FBAR Penalties Apply Per Form and Not Per Account

The failure to file an annual Report of Foreign Bank and Financial Assets (an FBAR report) for foreign bank accounts can result in a maximum penalty of $10,000 for nonwillful violations. Lower courts had been split on whether the penalty applies for the nonwillful failure to submit the required FBAR form (FinCEN Form 114) for the year or for each foreign account not reported. The U.S. Supreme Court decided in favor of the taxpayer that the nonwillful penalty applies per form (Bittner, S.Ct., 2/28/23). The Court’s conclusion was based on a number of factors, including the legislative history of the law governing the nonwillful penalty. Had the court decided otherwise, the taxpayer faced a penalty of $2.72 million due to his 272 foreign accounts.

Note: If the failure is willful, the law clearly imposes a penalty per account.