You must file a report with the IRS if you have foreign financial accounts with an added value greater than $10,000 at any time during the calendar year. The deadline to file FinCEN Form 114, Foreign Bank and Financial Account Reporting (FBAR) is June 30 of each year. Failure to file can incur huge civil or criminal penalties on those accounts. Both the IRS and the Financial Crimes Enforcement Network (FinCEN) have authority over the FBAR program, but the IRS now has responsibility for conducting the assessment and enforcement of FBAR penalties for noncompliance. The bottom line is that you have the legal right to appeal IRS decisions if you believe the penalty has been imposed arbitrarily. In this article, we will explore some key points of the FBAR appeal process.
IRS Office of Appeals
First, no FBAR penalty payments are required until the appeal process is complete. Also, please note that the statute of limitations is different for FBAR assessments and FBAR collections. The assessment of an FBAR penalty is done by a local tax examiner, but FBAR penalty appeals are handled at the IRS Office of Appeals in a centralized location where there will be an FBAR Coordinator who will ensure that rulings are consistent throughout the country. Since it is a coordinated topic, a referral to the IRS International Operations department is required before the first conference can be held.
Evaluation of the sentence: two types
Prior evaluation of appeals
If the taxpayer disagrees with the FBAR penalty assessment, they must appeal within 45 days. This will be considered a pre-assessment appeal. Pre-screened FBAR penalties are eligible for Fast Track Settlement (FTS) and also Fast Track Mediation (FTM), but only if Letter 3709 has not been issued to the taxpayer. So remember, there is no better time than now to appeal.
Post review of appeals
If there are less than 180 days left in the statute of limitations for assessment, the IRS may assess FBAR penalties at the time the appeals department receives your case. Does this mean that you can no longer appeal if the statute’s expiration date approaches? No problem; you may. In a scenario like this, you will be given post-assessment appeal rights. Post-assessment FBAR cases will be handled on an expedited basis and must be processed within 120 days of assignment. Fast Track Settlement (FTS) or Post-Appeal Mediation (PAM) rights are not available in post-assessment appeal cases.
litigation options
You may file a complaint in District Court or the Court of Federal Claims to challenge the imposed penalty. Once you have gone through a process known as “exhausting your administrative remedies,” you are eligible to file a lawsuit in court, disagreeing with the record on which the IRS claim is based. The involvement of a tax attorney familiar with the nuances of FBAR procedures (such as “intentional” and “unintentional” penalties) could be beneficial at this point and could help you win your FBAR citation appeal.
