Court finds non-willful FBAR penalty is per form


The U.S. District Court for the District of Connecticut ruled for the taxpayer in United States v. Kaufman (No. 3:18-cv-00787), holding that the non-willful foreign bank account report (FBAR) penalty is assessed per annual form, rather than per account reported on each form, and thus capping the taxpayer’s penalties at $30,000. However, it also held in favor of the government that the penalties are not excused under the reasonable cause exception.

If a taxpayer has a reportable foreign financial account, it may be required to report the account annually on an FBAR. Under the Bank Secrecy Act, each U.S. person must file an FBAR when the person has a financial interest in, or signature authority over, one or more accounts in a foreign country and the aggregate value of all such accounts exceeds $10,000 at any time during the calendar year. The FBAR is generally due April 15, but that date is most commonly extended to Oct. 15 each year.

The taxpayer in Kaufman, a U.S. citizen residing in Israel, had reported to his accountants that he did not have any foreign financial accounts, when in fact he had multiple accounts in Israel. The taxpayer claimed he did not learn of the FBAR filing requirement until September 2011. The IRS sought over $140,000 in penalties for taxpayer’s non-willful failure to file FBARs between 2008 through 2010.

In reaching its decision, the court relied heavily on a previous district court case, U.S. v. Bittner, (No. 4:19-cv-00415). In Bittner, the court found that “the text, structure, and purpose of the statute unambiguously point to the conclusion that the non-willful civil penalty applies per FBAR reporting violation rather than per account.” However, the U.S. District Court for the Central District of California, in U.S. v. Boyd (No. 2:18-cv-00803), ruled that the non-willful penalty for failing to file FBARs is not limited to $10,000 per year, and may be imposed on a per-account basis. The court viewed the statute as “somewhat unclear” as to whether the $10,000 penalty applies per year or per account. However, it found that the government’s position was a more reasonable interpretation of the statute. It held that a violation relates to an individual “account” not a per-form basis, and thus, that the non-willful FBAR penalty is not limited to $10,000 per year.

The outcome in Kaufman is now the second opinion out of three to support the interpretation of the statue that the non-willful penalty is per form. However, both Boyd and Bittner are out on appeal before their respective circuits.




Cory Perry

Washington DC, Washington DC

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