Is It One Penalty of $10,000 or Multiple Penalties of $10,000?

Suppose you are a resident of a foreign country–say, Romania–and you have foreign financial accounts.  You need to file the FBAR (Report of Foreign Bank and Financial Accounts) to tell the Financial Crimes Enforcement Network (FINCEN) what foreign accounts you have.  There is no tax due; however, there are substantial penalties for not filing the FBAR.  The penalty for willfully not filing the form starts at $100,000 per account.  The non-willful penalty is up to $10,000.

But a questions is unanswered regarding the non-willful penalty: Is the penalty per account that is not reported or per form that is not reported?  The Fifth Circuit Court of Appeals has held that it’s per foreign account; the Ninth Circuit Court of Appeals has held it’s per form.  This can make a huge difference (as you might imagine).

Alexandru Bittner failed to file his FBARs.  His violation was held to be non-willful.  He’s in the Fifth Circuit (he resides in Texas); he was assessed a penalty of $2.7 million.  Had Mr. Bittner resided in Nevada, he would have been fined $50,000.  That’s a difference of $2.65 Million, surely a large enough difference to file a petition for certiorari.

The Supreme Court doesn’t take many tax related cases.  Almost all of them relate to circuit conflicts such as this one.  Indeed, one of the primary purposes of the Supreme Court is to make sure that federal law is uniform among the states.  The Supreme Court granted certiorari this morning; the case will likely be heard late this year with a decision probably coming in early 2023.  At that point in time, we’ll know whether the non-willful penalty is based on accounts or forms.

One reminder to everyone: If you have an FBAR filing requirement, just file the form (including all of your accounts) and you avoid all these penalties.  I’d much prefer paying no fine at all then paying $50,000 (or $2.7 million).  The FBAR deadline coincides with the tax filing deadline (with an automatic extension to October 15th).

Case: Bittner v. United States


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