FBAR Statute of Limitations: How Long the Government Has to Act Against Filers Living Abroad
On this page:
- What is the FBAR, and what law requires it?
- Who has to file an FBAR?
- What is a statute of limitations for these penalties?
- Is there a time limit for the IRS to assess income tax if a return was never filed?
- How long does the government have to assess civil FBAR penalties?
- Can someone be criminally liable for not filing an FBAR?
- How is the FBAR filed now?
- Can the U.S. collect FBAR penalties in the filer’s home country?
- Is there a statute of limitations for criminal FBAR charges?
What is the FBAR, and what law requires it?
The FBAR (the Foreign Bank Account Report) comes from a different law than the federal income tax. The income tax sits in Title 26 of the U.S. Code. The FBAR comes from the Bank Secrecy Act, which is Title 31. These two laws are very different, with very different obligations and rights. One of the important differences is the time frame in which the government can assess penalties for not complying.
Who has to file an FBAR?
By its expansive terms, which some would call extraterritorial, the FBAR law applies to U.S. citizens residing outside the U.S. It also applies to most LPRs (lawful permanent residents, or green card holders) residing outside the U.S. Many of these people are unaware the rules reach them.
What is a statute of limitations for these penalties?
A statute of limitations is the time frame in which the government has to assess penalties for not complying with the law. For foreign accounts, these time periods are not the same under Title 31 (the Bank Secrecy Act) as they are under Title 26 (the income tax law). The gap between the two is what makes this area confusing.
Is there a time limit for the IRS to assess income tax if a return was never filed?
No. When a U.S. citizen or LPR residing overseas fails to file an income tax return, the time period for the IRS to make tax assessments never lapses. There is effectively no statute of limitations against the IRS in that situation. The clock to assess does not start until a return is filed.
How long does the government have to assess civil FBAR penalties?
Title 31, the Bank Secrecy Act, is different. It does have a time period that runs against the U.S. federal government, even if the FBAR was never filed. For civil assessments of penalties, that time period is 6 years.
Can someone be criminally liable for not filing an FBAR?
Yes. A U.S. citizen or LPR living overseas could become criminally liable for willfully not filing the FBAR form. Criminal liability carries different legal consequences than a civil penalty. The key word is willfully, which separates a criminal matter from a civil one.
How is the FBAR filed now?
All FBARs must now be filed electronically. The form is not filed with the IRS. It is filed with FinCEN (the Financial Crimes Enforcement Network), on Form 114, Report of Foreign Bank and Financial Accounts, through the BSA E-Filing System website. The electronic Form 114 supersedes TD F 90-22.1, the paper FBAR form used in prior years.
Can the U.S. collect FBAR penalties in the filer’s home country?
Not always. The laws of many countries outside the U.S. often conclude that enforcing these FBAR penalties against a U.S. citizen, inside that person’s home country, violates the laws of that country. Canada is one example. Calgary based tax attorney Roy Berg has written on the question of whether the IRS can collect FBAR penalties under the Canada-US Treaty.
Is there a statute of limitations for criminal FBAR charges?
Yes, there are also statutes of limitations for criminal charges the government brings for FBAR violations. The law gets much more complex here, especially when the taxpayer is residing outside the U.S. In that situation, the time period can be tolled or suspended in favor of the government, which extends the window to bring charges. Jack Townsend has written on the statutes of limitations for FBAR noncompliance related to tax noncompliance.