US Supreme Court Issues Significant Taxpayer Friendly Ruling on FBAR Penalties
The Financial Crimes Enforcement Network (FinCEN) Form 114, also known as the Report of Foreign Bank and Financial Accounts (FBAR), is required to be filed by U.S. tax residents with foreign financial accounts if the aggregate balance of the foreign accounts exceeds $10,000 at any point during the year. FBARs have long been associated with severe penalties for failure to file. A non-willful failure to file an FBAR can result in a penalty of $10,000.
A typical FBAR will separately list all of the foreign bank accounts owned by the filer. There has been an open question as to whether the $10,000 penalty is applied per account or per form. Obviously, for an FBAR filer with multiple accounts, this distinction can make an enormous difference.
This matter appears to be settled by the U.S. Supreme Court with its ruling on February 28, 2023, in Bittner v. United States. In Bittner, the failure to file was for five years and collectively covered over 270 accounts leading to a penalty sought by the U.S. Treasury Department of $2.72 million. Mr. Bittner, a dual citizen of the U.S. and Romania, successfully argued that his non-willful penalty for failure to file an FBAR should be calculated on a per form (effectively on a per year) basis. As a result, his penalty was reduced to $50,000.
This is a significant development for anyone who has recently paid or is facing penalties for failure to file an FBAR. Please contact our office to discuss how this case may impact you.