disclosure concerning your prior FBAR noncompliance, contact Sherayzen Law Office for professional help!  Our firm specializes in FBAR compliance and offshore voluntary disclosures to remedy prior FBAR noncompliance.

We have helped hundreds of clients around the world and we can help you! Contact Us Today to Schedule Your Confidential Consultation!

2021 FBAR Deadline in 2022 | FinCEN Form 114 International Tax Lawyer & Attorney

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The 2021 FBAR deadline is a critical deadline for US taxpayers this calendar year 2022. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2021 FBAR deadline in more detail.

2021 FBAR Deadline: Background Information

The official name of FBAR is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs must be timely e-filed separately from federal tax returns.

Failure to file an FBAR may result in the imposition of heavy FBAR penalties. The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.

2021 FBAR Deadline: Pre-2016 FBAR Deadline

For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed.

The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. Due to the six-year FBAR statute of limitations, however, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. The 2015 FBAR’s statute of limitations will expire only this year – on June 30, 2022.

2021 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR

For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.

The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR. Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.

Furthermore, during the transition period (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.

Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day.

2021 FBAR Deadline

Based on the current law, the 2021 FBAR deadline will be April 18, 2022. However, it is automatically extended to October 17, 2022.

The 2021 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system.

Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance

If you have unreported foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

2021 FBAR Civil Penalties | IRS FBAR Tax Lawyer & Attorney

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As if they were not high enough, the US Congress has obligated the IRS to adjust FBAR civil penalties for inflation on an annual basis. In this article, I will provide a broad overview of the current FBAR penalty system and describe the current 2021 FBAR civil penalties.

2021 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 case, a person can be sentenced to 10 years in prison for FBAR violation (and these two criminal penalties can be imposed simultaneously). Since the focus of this article is on FBAR civil penalties, I will not devote more time to the discussion of FBAR criminal penalties here.

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.

2021 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; it is far less clear what “violation” meant in this context. At that time, the IRS took a clear position that non-willful FBAR penalties are imposed on a per account basis similarly to willful penalties, but the validity of this position has been heavily compromised by recent court decisions. 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.

2021 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 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 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.

2021 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.

2021 FBAR Civil Penalties: Penalties Assessed On or After January 28, 2021

Now that we understand the history of FBAR penalties, we can specifically discuss the 2021 FBAR civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 28, 2021; prior to that date, the 2020 FBAR civil penalties were still effective.

The 2021 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $136,399 per violation. So far, for willful FBAR penalties, “violation” is applied on a “per account for each year” basis described above. Last year (i.e. penalties assessed after February 19, 2020 and before January 28, 2021), the willful penalty was $134,806.

The 2021 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $13,640 per violation; last year, the non-willful penalty was $13,481. The term “violation” in the context of non-willful FBAR penalties at this point has not been settled. Starting last year and culminating with the recent 11th Circuit court decision, the courts have been applying the term “violation” on a per-form (rather than per-account) basis. It other words, a taxpayer can argue that a non-willful violation of $13,481 should be applied per each delinquent FBAR rather than each account reported on an FBAR. This is of course a highly beneficial approach (for taxpayers) to FBAR penalty imposition, but it is still a struggle to get the IRS to accept this position.

The 2021 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,166; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $90,743. Last year, the respective amounts were $1,146 and $89,170.

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 seventy countries resolve their prior FBAR noncompliance concerning disclosure of their foreign bank and financial accounts. We can help you!

Contact Us Today to Schedule Your Confidential Consultation!