For typical IRS tax debts, the statute of limitations on collections is 10 years. In IRS-speak this “statute of limitations” is called the Collection Statute Expiration Date or CSED (pronounced “SEE-said”).
And wouldn’t you know it, if you have been assessed an FBAR Penalty (or several) during an FBAR or Opt-Out audit there is an FBAR CSED as well. There is a statute of limitations on collecting FBAR penalties, but the CSED rules are completely different.
The FBAR Penalty of Statute of Limitations on Collections
FBAR penalties are not taxes. FBAR penalties aren’t even tax penalties! They are “Bank Secrecy” Penalties! FBAR penalties cannot be assessed and collected like Title 26 income tax. The IRS only has two ways in which it can collect (outside a criminal plea or sentence):
- Intercept payments back to you from the Federal government like tax your tax refunds
- Or the Federal Government must sue to enforce its FBAR penalty assessment.
IRM Sec. 8.11.6.3.1.1 shows the different collections limitations.
In the first case, to intercept of offset payments like a tax refund — the CSED is forever or until the FBAR penalty is paid off.
In the other case, to file a suit to attempt to recover an FBAR penalty, the Government only has two years in which to bring an action. Once that two-year period has expired and no action has brought, then the IRS may only offset FBAR penalties via intercepting federal payments.
FBAR Penalty Appeals
If you have been assessed an FBAR penalty or a proposed FBAR penalty, you do have appeal rights. It is best to exhaust these remedies — perhaps you will prevail or perhaps you will at least make a potential FBAR penalty recovery case the government may bring against you weaker.
If you need assistance filling out your FBAR, or if you have questions or concerns about past FBARs you may have misfiled, contact us. We can help.
