On February 28, 2023, the 5-4 decision in Bittner v. United States was released by the Court. The opinion holds that the Bank Secrecy Act’s (BSA’s) penalty for non-willful FBAR violations should apply per report as one violation carrying a maximum penalty of $10,000 per year, and not a cascade of penalties calculated on a per-account basis.
Prior to the ruling, the civil penalty for a non-willful violation of a Financial Crimes Enforcement Network (FinCEN) filing could be at least $10,000 per account per year. It was possible to assert civil penalties for FBAR violations in amounts that exceeded the balance in the foreign financial account. Civil and criminal penalties could also be imposed together.
What is FBAR? The Bank Secrecy Act gave the Department of the Treasury authority to collect information from U. S. persons who have financial interests in, signature or other authority over accounts maintained with financial institutions located outside the United States. A “U.S. person” indicates a citizen or resident of the United States, an entity created, organized, or formed in the United States and certain U.S. territories, or an estate formed under the laws of the United States. This provision of the BSA requires that U.S. persons file a FinCEN Form 114 (commonly known as “FBAR”) if the aggregate maximum values of the foreign financial accounts exceed $10,000 at any time during the calendar year.
Who must file the FBAR? A U.S. person must file an FBAR if they have a financial interest in, signature or other authority over any financial account outside the U.S. and the aggregate amount in the account exceeds $10,000 at any time during the calendar year.
Financial accounts include but are not limited to bank accounts, securities accounts, financial instruments accounts, insurance or annuity policies with a cash value (such as a whole life insurance policy); mutual funds or similar pooled funds (i.e., a fund available to the public with a regular net asset value determination and regular redemptions); and any other accounts maintained in a foreign financial institution or with a person performing the services of a financial institution.
Where to File an FBAR: FBAR is not part of the Federal tax return. Electronic filing of FBARs is through the BSA E-Filing System, not to the Internal Revenue Service (IRS).
Due Date: The FBAR is an annual calendar year report and must be received by the Department of the Treasury on or before April 15 of the year following the calendar year being reported. However, FinCEN will grant filers that fail to meet the annual due date of April 15 an automatic extension to October 15 each year.
If you have questions regarding the Supreme Court opinion on non-willful FBAR violations, contact us or speak with your BPM tax professional for additional information.
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