Penalties for Non-Compliance with Reporting Requirements
Civil penalties for failure to timely file a FBAR Report can be severe - up to $10,000 for each unintentional violation or, in the case of willful violations, the greater of $100,000 or 50% of the account balance at the time of the violation. Under certain conditions, the IRS may abate FBAR failure to file penalties in whole in part for “reasonable cause.” Criminal penalties may also be imposed for willful violations of the FBAR reporting requirements.
In addition to the FBAR failure to file penalties, various Federal tax penalties can apply if a taxpayer fails to properly report taxable income on its undisclosed foreign accounts. Those tax-related penalties can include: (i) additional accuracy-related tax penalties of up to 20% of the underpaid tax; (ii) delinquent return penalties of up to 25% of the unpaid tax if no return is filed; (iii) civil fraud penalties of 75% of the tax understatement in the case of fraud; and (iv) in the case of willful violations, prosecution for criminal tax evasion.
