- 1 FBAR Statute of Limitations
- 2 What is the FBAR Statute of Limitations?
- 3 FBAR Civil 31 U.S.C. 5321(b)(1) & 5321(b)(2)
- 4 IRM & FBAR Statute of Limitations
- 5 IRM 188.8.131.52
- 6 IRM 184.108.40.206.1
- 7 Pursuing a Civil Action 31 U.S.C. 5321(b)(2)
- 8 FBAR Criminal Enforcement: 31 USC 5322 & 18 USC 3282(a) & 3292(a)
- 9 FBAR Criminal 31 USC 5322
- 10 18 USC 3282(a) – Offenses Not Capital
- 11 18 USC Section 3292(a)(1)
- 12 FBAR Violations & Enforcement are Time Sensitive
- 13 Golding & Golding: About Our International Tax Attorney Law Firm
FBAR Statute of Limitations
FBAR Statute of Limitations: Civil and Criminal Violations: The FBAR is Foreign Bank and Financial Account Form (FinCEN Form 114). The form is not an IRS form and does not fall under title 26 (Internal Revenue Code). In fact, it has nothing at all to do with tax. Rather, the FBAR form is a FinCEN Form (Financial Crimes and Enforcement Network) and falls under Title 31. Title 31 is the Money and Finance Section of the U.S.C. (United States Code). The reason this is important is because even though the IRS enforces the FBAR, the form is not a tax form. Therefore, the penalty assessment, appeal, protest and litigation aspect of the FBAR differs from other International Information Reporting Forms.
Let’s review the FBAR statute of limitations for civil and criminal violations.
What is the FBAR Statute of Limitations?
A statute of limitations refers to the amount of time a person or government has to enforce a violation. For example, the IRS generally has 3-years to initiate an audit or examination of a tax return – this is referred to as the statute of limitations.
The FBAR statute of limitations varies based on whether the US Government seeks to pursue a civil FBAR violation (31 USC 5321) and/or a criminal FBAR violation (31 USC 5321, 18 USC 3282(a) and 18 USC 3292(a))*.
*Criminal FBAR enforcement is rare.
FBAR Civil 31 U.S.C. 5321(b)(1) & 5321(b)(2)
The IRS essentially has 6-years to pursue a civil FBAR violation.
The general rule is a bit different than other tax return penalty enforcement. For example, when a person does not file a tax return, the Statute of Limitations does not begin to run yet and the statute is tolled. Conversely, with the FBAR, the US Government has 6-years to pursue an FBAR violation.
31 U.S.C. 5321(b)(1)
“Time Limitations for Assessments and Commencement of Civil Actions.—
(1) Assessments —
The Secretary of the Treasury may assess a civil penalty under subsection (a) at any time before the end of the 6-year period beginning on the date of the transaction with respect to which the penalty is assessed.”
IRM & FBAR Statute of Limitations
The IRM is the Internal Revenue Manual.
It does not have the force of law, but can be used to get a glimpse of how IRS personnel (should) respond to an FBAR penalty situation.
FBAR Statute of Limitations
“The statutes of limitations on assessment statute expiration date (ASED) and collection statute expiration date (CSED) of FBAR civil penalties are found in 31 U.S.C. 5321(b)(1) and 5321(b)(2), respectively.
Appeals controls the statute of limitations in pre-assessment cases with the ASED and in post-assessment cases with the applicable CSED. The statute of limitations must be determined on each individual under examination.
Note: Married couples under FBAR examination are treated as individual cases and an extension must be obtained from each individual under examination.”
The ASED of FBAR penalties is defined under Title 31, the Bank Secrecy Act.
ASED Failure to file FBAR report (either willful or non-willful)
6 years from the due date of the FBAR report.
For calendar years 2015 and prior, due date is 6/30/YYYY. For calendar years 2016 and later, due date is 4/15/YYYY. Failure to maintain required records (either willful or non-willful) 6 years from the date the IRS first asks for the records
For questions concerning extending the time to assess an FBAR penalty and for a copy of the consent form, contact the Appeals FBAR Coordinator. Use the Title 31 consent to extend the assessment statute form. An Appeals Officer has the authority to execute a Title 31 FBAR statute extension. See IRM 220.127.116.11, Delegation Order 25-13 (formerly DO 4-35, Rev. 1).
IRM FBAR Example
“Example 1: In calendar year 2019, a foreign bank account owned by a U.S. person exceeds $10,000.00. The Report of Foreign Bank and Financial Accounts (FinCEN Form 114) was due April 15, 2020, but the account holder does not file one. The penalty assessment statute of limitations for failing to file an FBAR report expires April 15, 2026.
Note: This does not include the 6-month automatic extension. At the time of this writing, no procedures have been established with regard to the automatic extension.
Example 2: Same facts as in Example 1, and in addition, the account holder failed to maintain required records. An examiner requested the records on March 1, 2020. The penalty assessment statute of limitations for failing to maintain required records expires on March 1, 2026.”
Pursuing a Civil Action 31 U.S.C. 5321(b)(2)
Once the penalty has been assessed and/or a criminal court judgment becomes final, then the U.S. Government can enfore the penalty with a civil action.
31 U.S.C. 5321(b)(2)
As provided by the IRC:
(2) Civil actions.—
The Secretary may commence a civil action to recover a civil penalty assessed under subsection (a) at any time before the end of the 2-year period beginning on the later of—
(A) the date the penalty was assessed; or
(B) the date any judgment becomes final in any criminal action under section 5322 in connection with the same transaction with respect to which the penalty is assessed.
What does this Mean?
It means that once a penalty has been assessed under 31 USC 5321(b)(1), the IRS has 2-years to recover the penalty by initiating a civil (court) action. The US government reserves the right to initiate the action the later of (A) and (B) above
FBAR Criminal Enforcement: 31 USC 5322 & 18 USC 3282(a) & 3292(a)
Unlike civil enforcement of an FBAR penalty — criminal enforcement is different. When someone commits an FBAR criminal violation, they are still entitled to due process similar to any other criminal procedure, and the U.S. government must prove their case beyond a reasonable doubt.
When it comes to criminal procedure and FBAR Enforcement, there are three (3) primary components:
- the criminal violation
- the enforcement statute
- the statute of limitation extension statute (potential)
FBAR Criminal 31 USC 5322
(a) A person willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except section 5315 or 5324 of this title or a regulation prescribed under section 5315 or 5324), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508, shall be fined not more than $250,000, or imprisoned for not more than five years, or both.
(b) A person willfully violating this subchapter or a regulation prescribed or order issued under this subchapter (except section 5315 or 5324 of this title or a regulation prescribed under section 5315 or 5324), or willfully violating a regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508, while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period, shall be fined not more than $500,000, imprisoned for not more than 10 years, or both.
18 USC 3282(a) – Offenses Not Capital
- (a) In General.— Except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any offense, not capital, unless the indictment is found or the information is instituted within five years next after such offense shall have been committed.
18 USC Section 3292(a)(1)
“(1) Upon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.
(2)The court shall rule upon such application not later than thirty days after the filing of the application.
(b) Except as provided in subsection (c) of this section, a period of suspension under this section shall begin on the date on which the official request is made and end on the date on which the foreign court or authority takes final action on the request.
(c) The total of all periods of suspension under this section with respect to an offense —
(1) shall not exceed three years; and
(2) shall not extend a period within which a criminal case must be initiated for more than six months if all foreign authorities take final action before such period would expire without regard to this section.”
What does this Mean?
The criminal enforcement of an FBAR violation is much more complicated. Generally, the US government has five years from when the FBAR offense has been committed in order to pursue a criminal indictment or complaint. The violation may result in both monetary penalties along with loss of freedom. In addition, the US government has the potential right to suspend the statute of limitations. This is due to 18 USC 3292 which allows the suspension in situations in which the crime involves investigation in a foreign country.
Since FBAR involves foreign bank accounts and other financial accounts, the US government can take this position.
FBAR Violations & Enforcement are Time Sensitive
In conclusion, the US government has significantly increased the enforcement of FBAR violations. While most violations are civil in nature, the US government can pursue a criminal indictment or a complaint as well. if you are out of compliance, you may consider consulting with a Board-Certified Tax Attorney Specialist to get the lay of the land.
Golding & Golding: About Our International Tax Attorney Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS disclosure & compliance.
Contact our firm today for assistance.