5.21.6. Foreign Financial Account Reporting

(1) Report of Foreign Bank and Financial Accounts (FBAR) is authorized by statute.

• 31 U.S.C. §5314(a) directs the Secretary to require residents or citizens of the United States, or a person in and doing business in the United States, to keep records and/or file reports when the person makes a transaction or maintains a relationship with a foreign financial agency.

• Section 5314(b) authorizes the Secretary of the Treasury to carry out this mandate by issuing regulations prescribing the application of the reporting requirements, including to whom the requirements apply.

(1) Each U.S. person who has a financial interest in, or signature or other authority over, one or more foreign financial accounts that has an aggregate value greater than $10,000 at any time during a calendar year is required to confirm the existence of the foreign account on Schedule B of Form 1040, and on similar schedules of other federal tax forms, as well as report the foreign accounts on FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR), formerly form TD F 90-22.1. The FBAR is due on or before April 15 of the year immediately following the calendar year being reported.

(2) Beginning with the filing season starting July 1, 2013, FinCEN requires that all FBAR reports be electronically filed through their website https://www.fincen.gov/.

(3) Each person who is required to report an interest in foreign financial accounts must also maintain certain records of any foreign accounts.

(4) See 31 C.F.R. 1010.350, Reports of foreign financial accounts, and 1010.420 Records to be made and retained by persons having financial interests in foreign financial accounts, for additional information regarding records.

(5) See IRM 5.1.18.16, Foreign Bank and Financial Account Report, for information on locating records of FBAR reports filed by the taxpayer.

(1) Failure to file the required report or maintain adequate records is a violation of Title 31. For each violation a penalty may be asserted.

(2) Violations Occurring Prior to October 23, 2004 (Willful). 31 U.S.C. §5321(a)(5) authorizes a civil monetary penalty for any person who willfully violates (or willfully causes any violation of) 31 U.S.C. §5314, not to exceed the greater of:

1. an amount equal to the balance in the account at the time of the violation up to $100,000, or

2. $25,000.

(3) Violations Occurring on or after October 23, 2004 (Willful):

31 U.S.C. §5321(a)(5)(C) authorizes a civil monetary penalty for any person who willfully violates (or willfully causes any violation of) 31 U.S.C. §5314 not to exceed the greater of:

1. an amount equal to 50% of the balance in the account at the time of the violation, or

2. $100,000.

   Note: The penalty can be for each violation.

(4) Violations Occurring on or after October 23, 2004 (Non-Willful):

• 31 U.S.C. §§ 5321(a)(5)(A) & (B) authorize a civil monetary penalty for any person who violates (or causes any violation of) 31 U.S.C. §5314 in an amount not to exceed $10,000.

• The penalty should not be asserted if there was reasonable cause for the violation.

Note: The penalty can be for each violation.

(1) Even though the penalty imposed under 31 U.S.C. §5321(a)(5) for failing to report these foreign financial interests (commonly called the FBAR penalty) is not a tax debt, the IRS has been delegated the authority to assess and collect the penalty for the government. Delegation Order 4-35, revised on March 24, 2008, authorizes revenue officers grade 9 and above to investigate possible civil violations of the FBAR requirements. This delegation order also authorizes insolvency units to protect the government's interest in bankruptcy, state and federal receiverships, and other state and federal insolvency actions.

(2) Collection is not delegated any enforcement authority with respect to FBAR penalties.

(3) See IRM 5.9.4.20, Report of Foreign Bank and Financial Accounts (FBAR), for information on filing claims in a bankruptcy proceeding.

(1) The filing of FinCEN Report 114 by or for the taxpayer will generate an IDRS IRPTR transcript. IRPTR will only reflect the filing of the form and does not provide any specific information such as name of the bank, account number, account balance, other owners etc,..

(2) Information reported on FBARs is entered into a database known as the FinCEN Query System (FCQ). Additional information such as the name of the bank where the account is located, the amount in the account, co-owners, and other useful information may be obtained by researching the FCQ. See IRM 5.1.18.16, Accessing Information on the FinCEN Query System.

(3) For additional information on FBARs, see IRM 5.9.4.20, Report of Foreign Bank and Financial Accounts (FBAR).

(1) The government has two years in which to file a civil action to recover an FBAR penalty beginning on the later of the date the penalty was assessed or the date any judgment becomes final in any criminal action under 31 U.S.C. §5322 in connection with the same transaction with respect to which the civil penalty was assessed. Currently, IRS has no procedures for soliciting a waiver of this two-year statute of limitations.

(2) See IRM 5.9.4.20, Report of Foreign Bank and Financial Accounts (FBAR), for CSED considerations in bankruptcy.

(1) FBAR penalties are asserted under Title 31 as a non-tax debt and do not appear on IDRS. They are tracked on a separate database at Detroit and that is where payments are posted and notices generated.

(2) The Bureau of Fiscal Service (BFS), formerly Financial Management Service (FMS), which is a bureau of the Department of the Treasury, is responsible for collecting all non-tax debts. This includes FBAR penalties.

(3) Advise all taxpayers who have questions or need to pay an FBAR penalty to write to:
Internal Revenue Service
Detroit Federal Building
P.O. Box 33115
Detroit, MI 48232

(1) Foreign Account Tax Compliance Act (FATCA) is a statute written subsequent to the FBAR statute. Some taxpayers who file FBAR forms have a further requirement to file Form 8938, Statement of Specified Foreign Financial Assets, if they have specified foreign financial assets with an aggregate value exceeding $50,000 on the last day of the tax year or $75,000 at any time during the tax year, with higher thresholds for married individuals filing jointly and individuals living abroad.

(2) The Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR form. Individuals must file each form for which they meet the relevant reporting threshold. See IRM Exhibit 5.21.6-1 for a comparison of these two foreign account reporting requirements.

(3) Use IDRS command code RTVUE to view if a taxpayer filed Form 8938. The “CC CD” indicator (or Computer Condition Code) will include an “H ” to indicate that Form 8938 was filed. If Form 8938 has been filed, ESTAB the return to view the return information. This may lead to the identification of a foreign asset or account.

(1)