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U.S. Supreme Court Clarifies Fines for FBAR Filing Penalties

February 28, 2023

Breaking news…the U.S. Supreme Court has ruled that FBAR penalties are applicable on a per form not per account basis. Here are the details.

The U.S. Supreme Court has ruled that The Bank Secrecy Act (BSA) $10,000 maximum penalty for the non-willful failure to file the FBAR applies on a per report basis, not a per account basis. This comes as welcome news for many taxpayers who would potentially be subject to such penalties. Here’s what you should know.

Background- What is the FBAR?

Do you have foreign financial accounts (FFA)? Any U.S. person with a FFA must report their accounts to the Financial Crimes Enforcement Network (FinCEN) on FinCEN Form 114 also known as the Foreign Bank Account Report (FBAR). Check out our recent blog, 2023 FBAR Deadline Reminder for more background and helpful deadline information.

Failure to file penalty

Previously, if you failed to file, you were subject to either a civil penalty of up to $10,000 for each negligent violation (non-willful violation), or a civil penalty of up to $100,000 or 50% of the balance of the account at the time of the purposeful violation (willful violation). Different courts were applying the non-willful penalty inconsistently.

United States vs. Bittner

The new guidance comes as a response to the case of the United States vs. Alexandru Bittner. From 2007-2011, Bittner, who was living in Romania, failed to report his interests in foreign bank accounts on the FBAR. He was charged $2.72 million for his 272 unreported accounts (272 x $10,000 penalty). Bittner challenged the fine, asserting that the BSA assesses a maximum penalty for non-willful violations of $10,000 per FBAR report, not per unreported account. Bittner lost the case in the Fifth Circuit.

What’s new?

On February 28, 2023, the Supreme Court voted 5-4 to reverse this ruling. Under the new ruling, the Supreme Court holds that the $10,000 maximum penalty under the BSA is assessed per report, not per account. So, in the case of Bittner, he would owe $50,000 for his five unfiled FBARs, as opposed to $2.72 million.

Questions? Wondering if you’re accurately reporting all your foreign accounts? We can help. Contact us.

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