By Megan L. Brackney
July 2015 Edition
The IRS has broad statutory discretion to impose penalties for both willful and non-willful failures to report foreign financial accounts. This discretion has made it difficult to predict the likely outcome of an examination or an opt-out from the IRS's Off:shore Voluntary Disclosure Program (OVDP). On May 13, 2015, the IRS's Small Business/Self-Employed Division issued "Interim Guidance for Report of Foreign Bank and Financial Accounts (FBAR) Penalties" (SBSE-04-0515-0025). The interim guidance will become part of the Internal Revenue Manual (lRM) provisions relating to FBAR penalties and procedures of IRM 4.26.16 and IRM 4.26.17 by July 1, 2016, but it is effective immediately and applies to all open cases. It contains guidance for assessing willful and non-willful FBAR penalties, as well as the internal procedures that examiners should follow in FBAR cases.