$10,000 FBAR penalty now $10,000 per year not $10,000 per account per year
The U.S. Supreme Court has decided (28 Feb 2023: Bittner v. United States) that ‘FBAR’ penalties – assessed by the IRS for non-reporting foreign (i.e. Irish) bank and financial accounts – are to be applied per form and not per account. This is important for U.S. taxpayers living in Ireland who are not compliant with their reporting obligations under U.S. law.
As well as filing an annual tax return with the IRS (if earning above a certain income threshold), U.S. taxpayers are required to report foreign financial assets to the IRS under the provisions of the Bank Secrecy Act of 1970. These reports are due each year if total financial assets in these accounts exceed $10,000 at any point in the year. They are normally filed with U.S. tax returns. They are commonly called FBARs (Foreign Bank Account Reports).
U.S. taxpyers include U.S. citizens, passport holders, and legal permanent residents (green card holder) – unless they have properly revoked their green card with the IRS.
In this case the plantiff (Bittner) had failed to report multiple bank accounts over 6 years. The IRS assessed penalties of $2.72m – which were reduced to $50,000 by the Court.
The effect of today’s decision will be to limit potential penalties that non-compliant U.S. taxpayers face if the IRS finds out about their Irish bank accounts. The maxium penalty for non-reporting is $60,000 – and taxpayers who have already paid FBAR penalties may be able to file a claim for refunds, if done in time.
Under the provisions of an intergovernmental agreement executed in 2012, each year the Irish Revenue Commissioners send the IRS details of bank and financial account held by U.S. taxpayer in Ireland.
There are various amnesty programmes that U.S. taxpayers may avail of – but these programmes are given at the discretion of the IRS and may be withdrawn at any time. Furthermore, eligibiity is generally based on non-willful conduct, and the programmes are not available if the IRS has contacted a delinquent taxpayer first.
Taxpayers are urged to act quickly. The IRS may seek to have the law changed to support its position, and any refund claims filed late will be rejected.
Download the full Transcript
Now is a good time for U.S. taxpayers to catch up with their IRS filings.
For more on this click on this link from The Irish Times (1 Mar, 2023).
irishtimes.com/business/2023/02/28/us-supreme-court-ruling-offers-reprieve-for-non-compliant-irish-born-or-resident-us-taxpayers/