FBAR and IRS Penalty Appeal Process

If your offshore financial accounts have an aggregate of more than $10,000 during the calendar year, you will need to file a report to IRS. The deadline for filing FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) is June 30 each year. Failure to file accounts can lead to severe civil and criminal penalties. While both the IRS (and the Financial Crimes Enforcement Network, FinCEN) have jurisdiction over the FBAR program, it is now the IRS that has to assess and enforce FBAR penalties if they are not met. You have the right to appeal against any IRS decision if you feel the penalty is unfairly assessed. This article will cover key aspects of the FBAR appeal process.

IRS Office of Appeals

First, you don’t have to pay any FBAR penalties payments until the appeal process is over. Note that the statutes of limitations are different for FBAR collection and assessments. While the local tax examiner determines an FBAR penalty, appeals of FBAR penalties must be made to the IRS Office of Appeals. This central location has an FBAR Coordinator who will ensure consistent resolutions across the nation. The first conference must be referred to the International Operations department at the IRS because it is a coordinated matter.

Assessment of Penalty – Two types

Pre-assessment of Appeals

The taxpayer can appeal within 45-days if he/she disagrees with the FBAR penalty’s assessment. This appeal will be treated as a preassessment appeal. The pre-assessed penalty FBAR is eligible for Fast Track Settlement (FTS), Fast Track Mediation(FTM), and Fast Track Settlement (FTS). However, the letter 3709 must not have been issued to taxpayer. Remember, appeals can be filed at any time.

Appeal after-assessment

The IRS can assess FBAR penalties if there is less than 180 days left in the statute of limitations. This happens when your case is received at the appeals department. If the statute expiration date approaches, does this mean you can’t appeal? It doesn’t mean you can’t appeal if the statute expiration date is approaching. You will have post-assessment appeal rights in this scenario. Post-assessment cases FBAR will be dealt with on an expedited basis. They must be processed within 120 day of assigning. Post-assessment appeals are not eligible for Fast Track Settlement (FTS), Post Appeals Mediation(P.A.M.) rights.

Optional Litigation

To challenge the assessed penalty, you may file a complaint to either the District Court of Federal Claims or the Court of Federal Claims. After you have completed the “exhausting your administrative options” process, you can file a lawsuit in court to dispute the IRS claim. An experienced tax lawyer with knowledge of the FBAR procedures (such “willful” as well as “non willful” penalties could prove beneficial to you at this point. This could help you win your FBAR penalty appeal.

We are a team of professionals with each having two decades of experience in start-ups, sales, marketing, finance, HR, large scale project and profit centre management and running mature cross functional operations. At we are big believers that knowledge transfer is critical to our industry’s evolution. We love to share our experiences and learnings through our online resources.

Related Articles

Back to top button