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What are the Penalties for Failing to File an FBAR?

Offshore Account Update

Posted on December 17, 2020 |

The requirement for U.S. taxpayers to file FinCEN Form 114, Report Foreign Bank and Financial Accounts (FBAR), exists under the Bank Secrecy Act (BSA). This statute was enacted in order to aid in the federal government’s fight against money laundering and other financial crimes, and violations of the BSA are taken very seriously. As a result, while it might not seem like a big deal if you failed to file an FBAR, the consequences can be substantial—and in some cases, FBAR violations can lead to criminal prosecution. Here, Boston offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains the penalties for failing to file an FBAR:

FBAR Violations Can Lead to Civil or Criminal Penalties Under the Bank Secrecy Act

The penalties for failure to file an FBAR are determined, in part, based upon the reason for the taxpayer’s failure to file. Under the BSA, failure-to-file violations are broken down into five categories:

  • Negligent Failure to File – Negligent failure to file is the least-severe form of FBAR violation. It carries a civil fine of slightly over $1,000 per violation as of 2020 (civil fines for BSA violations are subject to annual adjustments for inflation).
  • Non-Willful Failure to File – If an FBAR filing failure is deemed non-willful, as opposed to merely negligent, then the civil penalty increases to over $13,000 as of 2020.
  • Pattern of Negligent Activity – Businesses that demonstrate a “pattern of negligent activity” in failing to file FBARs can face enhanced civil penalties. As of 2020, the fine for engaging in a pattern of negligent activity is over $80,000.
  • Willful Failure to File – Willful failure to file an FBAR can be prosecuted as a civil or criminal offense. In civil cases, fines are calculated as the greater of either the statutory minimum (over $120,000 as of 2020) or 50 percent of the value of the account at the time of the violation. Criminal penalties can include up to a $250,000 fine and five years of federal imprisonment.
  • Willful Failure to File While Violating Certain Other Laws – Willful failure to file an FBAR, “while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period,” carries the same civil penalties as a stand-alone failure to file. However, the criminal penalties increase to up to a $500,000 fine and 10 years of federal imprisonment.

Filing a False FBAR Can Also Lead to Civil or Criminal Prosecution

In addition to failing to file an FBAR, filing a false FBAR can lead to civil or criminal prosecution as well. Negligent and non-willful mistakes carry the same penalties as failure to file, while “knowingly and willfully” filing a false FBAR can carry criminal penalties of up to $10,000 and five years of incarceration.

Schedule an Appointment with Boston Offshore Tax Lawyer Kevin E. Thorn

Boston offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, has decades of experience helping individuals and businesses meet their FBAR filing obligations and resolve past filing mistakes. To arrange a confidential consultation, please call 617-692-2989, email ket@thornlawgroup.com or request an appointment online today.

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