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

(1) Form 13535, Report of Foreign Bank and Financial Accounts Related Statute Memorandum (RSM), is used to document a good faith determination, based on the facts and circumstances, of whether a potential FBAR violation was in furtherance of a potential Title 26 violation. See IRM 4.26.17.2.1.2 for procedures to obtain an RSM.

(2) If the designated official determines, via the RSM, that a potential FBAR violation was not in furtherance of a potential Title 26 violation, Title 26 information cannot be used in the Title 31 FBAR examination. Any such use could subject the person(s) to penalties for violating the disclosure provisions protecting Title 26 return information. Therefore, the examiner is not authorized to initiate an FBAR examination. Additionally, the examiner should not ask questions or request documents that are relevant only to the FBAR examination.

1. Examiners are prohibited from making inquiries of a filer, an authorized representative, or a third party as to whether the FBAR was required, filed, or records required by the FBAR instructions and 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts, or records required by the FBAR instructions and CFR 1010.420 were retained.

2. Internal inquiries, such as research of FinCEN Query, searches of other internal databases, or review of documents and information included in the case file are permitted.

3. Even without an approved RSM, the examiner can ask questions or request documents that are relevant to the Title 26 examination even though they may also be relevant to an FBAR examination. For example, bank statements, which may be relevant to an FBAR examination, can be requested without an RSM, because these documents are relevant to the income tax examination.

(3) If the designated official determines, via the RSM, that a potential FBAR violation was in furtherance of a potential Title 26 violation (hereafter known as an "approved RSM"). Title 26 information can be used in the Title 31 FBAR examination. The "approved RSM" authorizes the examiner to initiate an FBAR examination.

1. Once approved, the RSM allows the sharing of all "return information" obtained in the examination, including that which was obtained prior to the RSM being secured.

2. A subsequent determination that there was no Title 31 violation does not terminate the approved RSM or prevent the Title 26 examination from going forward or from using the information secured during either examination.

(4) The approved RSM also serves as the initial input document for the FBAR examination database maintained by CTR Operations. All the information required in the RSM will be used to track the FBAR examination and provide information to the Department of the Treasury and Congress in required annual reports.

(1) Upon identification of a potential FBAR violation in furtherance of a Title 26 violation that warrants further investigation, the examiner will prepare the Form 13535. A separate RSM is required for each year and each person or entity potentially required to file an FBAR, even if a joint tax return or joint FBAR was filed.

(2) The following tables list fields that are required to be completed on Form 13535:

(3) The examiner uses the RSM to document the reasons the examiner believes the statutes (Title 31 and 26) are related. In the case explanation section, and on an attachment if needed, the examiner will:

1. Specifically identify the potential FBAR and Title 26 violations. For purposes of securing an RSM, it is not necessary to establish with certainty that there was an FBAR or Title 26 violation or that the FBAR violation was in furtherance of the Title 26 violation to meet the related statute test. Title 26 violations should be singular: A good faith determination that there may be an FBAR violation in furtherance of a Title 26 violation is all that is required. The following table provides some examples of violations:

FBAR	Title 26
Failure to file	Unreported income related to the unreported foreign financial account, such as investment income or pre-tax deposits
Failure to file timely	Erroneous or omitted information on Schedule B, Part III regarding foreign accounts and trusts
Filed but omitted foreign financial accounts	Failure to file timely or accurate international information returns, such as Form 3520, Form 3520-A, Form 5471, Form 8865, or Form 8938
Filed but materially misstated account information such as ownership or account balance	Failed to accurately report account information

2. Explain the relationship between the Title 31 violations and the Title 26 violations. "In furtherance of" means that there is a connection between the potential FBAR violation and the potential Title 26 violation. The potential FBAR violation need not occur in the same year as a potential Title 26 violation to be considered "in furtherance of" the Title 26 violation.

   Example: A U.S. person with a financial account in a foreign country may be required, under the BSA, to file an FBAR disclosing the existence of the foreign account. When the person fails to comply with the Title 31 FBAR filing requirement and fails to report interest income from the foreign financial account in violation of Title 26, this may indicate the FBAR noncompliance was in furtherance of a tax violation under Title 26.

3. Explain how the foreign financial account(s), or the likelihood of such account(s), became known to the examiner.

4. Detail all relevant information, including but not limited to, bank name(s) and location(s), bank account number(s), name on the account(s), the filer’s role in the account(s), account balance(s).

5. Identify whether any foreign income appears to be reported on the income tax return and if so, why it appears incomplete or inaccurate.

6. Identify if Schedule B was filed with the income tax return (for individual filers) and if so, how the foreign account/asset questions were answered in Part III.

(4) The examiner will forward the RSM, with any relevant documents attached, to the designated official.

(5) The designated official reviews the RSM and any attachments and determines whether a potential FBAR violation is in furtherance of a potential Title 26 violation. The designated official will check the applicable box and sign the determination portion of the RSM. Electronic signature of documents is acceptable.

(6) The designated official can decide based on the examiner’s attestation in the RSM regarding the potential violations. Further, the designated official does not have to be certain that there was an FBAR violation and that the violation was made in furtherance of a Title 26 violation; a good faith determination is all that is required.

(7) The signed RSM and attachments are returned to the examiner.

(1) After receiving the signed RSM, the examiner will review the RSM for the designated official’s determination.

(2) If the designated official determined that the potential FBAR violation was not in furtherance of a potential violation of Title 26, the examiner places the RSM in the Title 26 case file. This terminates the examiner’s FBAR responsibilities. The examiner will not conduct an FBAR examination.

(3) If the designated official determined that the potential FBAR violation was in furtherance of a potential Title 26 violation, any evidence acquired in the Title 26 examination can be used in the FBAR examination and the FBAR examination can begin.

(4) Within 3 business days of receipt of an approved RSM:

1. All examiners must email the signed, approved RSM to CTR Operations using the contact information in Exhibit 4.26.17-2, and

2. All SB/SE and LB&I examiners must request control of the FBAR case on ERCS. See IRM 4.26.17.2.3.

   Note: Under no circumstance should an approved RSM be secured and not submitted to CTR Operations. Similarly, under no circumstance should an approved RSM submitted to CTR Operations not be controlled on ERCS.

(5) The examiner will create a physical FBAR case file in accordance with IRM 4.26.17.2.4 and proceed with the FBAR examination.

(6) The original RSM and copy of the email submission to CTR Operations must be retained in the FBAR case file.

(7) Upon receipt of the approved RSM, CTR Operations will enter the RSM information into the FBAR database, establishing a record of the FBAR examination.

(8) In an FBAR examination that started from a Title 26 examination and used an RSM to establish the case in the FBAR database, the examiner will prepare Form 13536 and submit to CTR Operations only:

1. With updates as they occur throughout the examination. (see IRM 4.26.17.3)

2. With case closing information pursuant to IRM 4.26.17.4.

(1) Complete Form 5345-D, Examination Request - Examination Returns Control System (ERCS), in accordance with the following information:

(2) The examiner will print or type his/her name in the appropriate box, sign and date Form 5345-D. Following local procedures, submit to the group manager as required by IRM 1.4.40.4.2.1, Requisition of Returns.

(3) The group manager will review Form 5345-D for completeness and accuracy. If the group manager identifies errors or desires more information, the group manager will discuss with the examiner. If approved, the GM will sign and date the form (anywhere) and will provide the approved Form 5345-D to the group secretary for input into ERCS. Electronic signatures are acceptable. The form may be submitted via secure, encrypted email.

(4) Additional information regarding preparation and use of Form 5345-D can be found in IRM 4.4.23, AIMS Procedures and Processing Instructions, Openings.

(1) Upon receipt of the GM-approved Form 5345-D, the group secretary will input the establishment request into ERCS using the following procedures.

1. From the ERCS main menu, select 1 – Request Tax Return.

2. Select 2 – Control Penalty Investigation.

3. Enter PBC/SBC/EGC and Employee ID before continuing.

4. Enter Taxpayer TIN, then the first Tax Period being picked up.

5. Enter Activity Code 545. Once entered, the MFT will automatically be set to Y0 (Y- zero) and the Source Code will be set to 99.

6. Enter Status Code, hit Enter and a default statute date will appear below the status code.

   Note: ERCS defaults to a six-year, June 30 statute date.

7. Compare the statute date in Statute Info to the input document, such as Form 5345-D. If the examiner did not provide a statute date on the input document, secure the statute date from the examiner. If the default statute date in Statute Info is incorrect, input the appropriate statute date. After the Statute Info field is correct in ERCS, hit Enter.

8. Input the Tracking Code and Project Code, as applicable, hit Enter, and then hit Y to accept the information.

9. Enter additional years to be established, if any. When entering additional years, ensure the correct ASED is input for each year.

10. Enter the Key TIN, Key MFT and Key TP (Tax Period) for the key case, if any.

11. Input the Name and Address of the taxpayer being established.

    Note: For penalty records, ERCS will not automatically "pull" the address from the taxpayer’s key case (such as MFT 30); it must be input.

12. Managerial approval is required in ERCS to complete establishment of the record.

13. For each record (year) successfully established on ERCS, the group secretary will initial and date the Input on ERCS field in the Code/Data Area of Form 5345-D.

14. Upon completion, the group secretary will return Form 5345-D to the examiner for retention in the FBAR case file workpapers.

(1) Though rare, there may be situations where the group must re-establish controls on ERCS for corrective action, such as to secure a statute extension, or when Appeals returns a case to the group.

(2) Refer to existing procedures for re-establishing penalty records on ERCS. Contact your local AIMS/ERCS analyst, or BOD FBAR coordinator/analyst for further assistance.

(1) Each FBAR examination case file must include:

1. Examination workpapers index

   Note: TE/GE examiners use Form 5773, EO Workpaper Summary Continuation Sheet.

2. Examiner Activity Record.

3. If the FBAR exam is started from Title 26: Form 13535. See IRM 4.26.17.2.1.

4. If the FBAR exam is started from Title 31: Form 13536 providing opening information for the FBAR database. See IRM 4.26.17.2. (Form 13536 is used for all FBAR examinations and should be updated as the examination progresses. See IRM 4.26.17.3.)

5. Copy of email submission verifying the date that notification of RSM/opening FMD was submitted to CTR Operations.

6. Form 5345-D, Examination Request - Examination Returns Control System (ERCS) Users.

7. FBAR Lead Sheet or another written summary, and workpapers. See IRM 4.26.17.4 for further discussion

8. FBAR penalty computations.

9. Copies of FinCEN Query (and if applicable, prior system CBRS) research.

10. Copies of any delinquent FBARs secured prior to e-filing requirement, annotated in red on the top Secured by Examination, if applicable (see Note below). For e-filed FBARs, copies of research from FinCEN Query showing that the FBARs were filed.

    Note: Examiners must not accept delinquent paper FBARs. All FBARs must be electronically filed with FinCEN by the filer or a third party (tax preparer, for example) that the filer authorized to file the FBAR. See IRM 4.26.17.5.1 for delinquent FBAR procedures.

11. Information Document Requests (IDRs) with certified mail receipts, if applicable.

12. Copies of other correspondence, including, but not limited to Letter 4265, FBAR Appointment Letter, and all other correspondence with the account holder.

13. Copies Original Form 2848, Power of Attorney and Declaration of Representative, if applicable.

14. For all FBAR examinations starting from Title 26, (except those closing "No Action",) copies of relevant records from any related Title 26 case file, including, but not limited to: Copies of original and/or amended tax returns, and/or international information returns (such as Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner, Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, Form 8938, Statement of Specified Foreign Financial Assets, or other similar forms) as applicable.

15. Entity formation and/or dissolution documents, if applicable.

16. Any other relevant workpapers or other documents such as bank statements and summonses, if any.

17. Documentation of examination results, such as RAR and leadsheets, agreement form, and the taxpayer’s reasonable cause argument and/or protest, as applicable.

18. If any related Title 26 case is closed, indicate in the FBAR activity record how the Title 26 case(s) closed.

19. If any related Title 26 case is still open, indicate in the FBAR activity record the anticipated closure of the Title 26 case.

20. Possibility of substantial duplication of records is recognized, but required due to different processing, assessment and appeal procedures for each case.

(1) There are documents that, in addition to those found in IRM 4.26.17.2.4.1, are to be included in the case file. The following is a list of those documents:

1. Documentation of required coordination with an operating division FBAR coordinator. This should be in writing, such as an email.

2. Documentation of coordination with a Fraud Technical Advisor, as appropriate. See IRM 4.26.17.5.3.

3. For willful cases, Counsel’s written advice memorandum.

4. Documentation of managerial approval in accordance with IRM 4.26.16.6.8, Managerial Involvement and Approval of FBAR Penalties.

5. Form 13536 providing closing information for the FBAR database. This applies to all FBAR examinations. Follow the applicable closing procedures in IRM 4.26.17.4 to determine when and how to submit this document to CTR Operations.

6. Copy of Letter 3800, Warning Letter for Report of Foreign Bank and Financial Accounts (FBAR) Apparent Violations, if applicable.

7. Copy of Letter 3709, FBAR 30 Day Letter, if applicable.

8. Original Form 13449, Agreement to Assessment and Collection of Penalties Under 31 USC 5321(a)(5) and 5321 (a)(6), if applicable.

9. Notice 1330, Information on Making FBAR Penalty Payment by Check, if applicable

10. Filer’s reasonable cause argument and/or protest, as applicable

11. Rebuttal to filer’s protest, if applicable.

    Note: If prepared, a rebuttal must comply with IRM 4.2.7.4.1, Ex Parte Communication Procedures – Rebuttals of the Taxpayer’s Protest.

12. Form 4665, Report Transmittal, for unagreed cases being sent to Appeals. See IRM 4.26.17.4.3.4 for guidance in preparing Form 4665.

13. Copies of any payments and Form 3210 used to submit payment for processing.

(1) Outside of case folder: Form 3198, Special Handling Notice for Examination Case Processing:

1. List all related Title 26 income tax and penalty cases in the "Related Taxpayers or Key Cases section".

2. Include the following in the "Other" section within the "Forward to Technical Services" section:

3. "FBAR" and type of closing per FMD.

4. Project/tracking codes for the FBAR penalty case.

(1) CTR Operations will include the following documents, as appropriate:

1. Form 13448, Penalty Assessments Certification Summary (Title 31 "FBAR"), (Internal document).

2. Letter 3708, Notice and Demand for Payment of FBAR Penalty (copy).

3. Notice 1330, Information on Making FBAR Penalty Payment by Check (copy).

4. Receipt of check processing attached to original check.

5. Filer’s protest, if secured by CTR Operations.

6. Any other correspondence with, the filer or POA, Bureau of Fiscal Services, Appeals, Counsel, Department of Justice, as applicable

(2) If the FBAR penalty is appealed, Appeals will include documents in accordance with IRM 8.11.6, Penalties Worked in Appeals, FBAR Penalties.

(1) The period of limitation on assessment of FBAR civil penalties is found in 31 USC 5321(b)(1), Assessments. This section provides that the Secretary of the Treasury may assess a civil penalty under subsection (a) at any time before the end of the six-year period beginning on the date of the transaction with respect to which the penalty is assessed.

(2) For report filing violations purposes, the date of the transaction is the due date of the FBAR.

(3) The annual due date for filing FBARs required for foreign financial accounts maintained during calendar years 2015 and earlier, is June 30 of the following year.

(4) The annual due date for filing FBARs required for foreign financial accounts maintained during calendar years 2016 and later, is April 15th of the following year. This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act). Specifically, section 2006(b)(11) of the Act changes the FBAR due date to April 15th.

(5) The Act also mandates a maximum six-month extension of the filing deadline. To implement the statute with minimal burden to the public and FinCEN, FinCEN will grant filers failing to meet the FBAR annual due date of April 15th an automatic extension to October 15th of each year. Accordingly, specific requests for this extension are not required.

(6) When the April or October due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

(7) For FBAR reports due for calendar year 2016 and subsequent years, even if subparagraph (5) or (6) applies, examiners should treat April 15th as the date that the statute of limitations begins to run. However, if an assessment cannot be made before the April 15th statute date (such as six years after April 15th in the year that the FBAR should have been filed), contact Counsel for advice regarding whether an assessment can be made after the April 15th statute date.

(8) The date of the transaction for recordkeeping purposes is the date that the examiner first requests, via summons, the records required to be maintained under 31 CFR 1010.420, Records to be Made and Retained by Persons Having Financial Interests in Foreign Financial Accounts.

(9) The date that the FBAR civil penalty is assessed is the date that the IRS designated official stamps the assessment certification form, Form 13448, Penalty Assessment Certification Summary (Title 31 "FBAR"). The designated official is the department manager, CTR Operations or delegate.

(1) The period of limitation to commence a civil action to recover assessed FBAR penalties is found in 31 USC 5321(b)(2), Civil Actions. The Secretary may commence a civil action to recover a civil penalty assessed under subsection (a) at any time before the end of the two-year period beginning on the later of:

1. The date the penalty was assessed, or

2. The date any judgment becomes final in any criminal action under 31 USC 5322, Criminal Penalties, relating to the same transaction with respect to which the penalty is assessed.

(2) The date the FBAR penalty is assessed is the date that the IRS designated official stamps Form 13448, Penalty Assessment Certification Summary (Title 31 "FBAR").

(3) See IRM 4.26.17.4.4 for further details on the collection of FBAR penalties.

(1) Filers may voluntarily consent to extend the civil statute of limitation on FBAR penalty assessment such that assessment may be made on or before an agreed date. The statute of limitations on assessment of the FBAR penalties is found in 31 USC 5321(b)(1), Assessments. It is six years from the date of the transaction. In the case of filing violations, the date of the transaction is the due date for filing the FBAR. In the case of a recordkeeping violation, the date of the transaction is the date that the examiner first requests, by summons, the records required by 31 CFR 1010.420, Records to be made and retained by persons having financial interests in foreign financial accounts.

(2) The recommended language to be used for extending the statute of limitations on FBAR penalty assessment is shown in Exhibit 4.26.17-6.

(3) A consent to extend the statute of limitations for the Title 26 examination will not extend the statute of limitations on the FBAR examination.

(4) General guidelines in IRM 25.6.22.2, Guidelines for Soliciting Extensions, as modified to accommodate FBAR matters, should be used as general guidance for soliciting a consent to extend the FBAR assessment statute of limitations. These general guidelines should be further adapted and supplemented to reflect the most current and updated rules and procedures affecting FBAR assessment statute of limitations including, but not limited to:

1. Time frames, processes, and procedures impacted by the Appeals Judicial Approach and Culture (AJAC). Rules include, but are not limited to, the requirement of at least 365 days remaining before the expiration of the FBAR statutory period for assessment on the day the case file reaches Appeals and allowing an additional 30 days for the case file to reach Appeals once it has left exam’s jurisdiction.

2. For cases requiring Counsel review, there should be at least 90 days remaining on the FBAR statute of limitations when the FBAR case file is forwarded to Counsel. Counsel should review the case file within 45 days of receipt.

3. FBAR penalty assessment case files should be sent to CTR Operations for processing with at least 30 days remaining on the statute to allow enough time to process the case and assess the penalty.

4. If there is any delay in preparing a case file for closure from the exam group, the exam group manager must coordinate and obtain agreement from the CTR Operations group manager to send the case to CTR Operations for processing with less than 30 days remaining on the statute.

5. For guidelines related to the FBAR statute of limitations matters in criminal referral cases and CI involvement in the civil FBAR statute of limitations protection actions, see IRM 4.26.17.5.3 for more details.

(5) Procedures to solicit a consent to extend the FBAR statute of limitations are as follows:

1. Obtain managerial approval to solicit a consent.

2. Prepare the appropriate consent form in duplicate, working with Counsel when warranted. Consent should be prepared separately for each US person for whom the examination is being conducted (even for spouses filing joint income tax returns).

3. Verify correct filer identification number.

4. Determine correct filer name for consent. Follow procedures for filer name in accordance with IRM 25.6.22.6, Preparation of Consents for Specific Entities and Taxes.

5. Verify current address.

6. Verify the FBAR year(s) to be extended.

7. Verify the expiration date is correct.

8. Mail or present consent in duplicate to the filer and the POA on file.

9. Update activity record as to actions taken.

(6) After receiving a properly executed consent form extending the FBAR assessment statute of limitations, the examiner should:

1. Ensure the consent is properly date stamped by the receiving office.

2. Ensure the consent is properly executed by the filer or representative, with original signature(s).

3. Ensure the filer and/or representative did not make any alterations, deletions, or impose any restrictions on the consent. A consent which was signed by a filer must not be unilaterally altered by a Service employee.

4. If the consent is signed by a POA, verify the representative is authorized to sign the consent. The POA authorization must be valid at the time the consent is signed.

5. If the consent is signed by a corporate officer, verify the officer is empowered to sign the consent. Confirm the filer included the correct corporate name and the officer’s title.

6. If the consent is signed by a fiduciary, secure Form 56, Notice Concerning Fiduciary Relationship, and documents that verify a fiduciary relationship.

7. Prepare Form 5348, AIMS/ERCS Update (Examination Update), to update the statute of limitations for the FBAR case (ASED) on ERCS.

8. Submit consent package (for example, consent, Form 5348, FBAR, if available, POA document or other items bearing on validity of consent) to the group manager.

(7) The group manager is to:

1. Review the consent and necessary supporting documents to determine the validity of the consent.

2. Sign and date the consent. The consent must be properly countersigned by the appropriate Commissioner’s delegate per Delegation Order 25-13 (formerly DO 4- 35, Rev. 1) in IRM 1.2.52.14. Ensure that when consents are being signed by an acting manager, that person is appropriately designated to do so. A copy of any written acting manager designation should be attached to the consent.

3. Verify the accuracy of Form 5348, initial and date.

4. Direct the ASED to be updated on ERCS.

5. Return the consent package to the examiner.

(8) The examiner takes these final actions:

1. Copy of consent, together with a copy of the updated FMD are forwarded to CTR Operations by email. See Exhibit 4.26.17-2 for contact information.

2. Retain one of the original fully executed consents in the FBAR case file

3. Send one of the original fully executed consents to the filer (with copy to POA, if applicable). If the filer only returns one original consent, a copy of the fully executed consent should be sent to the filer and the POA, if applicable, and the original should remain in the FBAR case file.

4. Retain original FMD in the FBAR case file.

(9) If the filer refuses to execute the consent and indicates a desire to appeal the FBAR penalty, refer to IRM 4.26.17.4.3.4.2 for post-assessment appeal information.

(1) The statute of limitations on FBAR criminal penalties is five years from the date the offense is committed. The period of limitation for FBAR criminal penalties is the general criminal statute of limitations found at 18 USC 3282, Offenses Not Capital. This section provides that: except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any non-capital offense, unless the indictment is found, or the information is instituted within five years after such offense shall have been committed.

(1) The examiner should request records necessary to document: ownership and type of authority over foreign accounts, account transactions, aggregate and maximum balances and facts regarding willfulness.

(2) The information document request (IDR) for FBAR records should be issued either: by registered or certified mail, with return receipt requested, or in person, by having the filer initial and date the IDR to confirm receipt. The examiner should document the activity record as to the date the filer received the IDR.

(3) The IDR should request all relevant documents needed to determine compliance with the FBAR filing and recordkeeping requirements. Therefore, the examiner should prepare an IDR after considering the issues that need to be developed and the records that the filer should have (or is required to maintain) relevant to those issues. The examiner should avoid asking for irrelevant information. The examiner should draft the IDR precisely, with care taken in describing the records, indicating due dates, and identifying specific tax years. See IRM 4.10.2.10.2, Requesting Information or Documents from the Taxpayer, for further information.

(1) If an approved RSM has been secured by the examiner, any records secured via a Formal Document Request (FDR) under IRC 982, Admissibility of documentation maintained in foreign countries, can be used in an FBAR investigation because if the statutes are related in a case, Title 31 is considered “tax administration” under the “related statute” portion of the definition of tax administration in IRC 6103(b)(4)(A)(i), and the Service may access return information in furtherance of its Title 31 FBAR investigation. (IRC 6103(h)(1), Department of the Treasury)

(2) Under IRC 982(a), General Rule, when a taxpayer fails to substantially comply with any FDR within 90 days, the IRS may file a motion in any civil court proceeding (in which the tax treatment of the examined item is an issue) for the court to prohibit the introduction (by the taxpayer) of any foreign-based documents covered by the FDR request in Title 26 examinations. This provision does not apply to Title 31 examinations.

(1) If records requested via an IDR are not provided, the examiner should use a summons to obtain the records. In preparing a summons, the examiner may only request items requested on prior IDRs but must exclude any records already produced in response to those IDRs and rephrase any questions to a description of records that may be responsive to the unanswered questions.

(2) The date the summons is issued fixes the date on which account balances are used to compute recordkeeping violation statutory penalty maximums.

(3) Examiners must use a BSA summons (FinCEN Form 113) if there is no approved RSM and the information will not be used in a Title 26 examination. Summons authority, completion, issuance, and special disclosure rules for BSA summons are covered in IRM 4.26.17.5.2.

(4) A Title 26 summons, Form 2039, Summons, may be used if there is an approved RSM and the information requested can be used in a Title 26 examination.

(5) See Exhibit 4.26.17-4 for the language to be added to the Title 26 summons with respect to the records required to be kept under 31 CFR 1010.420, Records to be made and retained by persons having financial interests in foreign financial accounts.

(1) FinCEN Query (FCQ) is a tool designed to improve authorized users' ability to access and analyze FinCEN data including FBAR records. Refer to IRM 4.26.4, Bank Secrecy Act – FinCEN Query, for general considerations.

(2) Obtaining FinCEN Data via Gatekeeper: The following procedures must be followed when requesting General (Non-SAR) FinCEN data, such as CTR, FBAR, Form 8300 and other similar forms.

1. The examiner will complete the Form 10509, FinCEN Query (FCQ) Request, and forward it via encrypted email to their manager

2. The manager will digitally approve the form and send it to their gatekeeper.

3. The gatekeeper will access the BSA data and keep the approved Form 10509 for six years.

(3) FCQ users must be careful not to disclose sensitive information to FCQ Help Desk staff. Do not seek help in conducting specific queries from the FCQ Help Desk.

(4) Access to FCQ information is subject to UNAX guidelines and must only be made regarding specific and assigned tax administration matters.

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(6) For additional information on disclosure of FCQ information, including SARs, refer to IRM 4.26.14, Bank Secrecy Act, Disclosure.

(1) In willful violation penalty cases, the examiner will forward the written summary and the entire FBAR case file (unless FBAR Counsel agrees otherwise) to the appropriate FBAR Counsel for review and concurrence after the group manager, operating division FBAR coordinator, and if applicable, Fraud Technical Advisor, have reviewed and concurred with the assertion of the willful violation penalty.

(2) Counsel’s review will be limited to providing advice on whether:

1. An FBAR violation occurred,

2. The FBAR violation was willful,

3. The proposed penalty is within the statutory limitations of 31 USC 5321(a)(5)(C), Willful Violations, and

4. If Counsel believes the penalty may not be appropriate given the facts and circumstances of the case, additional facts the examiner may want to consider in determining the amount of the penalty.

(3) Review by Counsel is not required when the examiner has determined:

1. That there is no FBAR violation.

2. The issuance of Letter 3800, Warning for Report of Foreign Bank and Financial Accounts (FBAR) Apparent Violations, is appropriate.

3. A non-willful violation penalty is appropriate.

(4) Each SB/SE Counsel Area has at least one FBAR coordinator. LB&I Counsel also has FBAR coordinators. See Exhibit 4.26.17-3 for FBAR Counsel listings. The examiner may also contact local counsel for the name of the appropriate FBAR Counsel or for other assistance with respect to FBAR cases.

(5) Upon receipt of the written summary and appropriate attachments for review and concurrence, Counsel will:

1. Render its legal advice within 45 days or inform the examiner of potential delay. If coordination with an Associate Chief Counsel is necessary and will cause a delay, Counsel will inform the examiner. Counsel will work with the examiner to establish a shorter time frame if expedited review is needed.

2. Prepare a written memorandum of review of the FBAR case. If Counsel recommends proposal of a willful penalty, Counsel will write a memo to support the Government’s legal position.

3. If Counsel does not recommend proposal of a willful penalty, the memo will state the reasons for the disagreement. If the disagreement is based upon inadequate factual development, the memo should recommend areas for further examination.

4. The written advice memorandum is privileged information and can NOT be disseminated to the filer or other third parties.

(6) After the Counsel review has been completed, the group manager reviews the case and makes the final decision on the penalty. If needed, the FBAR Coordinator may assist in the penalty decision.

(7) If the group manager approves the penalty proposal, the examiner will issue the FBAR report package. See IRM 4.26.17.4.3.

(1) When the person violating the FBAR requirements agrees to assessment of the penalties, the person generally submits a signed and dated Form 13449, Agreement to Assessment and Collection of Penalties Under 31 U.S.C. 5321(a)(5) and 5321(a)(6), and payment to the examiner.

(2) The examiner will:

1. Follow all general FBAR closing procedures in IRM 4.26.17.4.

2. Follow all procedures for cases proposing penalties in IRM 4.26.17.4.3.

3. Place the signed agreement Form 13449 in the FBAR case file.

4. Process any payments received according to IRM 4.26.17.4.4.

5. Assemble the case file for closure according to IRM 4.26.17.2.4.

6. Forward the FBAR case for closure to the group manager.

(1) When the FBAR penalty is proposed but not agreed, the examiner waits 30 days from issuance of Letter 3709, FBAR 30 Day Letter, to see if the person will request an appeal as provided in Letter 3709.

(2) If less than 365 days remain on the statute and the filer will not extend the statute, the case will need to be closed for assessment of the FBAR penalty. See IRM 4.26.17.4.3.4.

(3) To appeal a proposed penalty, the person against whom an FBAR penalty is proposed must submit a written protest to the examiner, postmarked on or before the designated response date listed in the Letter 3709. The group manager may grant reasonable extensions of time to provide a protest. This should be documented in the Examination Activity Record.

(4) A valid protest must contain all the information required in Letter 3709. If the protest is valid, see IRM 4.26.17.4.3.4 for further procedures.

(5) If the protest is invalid, the examiner communicates the errors and/or omissions to the person against whom the FBAR penalty is proposed or their authorized power of attorney. If there is sufficient time remaining on the assessment statute of limitations to allow the person time to correct the protest, the examiner sets a reasonable deadline for its return. If insufficient time remains on the assessment statute of limitations, inform the person or authorized POA. Solicit a consent to extend the FBAR statute of limitations in accordance with IRM 4.26.17.3.1.3. If the statute is not extended, proceed with closing the case for assessment, as outlined in paragraph (6).

(6) If there is no response to the Letter 3709 the case is closed unagreed to CTR Operations, the penalty is assessed, and, if not already fully paid, the collection process begins. To prepare the case for closure, the examiner will:

1. Follow all general closing procedures in IRM 4.26.17.4.

2. Follow all procedures for cases proposing penalties in IRM 4.26.17.4.3.

3. Document on the Examination Activity Record in the FBAR case file, that no response to Letter 3709 was received.

4. Assemble the case file for closure in accordance with IRM 4.26.17.2.4.

5. Forward the FBAR case to the group manager for closure.

(1) Deficiency procedures under Title 26 (Subchapter B of Chapter 63) do not apply to FBAR penalties, which are authorized under Title 31. Therefore, penalties may be appealed pre-assessment or post-assessment.

(2) Payment of the proposed penalty is not required to appeal.

(3) The filer is allowed only one appeal, whether pre- or post-assessment.

(4) Pre-assessment appeal is only available if there is sufficient time left on the FBAR assessment statute of limitations. Otherwise, only post-assessment appeal is available. A filer may agree to extend the assessment statute in order to make pre-assessment appeal available.

(5) If a protest is received and is valid according to IRM 4.26.17.4.3.3 the examiner reviews the FBAR assessment statute of limitations to determine the type of appeal.

1. For a pre-assessment appeal, 365 days must remain on the FBAR assessment statute of limitations when the case file arrives in Appeals. See IRM 4.26.17.4.3.4.1 for pre-assessment appeal procedures.

2. If less than 365 days remain on the FBAR assessment statute of limitations, and the filer refuses to extend the FBAR statute of limitations, pre-assessment appeal is not available. See post-assessment appeal procedures in IRM 4.26.17.4.3.4.2.

3. See IRM 4.26.17.3.1 for information on determining the FBAR statute of limitations.

(6) In all appealed FBAR cases, the examiner follows general closing procedures in IRM 4.26.17.4 and procedures for cases with proposed penalties IRM 4.26.17.4.3. In addition, the examiner will:

1. Explain the differences in pre-assessment and post-assessment appeals to the filer.

2. Ensure that any documents needed in any related cases or in the FBAR case are copied so that there is a fully documented case file for each.

3. Prepare Form 4665, Report Transmittal, in accordance with Rev. Proc. 2012-18, section 2.03(4) and IRM 8.1.10.4.2, Administrative File. Form 4665 should not contain any statements or information intended to influence Appeals or that otherwise may violate the ex parte communication rules. In general, the Form 4665 should be limited to a neutral list of unagreed issues, without comment. The examiner should not include any commentary regarding the merits of the penalty appeal. The case file compiled at the time of the original FBAR civil penalty determination should have sufficient documentation regarding the determination to sustain the penalty. No separate memorandum should be prepared for Appeals discussing the basis for the original penalty determination. Note on Form 4665 that the case is an FBAR category case, UIL 9999.99- 01, in the Appeals Coordinated Issue (ACI) Program.

4. Assemble the case file for closure in accordance with IRM 4.26.17.2.4.

5. Forward the FBAR case to the group manager for closure.

(7) Appeals will:

1. Follow procedures in IRM 8.11.6, Penalties Worked in Appeals, FBAR Penalties, and on the Appeals website.

2. The appeals officer receiving the FBAR case must contact the Appeals FBAR coordinator prior to scheduling the initial conference. See IRM 8.11.6.2, FBAR Overview, for Appeals FBAR coordinator contact information.

3. Provide the examiner, via the group manager, Form 5402, Appeals Transmittal and Case Memo, or an equivalent Appeals Case Memorandum regarding the outcome of the appealed FBAR case.

4. Close the FBAR case to CTR Operations, following the closing procedures in IRM 8.11.6.

(8) See additional procedures in IRM 4.26.17.4.3.4.1 for pre-assessment appeals and IRM 4.26.17.4.3.4.2 for post-assessment appeals.

(1) If FBAR payments have been misposted (such as MFT 55, 30) or the Offshore Penalty has been misposted (such as an FBAR payment), you must complete Form 2424, Account Adjustment Voucher, to make the correction to move the payment to the correct account.

(2) Use Form 2424 to debit Master File and credit the 6400 Account. Use subaccount 2320. The form must be mailed/faxed to the campus where the payment was originally deposited. The campus where the payment was originally deposited can be determined by the first two digits in the Trace ID field. Any Trace ID number that begins with any number except 17 (Cincinnati) needs to be sent to the appropriate campus as listed in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

(3) Include an IDRS print with each Account Adjustment Voucher. TXMOD is preferred by accounting however IMFOLT & INOLES can be used.

(4) The following items should be completed on the top (debit) half of Form 2424:

1. Taxpayer Name and Address

2. X-ref TIN (Taxpayer SSN)

3. X-ref MFT

4. X-ref tax period

5. Transaction date

(5) The following items are completed on the bottom (credit) half of Form 2424:

1. Document Locator Number – leave blank

2. 1st T.C. - 642

3. Debit amount $

4. Form 813 amount – leave blank

5. Credit amount $

6. Date prepared

7. Prepared by – RA name

(1) Prior to issuance of a BSA summons, the summons must be reviewed. BSA examiners will follow the review and approval process in IRM 4.26.8.4.2, Review of BSA Summons Prior to Issuance. All other examiners follow the process in this section.

(2) The summons package forwarded for review includes:

1. The cover memorandum (see IRM 4.26.8.4.1.2, Summons Package Memoranda),

2. Copy of the first page of FinCEN Form 113, and

3. Attachments to the summons as described in IRM 4.26.8.4.1.1, Attachments to the Summons, including the listing of documents and records being summoned, definitions and information of reimbursement of expenses. (IRM 4.26.8.4, FinCEN Form 113, BSA Summons)

(3) The cover memorandum is addressed from the examiner through the group manager and Counsel to the examiner’s territory manager (TM) and:

1. Provides a brief history of the case,

2. Describes the potential FBAR violations,

3. States why the summons is being sought, and

4. States if the party being summoned indicated if they will comply with the summons.

(4) The examiner forwards the summons package for review through the group manager to Counsel.

(5) Counsel reviews the summons and if approved, prepares a memorandum to the TM approving issuance of the BSA summons and sends the memo to the TM with the rest of the summons package. If disapproved, Counsel works with the examiner to resolve the problem.

(6) The TM reviews Counsel’s approval memo and the summons package before signing the summons.

1. If in disagreement with the decision to issue the summons, the TM discusses with Counsel, the group manager, and the examiner, as appropriate.

2. If in agreement, the TM signs the summons as the issuing person. The TM then returns the signed summons and summons package to the examiner through the group manager for service of the summons.

(7) Procedures for service of the summons are described in IRM 4.26.8.3.3, Service of a Summons.

(1) The examiner will immediately report any refusal to comply or any proceeding brought by the summoned party to quash a summons to group and territory managers and Counsel.

(2) In cases where there is a refusal to comply or a proceeding brought by the summoned party, the examiner will:

1. Review IRM 25.5.10, Summons – Enforcement of Summons, for considerations in summons enforcement. The examiner will not refer a summons for enforcement in the situations given in IRM 25.5.10, such as 1) the summoned party or their representative has contacted the Service and indicated a willingness to comply and requests a reasonable extension of time to comply; or 2) the summoned party has appeared and denied under oath the possession or control of the documents summoned, unless there is good reason to believe otherwise.

2. If appropriate, request enforcement action when the summoned party neglects or refuses to comply. See IRM 4.26.17.5.2.3 for procedures to make this request.

(1) The examiner will prepare requests for enforcement of a BSA Summons in FBAR cases using the memorandum report format.

(2) The summons enforcement request memorandum is addressed from the examiner through the group manager and territory manager (TM) to Counsel. The memorandum is to be signed by the examiner’s TM.

(3) The memorandum includes the information in IRM 4.26.8.4.5, Summons Enforcement.

(4) The TM reviews the summons enforcement request memorandum prior to signing it. If in agreement with the decision to enforce the summons, the TM signs the memo and returns it to the group manager for forwarding to Counsel. If the TM does not agree, the TM discusses the decision with the examiner, group manager and Counsel, as appropriate.

(5) Counsel considers the summons enforcement request and notifies the examiner whether the summons can or cannot be enforced. The examiner will notify the group manager and territory manager of Counsel’s decision.

(6) If Counsel believes the summons can be enforced, the summons request is forwarded to the appropriate U.S. Attorney’s office. The original and one copy of the summons are transmitted through Counsel to the U.S. Attorney’s office in which the venue lies.

(7) If Counsel makes a referral for enforcement of a BSA summons to the U.S. Attorney’s office, FinCEN must be notified per IRM 4.26.8.4.6, Disclosure of Summons, Testimony, or Records. To complete these procedures, the examiner’s TM will contact the appropriate BSA Policy Program Manager listed on BSA’s website identified in Exhibit 4.26.17-3.

(1) IRS Criminal Investigation has BSA criminal examination authority under 31 CFR 1010.810(c)(2), Enforcement.

(2) Criminal FBAR penalties appear at 31 USC 5322, Criminal Penalties, and 31 CFR 1010.840, Criminal Penalty.

(3) Acceptance by Criminal Investigation of an FBAR referral for criminal investigation depends on the evidence establishing willfulness and sometimes other criteria.

1. Willfulness is a question of intent. Willfulness for criminal FBAR violations involves the intentional, voluntary violation of a known legal duty.

2. Criminal sentencing in FBAR cases depends on the federal sentencing guidelines. Federal sentencing guidelines for money laundering cases that include criminal FBAR reporting or recordkeeping violations appear in the U.S. Sentencing Guidelines, 2S1.3, Structuring Transactions to Evade Reporting Requirements. The relevant statutes require monetary reporting without regard to whether the funds were lawfully or unlawfully obtained.

3. The period of limitation for FBAR criminal penalties is the general criminal statute of limitations in 18 USC 3282, Offenses Not Capital. This section provides that except as otherwise expressly provided by law, no person shall be prosecuted, tried, or punished for any non-capital offense, unless the indictment is found, or the information is instituted within five years after such offense shall have been committed.

(1) If the examiner considers that the case warrants referral for possible criminal investigation, the examiner, with the approval of the group manager, will involve an FTA as soon as possible, if one is not already involved. See IRM 4.26.17.5.3 for procedures, including discussion of when FTA involvement is mandatory and when it is optional.

(2) If, on Form 13639, Fraudulent Intent Referral Memorandum (FIRM), the FTA determines that firm indications of willfulness and criminal criteria are present, the examiner will prepare Form 2797, Referral Report of Potential Criminal Fraud Cases, with a detailed explanation of the FBAR violations. The FTA will assist in the preparation of Form 2797 if requested by the examiner. When preparing Form 2797 for an FBAR referral, the examiner will follow the instructions attached to the form and:

1. Note that "filer" means the person required to file the FBAR regardless of whether the person filed;

2. Insert "FBAR Violation" in Item 2i (Basis for the Suspected Fraud - Other);

3. Include a narrative with Form 2797 to include 1) the results of FinCEN Query research for FBAR filings, 2) the filer’s knowledge of the filing requirements and 3) filing compliance status at the date of the referral (this must also be documented in the workpapers);

4. Omit items 3 (Tax Return Information) and 4 (Administrative Information); and

5. Attach a copy of Form 13535, Report of Foreign Bank and Financial Accounts Related Statute Memorandum, if secured. See IRM 25.1.12.7(3), Joint Title 26 - Title 31 Criminal Referral Disclosure Concern, for important information regarding disclosure concerns.

(3) SB/SE Examination - Specialty, BSA only: At the same time the referral package is sent to Criminal Investigation (CI), IRS is required by a Memorandum of Understanding to provide FinCEN a copy of the portion of the referral package to CI that is related to BSA violations or deficiencies. See IRM 25.1.12.7, Joint Title 26 - Title 31 Criminal Referral Disclosure Concern, for more information and procedures.

(4) See IRM 25.1.3, Fraud Handbook, Criminal Referrals, for detailed instructions concerning the processing of Form 2797.

(5) If a related tax case warrants a criminal referral per IRM 25.1.3, the examiner will:

• Prepare a separate Form 2797 for the tax case,

• Submit separate tax and FBAR referrals to CI concurrently, if possible, and

• Follow procedures established for criminal referrals in IRM 25.1.3.

(1) CI will evaluate the criminal FBAR referral following the general principles and procedures of IRM 25.1.3.3, Referral Evaluation, adapted as appropriate for FBARs.

(1) If the referral of the FBAR case to Criminal Investigation is declined, the general principles and procedures of IRM 25.1.3.5, Declined Criminal Referrals, adapted as appropriate for FBARs, apply. Additionally, the examiner will:

1. Place the transmittal memorandum that indicates declination in the retained FBAR file, and

2. Commence any appropriate civil FBAR penalty action in accordance with IRM 4.26.16 and this IRM. If no civil penalty action is appropriate, the examiner will follow applicable closing procedures in IRM 4.26.17.4.

(1) If the referral of the FBAR case to Criminal Investigation is accepted, follow the general principles and procedures of IRM 25.1.3.4, Accepted Criminal Referrals, IRM 25.1.4, Administrative Joint Investigation, and IRM 25.1.5, Grand Jury Investigations. However, they must be adapted for FBAR matters, due to distinct differences between Title 26 and Title 31, including but not limited to the following:

1. FBAR information is not available on AIMS. Therefore, no FBAR accounts or modules are available on which to place TC 914 controls.

2. Other than a filer’s consent to extend the SOL, there are no statutory exceptions, including fraud or willfulness, for FBAR SOLs. See IRM 4.26.17.5.3 for more information and IRM 4.26.17.5.3.5.1 for FBAR statute protection procedures in joint investigations.

(2) Additionally, the examiner will:

1. Retain the transmittal memorandum that indicates acceptance in the FBAR file,

2. Complete Form 13536, Foreign Bank and Financial Accounts Report Monitoring Document (FMD), showing CI acceptance;

3. Email the FMD to CTR Operations so that the FBAR database can be updated. Retain the FMD in the FBAR case file, and

   Note: The case file is not sent to CTR Operations at this point.

4. Keep the physical FBAR case file. Continue to work the civil FBAR examination as a joint investigation in accordance with IRM 25.1.4, Administrative Joint Investigation, and IRM 25.1.5, Grand Jury Investigations, all adapted as appropriate for FBAR matters.

   Note: Suspense applies to FBAR cases. See IRM 4.26.17.5.3.5.2 for more information.

(3) CTR Operations will enter the information from the FMD to the FBAR database.

(4) Criminal Investigation will cooperate in discussing statute problems with the examiner and manager.

(1) Criminal Investigation will advise the examiner through the FTA about the final disposition of the case.

(2) For criminal investigations that are discontinued at any point during the investigation, the general principles and procedures of IRM 25.1.4.3.9, Discontinued Investigation, adapted as appropriate for FBAR matters, apply.

(3) The function holding the civil FBAR case in suspense is responsible for releasing it from suspense for Exam to proceed with the civil case.

(4) Upon receipt of the civil FBAR case for resolution, the examiner will commence any appropriate civil FBAR action, following this IRM.

(5) If no civil action is appropriate, the examiner will follow applicable closing procedures in IRM 4.26.17.4.

(1) Under the doctrine of collateral estoppel, an issue already considered by a court cannot be re-litigated if that court has entered a final decision on the issue. See IRM 25.1.6.4, Collateral Estoppel, for further discussion of this doctrine.

(2) The elements of collateral estoppel are:

1. Prior litigation with identical issue,

2. Issue litigated in the first judicial proceeding, and the party against whom collateral estoppel is being asserted had a full and fair opportunity to litigate the issue in the first judicial proceeding, and

3. Issue necessarily decided and rendered as a necessary part of the court’s final judgment.

(3) The doctrine of collateral estoppel applies to criminal FBAR cases only under the following circumstances:

1. The criminal case brought against an individual includes a charge of criminal failure to file an FBAR,

2. The criminal case concludes with the individual being found guilty, after trial, of criminally failing to file an FBAR charge or pleading guilty to the criminal failure to file the FBAR charge, and

3. The decision in the criminal case is final. In other words, all appeal rights must be exhausted or time to appeal must have expired.

(4) Collateral estoppel will only support a civil penalty for the same year of the guilty verdict/plea agreement and the same individual at issue in the criminal case.

(5) Although there is a different standard for criminal and civil failure to file an FBAR, and, therefore, one could say the issue is not identical, the showing required for a civil failure to file an FBAR is less than that needed for criminal failure to file, so the identical issue requirement is met.

(6) Collateral estoppel only establishes that the willful penalty is appropriate; the individual can still dispute whether the amount of the penalty proposed or assessed is proper under the statute.