# FBAR Non-Wilful Penalty: Mitigation



## iota2014

> *What You Should Know About FBAR Penalty Mitigation*
> [..]
> Since the statutory FBAR penalties can be very burdensome, the IRS has developed and adopted mitigation guidelines to assist examiners in determining the appropriate FBAR penalty. See IRM 4.26.16.4.5 (07-01-2008). The Internal Revenue Manual directs that "... examiners are to use discretion, taking into account the facts and circumstances of each case, in determining whether a warning letter or penalties that are less than the total amounts provided for in the mitigation guidelines are appropriate." [IRM § 4.26.16.4.4(3) (07-01-2008).] The IRM reminds examiners that "[t]he sole purpose for the FBAR penalties is to serve as a tool to promote compliance with respect to the FBAR reporting and recordkeeping requirements." [IRM § 4.26.16.4.4(3) (07-01-2008).]
> 
> According to the IRS, a taxpayer that meets the following threshold requirements qualifies for the FBAR penalty mitigation [IRM § 4.26.16.4.6.1 (07-01-2008)]:
> 
> The person has no history of past FBAR penalty assessments and (for violations after October 22, 2004) the person has no history of BSA or criminal tax convictions for the preceding ten years;
> 
> No money passing through any of the foreign accounts associated with the person are from illegal sources or were used to further criminal purposes;
> 
> The person cooperated during examination (i.e., IRS did not resort to summons power); and
> 
> The IRS did not sustain a civil fraud penalty for underpayment of tax for the year in question due to failure to report income related to any foreign account.
> 
> In the case of a non-willful violation, the statutory penalties are mitigated as follows [IRM § 4.26.16.4.6.2 (07-01-2008)]:
> 
> Level 1 - If the aggregate balance of all accounts is not in excess of $50,000, the penalty for each violation is $500, not to exceed a total of $5,000.
> 
> Level 2 - If the aggregate balance of all accounts is in excess of $50,000, but less than $250,000, the penalty per violation is the lesser of $5,000 or 10% of the highest balance in each account during the year.
> 
> Level 3 - If the amount in the account is in excess of $250,000, the penalty per violation is the statutory maximum of $10,000.
> [..]


https://www.lexisnexis.com/legalnew...-fbar-penalty-mitigation.aspx?Redirected=true

The article goes on to describe mitigation of wilful penalties.

From another discussion of FBAR penalties:



> According to the IRS guidance, a non-willful penalty will not be recommended if a taxpayer has reasonable cause for the reporting failure and subsequently filed complete and correct FBARs. A nonwillful penalty will only be asserted as *one penalty for each year of violation (no matter how many unreported offshore accounts the taxpayer held in a single year)*. The non-willful penalty is limited to $10,000, and may be less depending upon the aggregate balance of all the unreported accounts per year. Only in extreme cases will the IRS assert a separate non-willful penalty for each account in a particular year. Regardless, “in no event will the total amount of the penalties for nonwillful violations exceed 50 percent of the highest aggregate balance of all unreported foreign financial accounts for the years under
> examination.”


("IRS Guidance To Cap Potential FBAR Penalties", gtlaw.com) Bolding added by me.


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## Lulu78

Thanks iota24, this is very helpful


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## ForeignBody

This also helps to put the penalty scenario in context from: https://www.irs.gov/Businesses/Smal...t-of-Foreign-Bank-and-Financial-Accounts-FBAR

_Delinquent FBAR Submission Procedures

Taxpayers who have not filed a required FBAR and are not under a civil examination or a criminal investigation by the IRS, and have not already been contacted by the IRS about a delinquent FBAR, should file any delinquent FBARs according to the FBAR instructions and include a statement explaining why the filing is late. All FBARs are required to be filed electronically through FinCEN’s BSA E-Filing System. Select a reason for filing late on the cover page of the electronic form or enter a customized explanation using the ‘Other’ option. If unable to file electronically you may contact FinCEN’s Regulatory Helpline at 800-949-2732 or 703-905-3975 (if calling from outside the United States) to determine acceptable alternatives to electronic filing.

The IRS will not impose a penalty for the failure to file the delinquent FBARs if income from the foreign financial accounts reported on the delinquent FBARs is properly reported and taxes are paid on your U.S. tax return, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted._


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