The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has increased enforcement efforts for the Report of Foreign Bank and Financial Account (FBAR). The penalties for a failure to file are harsh and the Supreme Court of the United States (SCOTUS) recently showed that it has little mercy for those who fail to follow these reporting expectations.
Who should comply?
United States law requires U.S. persons including individuals and businesses who have a financial or signatory interest in a foreign asset that had a value over $10,000 at any point in the taxable year to file an FBAR.
What happens if I do not file an FBAR?
Those who fail to file face penalties that can include a fine of up to $10,000 per filing. If, however, the government can establish that the failure was intentional, they can go after an even larger penalty — up to $100,000 or 50% of the balance of the account.
As mentioned above, SCOTUS has shown little mercy for taxpayers that find themselves facing these steep penalties. In a recent example, a woman inherited foreign assets from her father. She thought she had gone through and filed all the necessary paperwork, but the Internal Revenue Service (IRS) disagreed. They claimed she intentionally failed to file an FBAR and fined her half the value of the account. This translated to a penalty of over $2 million.
The taxpayer pushed back, arguing this was a violation of her constitutional right against excessive fines. The courts disagreed, so she tried to take the case to the highest court in the country. Upon review, SCOTUS chose not to take on the issue. This left the taxpayer with the bill.
The possibility of a steep financial penalty is just one concern. Depending on the facts of the case, the government could push for criminal charges and potential imprisonment. Do not take allegations of a failure to file lightly. The attorneys at Goldburd McCone are familiar with these complex laws and can review your situation and tailor a defense strategy to your case to better ensure your interests and rights are protected.