FBAR penalty amount guidelines set


Maximum penalties for willful failure to report foreign bank accounts on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), for multiple years are limited under new IRS procedures in IRS memo SBSE-04-0515-0025, issued in May.

Under 31 U.S.C. Section 5321(a)(5)(C), the maximum penalty is the greater of $100,000 or 50% of the balance in all subject accounts on each FBAR filing date, June 30. The memo instructs examiners to determine a single penalty for all years combined and then allocate it to each year. The single penalty is 50% of the highest aggregate balance in any of the years under examination.

The memo gives an example of highest balances for 2010, 2011, and 2012 of $50,000, $100,000, and $200,000, respectively. The highest balance during the three years is $200,000, of which 50% is $100,000. That amount is then allocated by a ratio of the highest balance for each year to the combined highest balances for all years, in this case, $350,000. So for 2010, the allocation is ($50,000 ÷ $350,000) × $100,000 = $14,286; for 2011, ($100,000 ÷ $350,000) × $100,000 = $28,571; and for 2012, ($200,000 ÷ $350,000) × $100,000 = $57,143.

Otherwise, the maximum penalty would have been $100,000 for each year.

SPONSORED REPORT

Why cybercriminals are targeting CPAs

This free report expands on the most commonly found scams, why education and specialized IT knowledge help to lessen security vulnerabilities, and why every firm should plan carefully for how it would respond to a breach.

PODCAST

How tax reform — and Excel — are changing the CPA Exam

Mike Decker, the vice president of examinations at the AICPA, discusses changes being made to the exam as a result of tax reform — and about how Excel will now be available for use on the test.