FBAR Audit—What Criminal Charges Could You Face?

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In criminal cases, penalties often depend sensitively on questions of intent. Did you willfully commit a crime… or just make an error or omission? In the context of FBAR (Reports of Foreign Bank and Financial Accounts) auditing, authorities want to know whether you intentionally opted not to share information about your foreign accounts and assets.

If so, you could face criminal charges. What might they be? What can you do to respond intelligently?

Penalties

First: a caveat. We are not attorneys. This blog does not constitute legal advice. If you face charges, speak with a qualified criminal defense attorney.

That being said, here’s an outline of the standard criminal penalties:

  • Neglecting to file FBAR or providing records of foreign accounts can result in a fine of $250,000 and/or a five-year prison sentence.
  • If you simultaneously commit additional crimes, you can be fined up to $500,000 and/or face a 10-year prison sentence.
  • Knowingly and willfully filing a false FBAR can lead to a fine of $10,000, five years’ imprisonment or both.

Defenses

To justify a penalty due to someone’s willful act, the IRS must provide proof of a voluntary, intentional violation of a known legal duty.

You and your attorney may compile evidence to show you intended no wrongdoing. For instance, maybe you emailed your accountant asking if the filing was necessary. Or maybe documents show you attempted to file.

Reasonable Cause

Do you have a plausible explanation for failing to file an FBAR? If so, you may be eligible for penalty relief under the Reasonable Cause Defense.

According to the IRS, the following reasonable causes include:

  • Fire, flood, other natural disasters, or other severe disruption.
  • Inability to acquire necessary records.
  • Cases of death, severe sickness, incapacitation or inescapable vacancy.
  • Another explanation that affirms that you exercised all conventional care and caution to adhere to your federal tax responsibilities but were nonetheless unsuccessful at doing so.

To discuss the details of your FBAR audit and what to do about the actual audit, contact the Highland Tax Group team at 720-398-6088.