Any US tax payer with an interest in overseas financial accounts will have to file a FBAR through FinCEN Form 114 (formerly Form TD F 90-22.1) where the aggregate value of those financial accounts exceeds $10,000 during the calendar year. If you fail to comply with FBAR reporting, civil/criminal penalties could be imposed on FBAR violations. Nevertheless, you have the right to appeal against the projected FBAR penalties if the IRS assessment does not reflect things accurately. Here is what you have to know about FBAR penalty appeals.
Evaluating the Penalty
First off, there is no need to pay for any kind of penalties until the end of the appeal course of action. And keep in mind that, the statute of limitations are different for FBAR assessments and FBAR collections. Assessment of FBAR penalty is carried out by a local tax examiner but FBAR penalty appeals are addressed at IRS Office of Appeals in a centralized region where there will likely be a FBAR Appeals Coordinator who will make sure that resolutions are consistent nationwide. As it is often a coordinated issue a recommendation to International Operations of the Internal Revenue Service is required prior to carrying the first discussion.
Assessing the penalty - Two types
Appeals Pre-Assessment
In the event the taxpayer doesn't agree with the assessment of the FBAR penalty, then they ought to appeal within forty five days. This case will be viewed as pre-assessment appeals. If you are given notice of a proposed FBAR penalty ahead of the actual assessment it is important that you understand THIS IS THE TIME TO APPEAL.
Post-Assessment
When there is under 180 days remaining on the assessment statute of limitations, the IRS is allowed to assess FBAR penalties even at the time your case is picked up by Appeals. Is this indicate that I cannot appeal anymore if the statute expiration date is close by? No, you could. In situation like this, you will be given post-assessment appeal rights. Post-assessment FBAR cases would be addressed on expedited basis and it has to be processed in 120 days of assignment. But remember thatPost Appeals Mediation (P.A.M.) or Alternative Dispute Resolution rights will not be provided in a post-assessment Appeals procedure.
Judicial Considerations
You can actually submit a complaint either in District Court or the Court of Federal Claims to challenge the assessed FBAR penalty. On that suit, showing that you've tried to exhaust all of the administrative remedies, or disagreed with the report the IRS has centered its claim upon, by appealing an adverse FBAR penalty resolution at an administrative level, is often a good option. Additionally, you simply could win the FBAR penalty appeal, granting a dispensation of any threat of FBAR lawsuit.