Tax Byte

The U.S. Supreme Court in a 5-4 decision has held that non-willful Foreign Bank Account Report (FBAR) penalties apply per report, not account. Today’s news is being hailed as a surprising and significant win for non-willful FBAR non-filers.

The FBAR is an annual report due on April 15 following the calendar year reported and is filed electronically through the Financial Crimes Enforcement Network’s (FinCEN) BSA E-Filing System. Generally, any U.S. person, corporation, partnership, limited liability company, trust, and estate must file an FBAR to report a financial interest in, signature, or authority over at least one financial account located outside of the U.S. if the aggregate value exceeds $10,000 at any time during the calendar year reported.

Although an FBAR is not filed with the IRS via a federal tax return, the IRS can begin an FBAR examination as a result of an audit under the Internal Revenue Code. The IRS provides FBAR resources and additional information HERE.

200 Accounts Walk Into an FBAR: The Court released its opinion in Bittner v United States on February 28. Justice Neil M. Gorsuch, authoring the opinion, agreed with Alexandru Bittner’s reading of the law in that the Bank Secrecy Act’s (BSA) $10,000 maximum penalty for the non-willful failure to file a compliant report accrues on a per-report, not per-account, basis. “Best read, the BSA treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis,” Gorsuch wrote.

So, this would mean Bittner’s tab is coming to $50,000 for five years of missing reports instead of the IRS’s original penalty assessment of over $2.7 million based on over 200 accounts. FBAR non-filers are sure to cheers to that.