Based on a recent case before the U.S. District Court for the Southern District of Texas, United States of America v. Maria E. Rosales, significant financial penalties may be imposed on U.S. taxpayers who willfully fail to comply with the Foreign Bank and Financial Accounts (FBAR) reporting requirements. In the case at issue, the taxpayer admitted that she willfully failed to make annual FBAR filings from 2005 to 2012 with respect to foreign accounts in which she held a financial interest or signatory authority. The United States demanded $3.7 million in interest and penalties, and a judgment has been entered for $3.3 million.

U.S. taxpayers are generally required to make annual FBAR filings to disclose interests in or signature authority over foreign financial accounts, such as bank accounts, securities accounts, insurance or annuity policies with cash value, commodity futures or options accounts, mutual funds, or other, similar accounts with a value greater than $10,000 at any time during the calendar year.

While civil penalties for the unintentional failure to comply with the FBAR filing requirement are limited to a maximum of $12,921 (current maximum, adjusted for inflation) per each year an FBAR is not filed (per a recently decided case, United States v. Boyd), the penalties for a willful failure to file can include fines of up to the greater of $129,210 or 50% of the balances in the foreign account, and are imposed per each account. In certain circumstances, taxpayers who fail to file their FBARs in a timely manner may file late FBARs to reduce the resulting penalties.

How Can Venable Help?

Given the steep penalties for willful failures to meet the FBAR filing requirements, taxpayers are encouraged to reevaluate any interests currently held in foreign financial accounts, as well as their historical positions. Venable has significant experience helping individuals understand their FBAR obligations and resolving any delinquent filings.

*Special thanks to Marianna Felshtiner For her contributions to this article.