FBAR Late Filing Penalties

What is the due date for the FBAR?

The due date for the FBAR is June 30th of each year.  

Can I put the FBAR on extension?

No. Unfortunately, there is no extension for the FBAR! The FBAR is not filed with a federal tax return. Any filing extensions of time granted by the IRS to file a tax return does not extend the time to file an FBAR.

What are the penalties for filing the FBAR (Report of Foreign Bank and Financial Accounts) late?

There are 2 different types of penalties for not filing an FBAR by the due date – Non-Willful and Willful.

Maximum Penalty Non-willful:

  • $10,000. No penalty shall be imposed if the violation was due to reasonable cause and the amount of the transaction or the balance in the account at the time of the transaction was properly reported

Maximum Willful violations:

  • The greater of $100,000 or 50% of the balance of the account at the time of the violation

Penalty Mitigation-

The law provides a ceiling for the FBAR penalty. The actual penalty is left to the discretion of the examiner. The IRS has guidelines for its employees which allow them some discretion. If the IRS determined that a taxpayer meets the following four threshold conditions, that taxpayer may be subject to a penalty less than the maximum FBAR penalty

1. The person has no history of past FBAR penalty assessments;

2. No money passing through any of the foreign accounts associated with the person was from an illegal source or used to further a criminal purpose;

3. The person cooperated during the examination (i.e., the Service did not have to resort to a summons to obtain non-privileged information; the taxpayer responded to reasonable requests for documents; meetings, and interviews; or the taxpayer back-filed correct reports); and,

4. The Service did not sustain a civil fraud penalty against the person for an underpayment for the year in question due to the failure to report income related to any amount in a foreign account.

 The penalties for Non-willful violations that occurred after October 22, 2004 under the mitigation threshold conditions are:

  1. If the aggregate balance of all accounts held during the year does not exceed $50,000, then the penalty for each violation is $500, not to exceed a total of $5,000 in penalties.
  2. If the aggregate balance of the accounts is over $50,000, but less than $250,000, the penalty is, per violation, the lesser of $5,000 or ten per cent of the highest balance in the account during the year for which the account should have been reported.
  3. For violations regarding an account exceeding $250,000, the penalty per violation is the statutory maximum of $10,000.

The penalties for Non-willful violations that occurred after October 22, 2004 under the mitigation threshold conditions are:

1. Level I Willful Violations Occurring After October 22, 2004 - If the maximum aggregate balance for all accounts to which the violations relate did not exceed $50,000, Level I applies to all accounts. Determine the maximum balance during the calendar year for each account. Add the various maximums to find the maximum aggregate balance. The Level I penalty is the greater of $1,000 per violation or 5% of the maximum account balance during the calendar year for each Level I account.

2. Level II Willful Violations Occurring After October 22, 2004 - If Level I does not apply and if the maximum account balance to which the violations relate at any time during the calendar year did not exceed $250,000, Level II applies to that account. The Level II penalty assessed for each account is the greater of $5,000 per violation or 10% of the maximum account balance during the calendar year for each Level II account.

3. Level III Willful Violations Occurring After October 22, 2004 - If the maximum account balance to which the violations relate at any time during the calendar year exceeded $250,000 but did not exceed $1,000,000, Level III applies to that account. The Level III penalty assessed for each account is the greater of 10% of the maximum account balance during the calendar year for each Level III account or 50% of the closing balance in the account as of the last day for filing the FBAR.

4. Level IV Willful Violations Occurring After October 22, 2004 - If the maximum account balance to which the violations relate at any time during the calendar year exceeded $1 million, Level IV, the statutory maximum, applies to that account. The Level IV penalty is the statutory maximum applied to each account. It is the greater of $100,000 or 50% of the closing balance in the account as of the last day for filing the FBAR.

How do I file the FBAR?

Effective July 1, 2013, electronic filing of FBARs is mandatory. The FBAR must be filed via the BSA E-Filing System at http://bsaefiling.fincen.treas.gov/main.html

What to do if I am late filing my FBAR?

If you are late, you should file your FBAR as soon as possible and attach a brief explanation of why you are filing late. While there are stiff penalties for failing to file the form, those penalties could possibly be waived or reduced based on your particular situation. Under no circumstances should you not file your FBAR as that could be considered a willful failure to fail.

Source: www.irs.gov