Bittner v. U.S. has been scheduled onto the Supreme Court’s fall calendar, which will be crucial in resolving the Fifth Circuit and Ninth Circuit split on the penalty of violating FBAR A.K.A. Foreign Bank and Financial Accounts Reporting filing requirements.
What is FBAR?
Whether living in the U.S. or abroad, every U.S. person (citizens, resident aliens, green card holders) is required to file FinCEN Form 114 as long as the balance of all foreign accounts is greater than $10,000 at any point during the calendar year. It does not matter if you are an owner of the account, a nominee, or can control the distribution of the account’s funds, you will still need to file FinCEN Form 114.
Current Penalties
Failing to disclose information on your Foreign Bank and Financial Accounts Reporting will lead to nothing but headaches, and steep penalties. These penalties can be broken down into two separate classes, willful and non-willful.
Non-willful penalties are enforced more sparrigly, being capped at $10,000 per FBAR filing. In terms of willful penalties, you can expect to be penalized in a much more severe fashion. This can be seen through the willful penalties cap of up to the greater of $100,000 or 50% of the balance in the account at the time of the violation.
Court Case’s Potential Changes
The question to be presented to the Supreme Court is whether FBAR penalties should be assessed as a failure to file an annual FBAR, or whether there should be a separate violation for each individual account not properly recorded.
This could make a huge difference in terms of the magnitude of various penalties enforced. For example, if someone non-willfully failed to file FBARs on 100 various accounts, if charged with the maximum penalty on a per account basis, they could be facing a $1 million penalty. Whereas if someone non-willfully failed to file the same FBAR filings on an annual basis, they would only be hit with a $10,000 penalty per form, not on an account basis.
Wrap Up
This case will be something to keep an eye on for those who hold foreign bank or financial accounts. The decision made by the Supreme Court will surely have a large impact on those who hold money overseas.