The United States Supreme Court is set to hear Bittner v. U.S. in November 2022, a case regarding penalties on Foreign Bank Account Reports, known as FBAR filings and whether the penalties apply per account or per year. The petitioner, Alexandru Bittner, a Romanian-American businessperson was assessed $2.72 million in penalties for failing to report and file FBARs on 272 accounts.
The Bank Secrecy Act requires FBARs (Report of Foreign Bank and Financial Accounts) to be filed annually. Although the form is issued by the Treasury’s FinCEN, it is filed with the IRS and is due at the same time as annual tax returns for the previous calendar year. With certain exceptions, U.S. residents for tax purposes are required to report on an FBAR all financial interests in, or signature or other authority over, financial accounts located outside the United States if the aggregate value of those financial accounts exceeded $10,000 at any time during the calendar year covered by the FBAR.
Bittner immigrated to the United States from Romania in 1982 and became a naturalized U.S. citizen in 1987 or 1988. He filed U.S. income tax returns but did not file FBARs until 2012, despite his foreign financial accounts holding a balance greater than the $10,000 threshold required by law. The IRS then assessed a civil penalty of $10,000 per account that was not reported with his yearly FBARs, for a total of $2.72 million on his 272 foreign accounts.
Bittner argued that the maximum civil penalty for a non-willful violation of the requirement to file an FBAR is applied per FBAR, not per foreign account. He would have faced a total penalty of $50,000 under this interpretation of the statute. The Supreme Court will ultimately decide between the split rulings made by the Fifth and Ninth Circuits.
The international tax attorneys, attorney-CPAs and other tax professionals at Rosefelt Tax Law have significant experience in assisting clients in resolving offshore reporting issues including IRS Streamlined Filing Compliance Procedures, IRS Voluntary Disclosure, FBARs and other international reporting. If you have unreported offshore financial accounts or assets, contact Rosefelt Tax Law today at (866) 995-0061 or click here for a free confidential case review.
Authors: Daniel S. Rosefelt, Raeshel Kelly