Non Willful FBAR PenaltyFebruary 28, 2023 | By Erik Lincoln
The Supreme Court overtured the Fifth Circuit, by holding that the $10,000 maximum penalty for the non-willful failure to file an FBAR accrues on a per-FBAR, not a per-account, basis. (Bittner, (S Ct 2023))
A U.S. person (i.e., citizen or resident alien) must report all foreign bank accounts if the aggregate value of those accounts exceeds $10,000 anytime during a calendar year. The accounts are reported on FinCEN Form 114, Report Foreign Bank and Financial Accounts, also known as an FBAR.
A person who fails to report a reportable account on an FBAR may be subject to a penalty. The amount of the penalty depends on whether the violation was willful or non-willful. The maximum penalty for a non-willful violation of the reporting requirements is $10,000 (adjusted for inflation for violations after 2015).
The Fifth Circuit had held that the penalty applies per account not reported. However, the Ninth Circuit, along with other federal district courts, had held that the $10,000 non-willful failure to file an FBAR penalty applied per FBAR, not per financial account (e.g., bank accounts) required to be reported on the form.
The Supreme Court, reversed the Fifth Circuit opinion, found that, “Best read, the [non-willful penalty rules] treat 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.”