Page 1 - Penalties.The Government’s New Stance That the Non-Willful Civil FBAR Penalty Applies to.JTPP_22-02_Rule

Penalties

CarolIne rule is a partner at
Kostelanetz & Fink, LLP, New York,
New York. The Government’s New Stance That the
Non-Willful Civil FBAR Penalty Applies to

Every Account on an Untimely-Filed FBAR,

Rather Than to the Single Untimely FBAR

Form

By Caroline Rule

ecent litigation has focused on the government’s new position that the
$10,000 non-willful civil FBAR penalty applies per account listed on an
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R non-willfully untimely-filed annual FBAR—a Report of Foreign Bank
or Financial Accounts that must be filed by a U.S. person “who has a financial
interest in or signature authority over foreign financial accounts” if the aggregate
value of the accounts “exceeds $10,000 at any time during the calendar year.” The
FBAR is filed in the following calendar year. Until recently, the rule recognized
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by courts has been that the non-willful civil penalty applies per single untimely
filed FBAR form, not per account listed on that FBAR.
This issue, of first impression in an appellate court, is pending before the Ninth
Circuit in J. Boyd. The same issue is currently before the Eastern District of Texas
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in Bittner, and the Central District of California in Patel, et al. 5
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In Boyd, the taxpayer did not file timely FBARs reporting 13 foreign accounts,
but was not willful. The government believes that it was proper when, “[i]n
assessing the thirteen separate FBAR penalties against Boyd, the IRS treated
each account that was not listed on a timely filed FBAR as a separate non-willful
violation.” The District Court agreed, holding that: “Each non-willful FBAR
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violation relates to a foreign financial account, and the IRS may penalize each
such violation with a penalty not to exceed $10,000.” 7

a. prior decisions on this Issue

The government’s argument that the non-willful civil FBAR penalty of $10,000
applies per account that is not reported on a single untimely FBAR is very new.
In cases before 2019, courts accepted that the penalty applied per untimely
filed FBAR form. As an example, in 2017, in Jarnagin, the Federal Court of
Claims wrote that the IRS may “impose a civil monetary penalty of not more
than $10,000 for failure to file [an FBAR].” The U.S. Tax Court, in 2016, also
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