A district court has found that the $10,000 non-willful FBAR penalty (for failure to file the FBAR) applies per FBAR form, not per the number of bank, etc. accounts required to be reported on the form. Two district courts have now come to this conclusion. One district court has found the opposite.
Under 31 USC § 5314(a), every U.S. person that has a financial interest in, or signature or other authority over, a financial account, or accounts, in a foreign country must report the account, or accounts, to IRS annually on a FinCEN Report 114, Report of Foreign Bank and Financial Accounts (commonly referred to as an FBAR or FBAR form) if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
One FBAR is used to report multiple foreign financial accounts. (FBAR instructions)
The penalty for violating the FBAR requirement is set forth in 31 USC § 5321(a)(5). The amount of the penalty depends on whether the violation was non-willful or willful.
One district court has held that the penalty for a non-willful FBAR violation relates to each account required to be shown on the FBAR. Thus, IRS could impose the statutory maximum penalty of $10,000 for each of the taxpayer's thirteen accounts that should have been reported on one FBAR. (US v. Boyd, (DC CA 2019) 123 AFTR 2d 2019-1651).
But another district court came to the opposite conclusion. It found that the $10,000 non-willful penalty applies only to the FBAR form itself, not the number of accounts required to be shown on the FBAR. (US v. Bittner (DC TX 6/29/2020).
In 2010, Mr. Kaufman had 17 foreign accounts, the balance of which, in aggregate, exceeded $10,000. He was required to file an FBAR, but he did not do so.
A court found that his failure was non-willful, and the IRS imposed a penalty of $170,000, i.e., $10,000 for each account.
Mr. Kaufman argued that the penalty should be capped at $10,000, i.e., $10,000 for failure to file one FBAR.
The district court, finding the court's argument in Bittner persuasive, found the non-willful FBAR penalty applies per form, not per account. Thus, the penalty was capped at $10,000.
The district court found the arguments in Boyd unpersuasive. And the court noted that the Boyd decision was not binding on it. Him