US DOJ Asks Supreme Court to Weigh In on FBAR Maximum Penalty Dispute

International Wealth Tax Advisors

A debate over penalties for non-willful failure to disclose all of an individual’s or business’ foreigh bank accounts may reach the Supreme Court, if a Department of Justice request is granted, according to its recently filed brief. At issue: should the maximum $10,000 Foreigh Bank Account Reporting (FBAR) penalty apply on a per-account basis, or rather than in one unified annual basis.

Fifth and the Ninth Circuit Courts have produced dueling rulings that could mean the difference between a multi-million dollar penalty and one in the thousands.

Currently, individuals, entities and businesses are required to file a single form disclosing their foreign accounts, due by April 15 of the year following the calendar year being reported.

At issue: Alexandru Bittner, a Texas resident with Romanian citizenship, had been assessed $2.7 million in penalties in 2017. Penalties were assessed for each account he failed to disclose over a 5 year period on 61 accounts in 2017 and 54 in 2011. Bittner argued that his non-willful failures to report FBARs should have been hit with penalties for each year of non-reporting, not for each account he failed to report.

DOJ maintains that weakening the penalties undermines the deterrent effect of FBAR. The diametric Circuit Court decisions may possibly reach the Supreme Court if the case goes forward.

Given the IRS’ directives by the Biden Administration, FinCen, and the Bank Secrecy Act – to rout out bad actors and decrease non-compliance, it’s difficult to imagine that the Supreme Court would reward negligence and change the rules. Watch this space.

Written by:

International Wealth Tax Advisors

International Wealth Tax Advisors on:

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