For the latest on the Bittner decision, see our updated article:
As previously discussed, the U.S. Supreme Court granted review in the case of Alexandru Bittner, who was held liable by the IRS for $2.72 million in penalties for failing to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Oral arguments occurred on November 2, 2022, and the U.S. Supreme Court has issued its decision.
On February 28, 2023 the U.S. Supreme Court’s released opinion holds that the maximum penalty under the Bank Secrecy Act (BSA) accrues on a per-report, not a per-account basis. The Justices, voting 5-4, held that, “Best read, the BSA treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis.” Despite the IRS arguing that Bittner violated the BSA 272 times, resulting in a $2.72 million assessed penalty, the Court ruled otherwise.
Bittner centered around the Bank Secrecy Act, which, while not part of the Internal Revenue Code, requires that any U.S. persons with either a “financial interest in” or “signature authority over” a foreign financial account to complete and file the FBAR report annually, if the aggregate value of those foreign accounts exceeds $10,000 any time during the calendar year. The maximum penalty for a non-willful FBAR violation is $10,000.
This is a HUGE win for taxpayers.
The harsh penalties and increased compliance issues for U.S. tax residents have pushed many toward giving up passports and permanent residence status to avoid penalty exposure. Taxpayers should be elated as this decision significantly alters the offshore compliance landscape for those not currently in compliance.
Do you think that you may have unreported offshore accounts or foreign assets and want to discuss your options to come into compliance? Wolf’s International Tax Team is here to assist you.
