In February, a significant decision by the U.S. Supreme Court had a profound impact on the penalties imposed by the IRS for the non-willful failure to file a Report of Foreign Bank and Financial Accounts (FBAR) by the April 15 deadline. The court ruled that the statutory penalty of $10,000 for non-willful failure to file an FBAR applies to each unsubmitted report rather than per account. Consequently, individuals who have already paid penalties for non-willful FBAR violations may be eligible for a refund.
Previously, the IRS had been assessing penalties based on each individual foreign account, resulting in considerably higher penalty amounts. For instance, in the Supreme Court case, the IRS had proposed FBAR penalties of $2.72 million for the individual’s failure to report multiple accounts over five years. However, following the court’s interpretation, the IRS would only be able to impose a $50,000 penalty for the same five-year period. Consequently, the IRS may be required to refund substantial amounts in penalties that were previously assessed.
It’s worth noting that this decision could have widespread implications, potentially leading to the refund of millions of dollars in FBAR penalties that were previously levied by the IRS.
