Over the last few days I have blogged about the IRS “tax amnesty,” or settlement initiative, for owners of offshore bank accounts who make a voluntary disclosure to the IRS concerning the existence of those offshore bank accounts. It is because the potential tax penalties are so severe that the IRS settlement initiative may be attractive.
The following chart is from the IRS website and sets forth the civil tax penalties and the criminal tax penalties that may be asserted for not complying with the FBAR reporting and record keeping requirements. The citations are to the Bank Secrecy Act, and the code of Federal Regulations; not the Internal Revenue code.
| Violation | Civil Penalties | Criminal Penalties | Citation |
| Negligent Violation | Up to $500 | N/A | 31 U.S.C. § 5321(a)(6)(A) 31 C.F.R. 103.57(h) |
| Non-Willful Violation | Up to $10,000 for each negligent violation | N/A | 31 U.S.C. § 5321(a)(5)(B) |
| Pattern of Negligent Activity | In addition to penalty under § 5321(a)(6)(A) with respect to any such violation, not more than $50,000 | N/A | 31 U.S.C.§ 5321(a)(6)(B) |
| Willful – Failure to File FBAR or retain records of account | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation | up to $250,000 or 5 years, or both | 31 U.S.C. § 5321(a)(5)(C) 31 U.S.C. § 5322(a) and 31 C.F.R. § 103.59(b) for criminal. The penalty applies to all U.S. persons. |
| Willful – Failure to File FBAR or retain records of account while violating certain other laws | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation | up to $500,000 or 10 years, or both | 31 U.S.C. § 5322(b) and 31 C.F.R. § 103.59(c) for criminal. |
| Knowingly and Willfully Filing False FBAR | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation | up to $10,000 or 5 years, or both | 18 U.S.C. §1001, and 31 C.F.R. § 103.59(d) for criminal. |
| Civil Tax Penalties and Criminal Tax Penalties may be imposed together. 31 U.S.C. §5321(d). |
The chart does not include the civil tax fraud penalty under the Internal Revenue Code which is 75% of the understatement of tax, or the accuracy related penalty of 20% of the understatement of tax.
If you have a Swiss bank account or an offshore bank account in another country, you may wish to contact the tax litigation attorneys at Brager Tax Law Group to see whether a voluntary disclosure makes sense for your situation.