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HAVE MORE THAN $10,000 IN A FOREIGN ACCOUNT?

March 1, 2023

The Bank Secrecy Act (BSA) requires U.S. taxpayers with more than $10,000 in a non-United States institution to report specific information to the IRS at any point in a year. Failure to “non-willful” failure to report results in a penalty of up to $10,000.

As a dual citizen of the United States and a foreign country, Alexandru Bittner was required to report each account containing over $10,000 for which he had a financial interest. Because he was out of the country between 2007 and 2011, Bittner was not aware of the BSA’s requirement. Upon returning to the U.S. in 2011 and learning of the requirement, Bittner filed properly as required by the BSA. His filings reported that Bittner had up to 61 accounts for five consecutive years.

Like other taxpayers (maybe you), the IRS assessed a $10,000 penalty against Bittner on each account for five years; an assessment totalling $2.72 million. Although his filings were late, the IRS never argued that Bittner’s failure to report the accounts was “willful.” The BSA states that a “non-willful” failure to report results in a maximum penalty of $10,000.

The question at issue was whether a BSA “non-willful” failure to report accounts of more than $10,000 results in a maximum penalty of $10,000 per account or per yearly report.

The IRS argued for a penalty of $10,000 per account for each year—which resulted in a $2.72 million penalty—and Bittner argued for a $10,000 penalty per year. The IRS’s view would result in a $2.72 million penalty ($10,000 for 272 accounts during the five-year period) and Bittner’s view would be a $50,000 penalty ($10,000 for each of five years).

The U.S. Supreme Court held in Bittner’s favor and limited BSA penalties to one maximum $10,000 penalty per yearly report for “non-willful” failures to report, not on a per-account basis.

You might be entitled to a refund if you have paid more than $10,000 per year in BSA penalties. Call one of our tax attorneys to see if you may qualify to get some money back.

If you have failed to report foreign accounts that held more than $10,000 at any point, we can help you file the required information to avoid a “willful” violation resulting in a maximum penalty of the greater of $100,000 or 50% of the account’s balance at the time of the violation! Call us.