How do recent court holdings impact non-willful FBAR violations?

On Behalf of | Jan 20, 2022 | International Tax Law

Courts throughout the country have provided holdings that further complicate the issue of how courts will address penalties for non-willful FBAR violations.

Opposite opinions highlight need for clarity

The Ninth Circuit recently held in United States v. Boyle that the $10,000 penalty for a non-willful FBAR violation applies per FBAR form, not per account listed on said form. The Ninth Circuit is just one of a handful of courts that have issued similar holdings.

However, in direct contrast to that holding, the Fifth Circuit recently addressed the same issue and came out with the opposite holding. Instead of basing the penalty for these violations on a per-form analysis, they went with a per-account analysis. The court reasoned the text and purpose of the relevant statute shows the term “violation” is the failure to report “a qualifying account.”

Due to the discrepancy between these two holdings, it appears the only way we will get clarity on this issue is if the issue makes its way up to the Supreme Court. Since two high ranking courts have come down on opposite sides of the issue, that likelihood is pretty high.

A word of caution

It is important that those who believe their taxes may not be in full compliance with applicable law take action to remedy the situation. Although the holdings of the two courts discussed above were different, they both tend to find that taxpayers should know about their need to pay taxes on foreign accounts. A failure to do so can result in serious penalties, sometimes even leading to allegations of criminal wrongdoing. The attorneys at Goldburd McCone are experienced in these matters and can review your situation. This will lead to a discussion that focuses on your specific remedies and a plan that mitigates risks, better ensuring a more favorable outcome.