The U.S. is seeking to recover 50% of the account balance for each of the four years taxpayers willfully failed to file an FBAR report in United States v. Zwerner (SD FL No. 13-cv-22082-CMA). The U.S. asserts the Zwerner’s hid between approximately $723,000 and $845,000 per year from 2004 through 2007 in their offshore Swiss bank account, and because of this, the United States is entitled to ½ of the balance per year (resulting in a total of more than twice the maximum value of the account). The penalty for failing to file an FBAR varies depending on whether the failure was non-willful or willful. Regardless, the penalties are assessed per account, per account holder, per year of violation. So if a taxpayer has three joint accounts that have gone unreported for three years, the taxpayers could be 18 separate penalties assessed.
The non-willful penalty can be up to $10,000 per violation, per person, per year. The willful penalty is up to the greater of $100,000 or 50% of the amount in the account at the time of the violation. Additionally, criminal penalties of up to $250,000 or five years in jail, or both. While the IRS still has the Offshore Voluntary Disclosure Program (OVDP) available, taxpayers should consider this option to avoid the harsh penalties if audited outside of the program. Click here to read the Zwerner complaint.