8.11.6. FBAR Penalties

(1) Purpose: This IRM section provides guidance to Appeals Technical Employees (ATEs) working a failure to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) penalty case file in Appeals.

(2) Audience: Appeals Technical Employees and Appeals Team Managers.

(3) Policy Owner: Chief, Appeals.

(4) Program Owner: Director, International Specialty Operations.

(5) Contact Information: Appeals employees should follow established procedures on How to Contact an Analyst. Other employees should contact the Product Content Owner shown on the Product Catalog Information page for this IRM.

(1) A United States person must file an FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts) if that person has a financial interest in or signature authority over any financial account(s) outside of the United States and the aggregate value of the account(s) exceeds $10,000 at any time during the calendar year. Failure to file this form may result in civil and/or criminal penalties. The civil penalties may be appealed administratively.

(2) FinCEN has introduced new FinCEN Form 114a, Record of Authorization to Electronically File FBARs, for filers who submit FBARs jointly with spouses, or wish to submit them via third-party preparers.

(3) Effective July 1, 2013, filers must electronically file the FBAR through FinCEN's Bank Secrecy Act (BSA) E-Filing System.

(4) Filings can be researched on the FinCEN Query System (FCQ) or on Integrated Data Retrieval System (IDRS) using command code (cc): IRPTRO. IDRS will have an indicator if FBARs were filed. IDRS IRPTRO will have a Document Code (DC) indicator of 13, Form listed as FBAR and the number of pages of the FBAR. Each page provides information including: FBAR filing date, Payee (Taxpayer) name and address, Payer (the financial entity or foreign bank) name and address, financial account number, type of account, joint account and range of max value in the account. Penalty cases, assessments, and payments are recorded on a separate FBAR database maintained by the Small Business/Self-Employed (SB/SE) Specialty Currency Transaction Report (CTR)/Bank Secrecy Act (BSA) unit.

(5) Post-assessed FBAR cases in excess of $100,000 (excluding interest, penalties and administrative costs) cannot be compromised by Appeals without approval of the Department of Justice (DOJ). See 31 USC § 3711(a)(2) and 31 CFR § 902.1(a) and (b). Once assessed, the penalty becomes a claim of the U.S. government.

(6) Pre-assessed FBAR penalties are eligible for Fast Track Settlement (FTS) only if the FBAR 30-Day Letter, Letter 3709, has not been issued to the taxpayer. Refer to IRM 8.26.2, Fast Track Settlement for Small Business/Self Employed (SB/SE) Taxpayers.

(7) Once FBAR penalties have been assessed, Alternative Dispute Resolution (ADR) is not available.

(8) Rapid Appeals Process (RAP) is not available in any FBAR penalty case.

(9) Post Appeals Mediation (PAM) is not available in any FBAR penalty case.

(10) Refer to IRM 4.26.16.6.6, Mitigation, for mitigation threshold conditions for FBAR penalties.

(11) There is no joint and severable liability with FBAR penalty cases.

(12) Interest on FBAR penalties does not accrue until the penalty is assessed, and is payable only if full payment of the FBAR penalties is not made within 30 days of the date of notice, Letter 3708, Notice and Demand for Payment of FBAR Penalty, or Letter 3708A, Notice for Demand and Payment of FBAR Penalty after Appeal Denial Letter 3708/3708A is mailed by the CTR/BSA FBAR Coordinator.

(13) Unagreed FBAR cases are closed immediately to CTR/BSA for assessment. A statutory notice of deficiency is not issued. For post-assessed cases, see IRM 8.11.6.9.3, FBAR Closing - Post Assessment Case.

(14) Title 11 Bankruptcy does not provide relief for FBAR penalty debt.

(15) FBAR penalties may come to Appeals as stand-alone cases or together with a related income tax or international penalty case.

(16) FBAR penalties are an Appeals Coordinated Issue and require a referral to International Operations prior to holding the first conference.

(17) The FBAR penalty case will usually be received in Appeals as a pre-assessed case. However, in certain circumstances, Appeals will also conduct post-assessment hearings to consider FBAR penalty liability and collection. Whether the penalty is pre- or post-assessed when it comes to Appeals, it is considered the same penalty and only one appeal is available.

(18) The venues for challenging FBAR penalties are the United States District Courts and the Court of Federal Claims, not the United States Tax Court.

(19) A Qualified Offer (QO) under IRC § 7430 is not available to Title 31 FBAR Penalty cases.

(20) First Time Abatement (FTA) - Effective with the Calendar year 2016 FBAR, FTA is available to the taxpayer who failed to file the FBAR the first time an FBAR was required to be filed by the taxpayer. At the time of publication, procedures have not been established with FTA.

(21) Automatic Filing Extension - Effective with the calendar year 2016 FBAR, an automatic 6-month extension to file is granted to 10/15/YY. At this time, there is no requirement to file an extension form.

(22) Refer to additional FBAR resource materials available:

• IRM 4.26.16, Report of Foreign Bank and Financial Accounts (FBAR). It should be used as a reference for background and statute information.

• IRM 4.26.17, Report of Foreign Bank and Financial Accounts (FBAR) Procedures.

• LB&I website http://lmsb.irs.gov/pa/wii/campus_compliance_unit/FBAR_Home.asp

• SB/SE website http://mysbse.web.irs.gov/examination/tip/FBAR/default.aspx

• IRS.gov http://www.irs.gov

• FinCEN website http://bsaefiling.fincen.treas.gov

(1) For pre-assessed FBAR cases, Appeals requires 365 days remaining on the assessment statute of limitations at the time the administrative file is received in Appeals. Return cases with less than 365 days remaining on the assessment statute of limitations at the time the case is received by Appeals to the originating function as a premature referral so an assessment statute extension may be secured or the penalty assessed. If the penalty is assessed, the taxpayer will be given post-assessment appeal rights and the 365-day statute requirement is no longer applicable. Refer to IRM 8.11.6.4.1 for information on the assessment statute of limitations for FBAR cases. If an FBAR case is being returned to Examination with new information, there must be at least 210 days remaining on the statute of limitations at the time Examination receives the case. Refer to IRM 8.6.1.6.7, Jurisdiction Released.

(2) Administrative files are generally forwarded to the Appeals Office by:

(3) The administrative file will contain the following documents:

• Brief summary memorandum explaining the FBAR violation(s), which includes:

Item Number	Description
1.	A discussion of the FBAR violations.
2.	The number of penalty assessments.
3.	The penalty calculation and dollar amounts.
4.	The FBAR case disposition.

• A Form 13535, Foreign Bank and Financial Accounts Report Related Statute Memorandum, signed by the designated Territory Manager affirming that the information shows the FBAR violations were committed in furtherance of income tax violations, when appropriate. For exceptions where Form 13535 will not be in the case file, refer to IRM 4.26.17.2.3, Cases Where No Related Statute Memorandum (RSM) Needed.

• FBAR issue workpapers.

  Note: If it is not clear that the summary memorandum was shared with the taxpayer, follow the appropriate ex parte requirements

• Copy of FBAR 30-Day Letter.

  Note: Letter 3709 will be in the case file for both pre- and post-assessed FBAR penalties.

  Note: Letter 3708 is issued by CTR/BSA to the taxpayer after the penalty has been assessed. This letter will be in the case file only for post-assessed penalty cases and is only issued if the penalty has not been paid in full at the time of assessment.

• Form 13449, Agreement to Assessment and Collection of Penalties under 31 U.S.C. 5321(a)(5) and 5321(a)(6).

• Taxpayer's protest. The protested years should be the same as the years on the case summary card (CSC).

  Caution: The years listed on the CSC must match the years on the Letter 3709, Form 13449, and the years protested by the taxpayer. If they do not, seek guidance from the Appeals FBAR Coordinator.

• FBAR/Title 31 Power of Attorney Form 2848, Power of Attorney and Declaration of Representative, or if there is no related statute memorandum, a general power of attorney form which is valid under state law, if applicable.

• IRS Counsel Opinion memo approving assessment of willful FBAR penalties.

  Note: Prior to the issuance of Interim Guidance for Report of Foreign Bank and Financial Accounts (FBAR) Penalties, SBSE-04-0515-0025, on May 13, 2015, Counsel approval was also required for the assessment of non-willful FBAR penalties.

• Title 31 consent(s), if applicable.

(1) The statutes of limitations on assessment statute expiration date (ASED) and collection statute expiration date (CSED) of FBAR civil penalties are found in 31 U.S.C. 5321(b)(1) and 5321(b)(2), respectively.

(2) Appeals controls the statute of limitations in pre-assessment cases with the ASED and in post-assessment cases with the applicable CSED.

(3) The statute of limitations must be determined on each individual under examination.

(1) For APS procedures regarding establishing FBAR cases on ACDS, refer to IRM 8.20.5.26, Foreign Bank Account Report (FBAR) Penalty Case Carding.

(1) All FBAR penalty cases are controlled on ACDS.

(2) Initial review of the case file is required within 45 days from the date of receipt on ACDS.

(3) Upon review of the case, the ATE will verify the CSC information and make or request changes as required.

(4) Verify the entity information:

1. Taxpayer Name is the U.S. person subject to the FBAR penalty and could include an individual citizen or resident of the United States or a U.S. entity (includes corporations, partnerships, LLCs, estates, trusts, and any other legal entity formed in the U.S.)

2. Taxpayer Identification Number (TIN) to ensure correct account is controlled on ACDS

3. MFT = 00

4. Type code = FBAR

5. Feature Code = AI, IC, IT and any others which apply

6. Category Code = Other

7. UIL Code= 9999.99-01

8. AIMS indicator = E (exempt). FBAR cases are not controlled on AIMS (Audit Information Management System)

9. POA/Representative information:

   Note: Form 2848 was developed to meet requirements relating to tax. It is generally inappropriate for Title 31 BSA examinations, including FBAR examinations. If the Related Statute Memorandum (RSM), Form 13535 has been secured by Exam, the Form 2848 may be used for FBAR purposes. Line 3 on the Form 2848 reflects the description of the matter in the first column, tax form number in the second column, and years and period in the third column. The words, "Foreign Bank and Financial Accounts Report Matters" must be added in the first column, “FinCEN Form 114” added to the second column, and the tax periods at issue covered by the representative's authority in the third column. See IRM 4.26.17.5.2, FBAR Power of Attorney, for more information on valid power of attorney and when an RSM has not been secured.

10. STATDATE (statute date) and STATCODE (statute code) must be validated within 45 days of receipt. See IRM 8.21.3, Appeals Technical Employees Statute Responsibility. The appropriate entries on these fields are dependent upon whether the penalty is pre- or post-assessed. See table below for the appropriate entries.

If FBAR Penalty is:	STATDATE (statute date)	STATCODE (statute code)
NOT assessed	6 years from the date of the violation, either the due date of the FBAR report or date on which records requested.	Blank
	Note: At the time of publication, no relevant procedures have been established with respect to the automatic 6-month extension to file the FBAR.
Assessed	2 years from the date of assessment	FBAR2

11. Calendar Years: Verify the protested years match ACDS. If the years don't match, contact the Appeals FBAR Coordinator.

    Note: The Appeals FBAR Coordinator will notify Examination of the discrepancy. If necessary, Examination will either send or prepare Form 13536, FBAR Monitoring Document (FMD), to CTR/BSA to have the calendar year corrected by either closing or establishing the year in CTR/BSA. Once the calendar year has either been opened or closed by CTR/BSA, ACDS must be updated accordingly.

12. Penalty Amount: Verify the penalty amount for each period is accurate.

13. For pre-assessed penalty cases, update per the amounts on Form 13449.

14. For post-assessed penalty cases, update per the amounts on Form 13448. Form 13448 is verification from CTR/BSA that the penalty has been assessed.

(5) Prepare and forward a referral through the ATM to Specialized Examination Program and Referrals (SEPR) on ACDS using Form 13381, Appeals Technical Guidance / International Referral, when the case is received by the ATE.

1. Request the International Technical Specialist (ITS) as a consultant.

2. A list of Appeals Coordinated issues, the responsible ITS, and their ATM may be found at on the Appeals website.

(6) Post-assessment FBAR penalty cases are priority cases and must be worked expeditiously. Refer to IRM 8.11.6.9.3, FBAR Closing - Post-Assessment Case for additional guidance.

(7) Verify the Non-docketed Acknowledgement and Conference, Letter 5157, was generated and issued to the taxpayer with Pub 4227, Overview of the Appeals Process Brochure, explaining the Appeals process and taxpayer's rights.

(8) ATE will obtain review and concurrence from Appeals FBAR Coordinator on the proposed settlement determination as presented in the ACM prior to making the offer to the taxpayer or representative.

(9) ATE will mail Letter 5834, Foreign Bank and Financial Accounts Report (FBAR) Agreement Form Transmittal, with Form 13449, Agreement to Assessment and Collection of Penalties Under 31 U.S.C. 5321(a)(5) and 531(a)(6), for the taxpayer to sign and return.

(10) ATE will have the Appeals Team Manager (ATM) execute the Form 13449 prior to assessment at CTR/BSA.

1. For agreed pre-assessed FBAR cases, the ATM will sign the Form 13449 after the taxpayer has signed indicating agreement with the determination. This signed form is sent with closing Letter 5080, FBAR Penalty Agreed Closing Letter, to the taxpayer.

2. For unagreed pre-assessed FBAR cases, the ATM will sign the Form 13449 prior to requesting the assessment of penalties from CTR/BSA.

   Note: Form 13449 is required to be signed by the ATM prior to assessment by CTR/BSA to indicate the ATM agrees with the assessment.

(1) If payment is received on an FBAR penalty case:

• Photocopy the check or money order and attach to the original Form 13449.

• Complete Form 3210, Document Transmittal, describing all documents attached.

• Forward the original payment with a copy of the Form 13449 and Form 3210, by UPS Overnight Mail to the following address:

Internal Revenue Service

SBSE Specialty Operations CTR/BSA

Attn: FBAR Penalty Coordinator

985 Michigan Ave 4th Floor

Detroit, MI 48226

Tel (313)-234-1611

Fax (313) 234-2278

Email *SBSE BSA Compliance-FBAR Penalty Coordinator

• For unagreed cases, send Form 13449 to CTR/BSA to assess the penalties prior to closing the case from Appeals. The manager should sign the Form 13449 indicating agreement with the assessment. CTR/BSA will provide a copy of the Form 13448 for verification of assessment to put in the case file.

(2) DO NOT USE Form 3244, Payment Posting Voucher, when processing a payment on an FBAR penalty case. See IRM 8.11.6.8 when this occurs to resolve the problem.

(3) For taxpayers mailing payments via regular mail:

• Advise the Taxpayer to make the check payable to the United States Treasury and in the memo section write FBAR and the tax period

Internal Revenue Service

SBSE Speciality Operations CTR/BSA

PO Box 33115

Detroit, MI 48232-0115

(4) The information above is also available in IRM 4.26.17.4.5, Closing the FBAR Case - Payment.

(1) Form 3244 is not used to post the payment for FBAR penalty cases.

(2) If Form 3244 is inadvertently executed, take the following steps:

• The Appeals employee will be responsible for tracing the payment to ensure that it is refunded from the tax module.

• The Appeals employee will then need to obtain another payment, which will be sent to CTR/BSA for posting to the FBAR database.

• CTR/BSA will record and process the payment, using, as appropriate:

Type of Document	Title
Form 13448	Penalty Assessment Certification Summary (Title 31 “FBAR”) (internal document)
Letter 3708A	Notice for Demand and Payment of FBAR Penalty after Appeal Denial
Notice 1330	Information on Making FBAR Penalty Payment by Check

(1) Refer to IRM 8.20.7.32, Foreign Bank and Financial Account (FBAR) Penalty Case Closing Procedures, for APS procedures for closing all types of FBAR cases.

(2) There are three types of closings for an FBAR penalty case. Determine the type of case and follow the instructions outlined in the following sections:

• Premature Referral

• Pre-Assessment

• Post-Assessment

(3) Determine the valid ACDS closing code:

(4) Case Activity Record and Automatic Timekeeping System (CARATS) codes - mandatory codes:

(5) All Appeals employees must adhere to the procedures for shipping Personally Identifiable Information (PII). Refer to IRM 8.20.7.6, Procedures for Shipping Personally Identifiable Information (PII).

(1) The following documents should be included in the administrative file and uploaded to ACDS by the ATE/ATM:

• Form 5402

  Note: If the case has both pre-assessed and post-assessed penalties, close all penalties together on the same Form 5402. Use the closing code for the post-assessed year on the Form 5402

• Appeals Case Memorandum (ACM)

• Schedule of Adjustments (SOA)

• Letter 5834, Foreign Banking and Financial Accounts Report Agreement Form Transmittal

• Form 13449 prepared by Appeals

• Form 13448 or other documentation received from CTR/BSA to confirm the penalty posted

• Copy of any checks received in Appeals, if applicable

• Appropriate closing letter dated and signed by the ATM

For agreed cases —Letter 5080

For unagreed cases — Letter 5143

For no-change cases —Letter 913

• FBAR Penalty computation spreadsheet/worksheet

• Form 13536, FBAR Monitoring Document (“FMD”), if applicable

• Additional items identified as necessary

(1) Appeals may not compromise a post-assessed FBAR Penalty in excess of $100,000 without DOJ approval. See 31 USC § 3711(a)(2) and 31 CFR § 902.1 (a) and (b). Once assessed, the penalty becomes a claim of the U.S. government.

(2) Post-assessed FBAR penalty cases are cases received by Appeals with the penalties assessed by CTR/BSA. These are priority cases and should be worked within 120 days of receipt.

(3) CTR/BSA will notify the taxpayer of the assessment with Letter 3708, Notice of Demand for Payment of FBAR Penalty. A case can be protested to Appeals before or after receipt of this letter.

(4) The U.S. government has 2 years from the date of assessment to file civil suit to collect the FBAR penalty. (31 U.S.C. § 5321(b)(2)).

(5) Appeals will not accept assessed FBAR cases more than 180 days after the date of assessment.

(1) On post-assessed Appeals FBAR penalty cases over $100,000, Appeals will, through SB/SE Division Counsel, provide a settlement proposal to DOJ no later than nine months prior to the date required to file a civil collection suit (i.e., the date upon which the collection statute expires). Appeals will send the case to SBSE Division Counsel for referral to DOJ. The AO will work with the FBAR Coordinator to facilitate this process.

1. If DOJ has not provided its views regarding the proposed settlement within 60 days of the date the proposal was sent to DOJ, Appeals must follow up with DOJ regarding the status of DOJ’s consideration.

2. If DOJ has not provided its view regarding the proposed settlement within 60 days of the expiration of the time to file a civil collection suit, Appeals should reject any pending offer, close its file, and refer the matter to IRS Counsel for further processing. The ATE will notify CTR/BSA of the closure with Form 13536 (FMD).

3. If DOJ concurs with the Appeals settlement proposal:

Step 1 - DOJ will authorize Appeals to present the settlement offer

Step 2 - If the taxpayer agrees with the settlement offer, then Appeals will request authorization from DOJ to enter into the settlement agreement.

Step 3 - After permission is received, the case will be settled and closed under normal procedures.

Note: To the extent possible, full payment is expected at the time of closure.

4. If DOJ does NOT agree with the Appeals settlement proposal, then Appeals will reject the offer and the case will be closed. Appeals will send the case file to IRS Counsel to refer to DOJ with Form 13536. Appeals will notify CTR/BSA of the closure to DOJ for collection.

(2) If there is less than nine months remaining to file a civil collection suit, no settlement proposal shall be sent to DOJ for collection. Rather, the case will be closed and Appeals will send the case file to IRS Counsel to refer to DOJ. Appeals will notify CTR/BSA of the closure with Form 13536 .