Georgia residents who have kept a foreign bank account without reporting it to the Internal Revenue Service may be charged with an FBAR violation. However, the potential penalties for failing to file an foreign bank account report just got reduced. In May, the IRS announced a new cap on FBAR violation penalties and new guidelines for issuing the penalties.
In the past, the IRS has threatened individuals with FBAR violation penalties in excess of the highest aggregate balance of their unreported foreign accounts. One case involved a man in Florida who was ordered to pay 150 percent of the value of his unreported Swiss bank account. With the new FBAR violation guidelines, the IRS will no longer issue a penalty for an FBAR violation that exceeds 100 percent of the highest aggregate balance of a person’s unreported foreign bank accounts.
The 100 percent FBAR violation penalty cap only relates to willful violations. For every year that a person did not file an FBAR for a foreign bank account, IRS examiners must provide evidence that the violation was willful. Cases that involve a nonwillful FBAR violation will be subject to differing penalties depending on the circumstances involved. The maximum penalty for a nonwillful violation will in most cases not exceed $10,000 for each year that a foreign bank account was not reported to the IRS.
Some argue that the new FBAR penalty regulations have been created so that the IRS will not be accused of issuing excessive fines. The argument that IRS fines are too excessive is often raised when a person is penalized for a violation. An attorney may be able to help someone who is facing a potential tax lien by arguing for reduced penalties.