On February 28, 2023, the United State Supreme Court issued its opinion in a highly watched case concerning the maximum penalty that may be imposed for a “non-willful” violation of the Report of Foreign Bank and Financial Account (FBAR) requirements. Under the Bank Secrecy Act, all U.S. persons with accounts at foreign institutions with an aggregate balance above $10,000 at any point during the year must annually report certain information about the accounts on an FBAR. The statute imposes a $10,000 maximum penalty for a “non-willful” FBAR violation.
The Supreme Court’s decision in Bittner v. United States resolves a longstanding dispute between the IRS and Taxpayers on how the $10,000 penalty is applied. The IRS’s position has been the $10,000 penalty is imposed “per account” not properly disclosed on an FBAR; while Taxpayers have argued the penalty is applied on a “per year” basis, regardless of the number of accounts required to be disclosed. The facts of Bittner accentuate the stark differences in results: under the IRS’s theory, the Taxpayer was assessed a penalty of $2.72 million; under the Taxpayer’s it was $50,000.
But the Supreme Court sided with the Taxpayer, conclusively deciding the “non-willful” FBAR penalty may only be applied on a per year (as opposed to per account) basis.
While this is a huge win for Taxpayers, many have already acquiesced to the IRS’s prior insistence on collecting penalties on a “per account” basis. If this applies to you, call one of the attorneys at Anderson & Jahde to see if you might be able to get back some of what you have already paid.
Contact Anderson & Jahde for competent, professional tax help if you have any questions.