As stated in our recent post, the IRS released internal documents pursuant to a Freedom of Information Act ("FOIA") request. Many of the documents released relate to FinCEN Form 114 (the "FBAR," formerly Form TD F 90-22.1).
The penalty for willfully failing to file the FBAR is the greater of $100,000 or 50% of the account balance at time of violation. The penalty for a non-willful violation is up to $10,000. The documents released by the IRS list the factors that the IRS considers when determining whether an FBAR violation was willful:
Factors supporting a willful FBAR penalty:
Factors not supporting a willful FBAR penalty:
What is an FBAR "violation?"
The FBAR statute does not define what constitutes a separate FBAR "violation." See 31 U.S. Code § 5321(a)(5). As a result, the IRS could impose multiple FBAR penalties per year. The documents released by the IRS use the example of an individual who failed to file the FBAR for three years to report two foreign accounts. The IRS examiner has the discretion to assert either (i) 6 violations, one per account per year, (ii) 3 violations, one per FBAR, or (iii) one violation for the entire three year period. However, the document states that "assertion of multiple penalties and the assertion of separate penalties for multiple violations with respect to a single FBAR form should only be taken in the most egregious cases."