Part 8. Appeals

Chapter 11. Penalties Worked in Appeals

Section 6. FBAR Penalties

8.11.6  FBAR Penalties

Manual Transmittal

August 14, 2012

Purpose

(1) This transmits revised IRM 8.11.6, Penalties Worked in Appeals, FBAR Penalties.

Material Changes

(1) Revised IRM to reflect new organizational titles resulting from the Appeals 2012 Alignment Project.

(2) Revised IRM to incorporate Interim Guidance AP-08-0412-12 to eliminate the requirement to create and maintain closed office files.

(3) Revised IRM 8.11.6.3.1 (1) to include Delegation Order 25-13 which revokes Delegation Order 4-35 effective April 11, 2012.

(4) Made minor editorial changes throughout.

Effect on Other Documents

This supersedes IRM 8.11.6 dated November 01, 2011. Incorporated Interim Guidance Memorandum AP-08-0412-12, Elimination of Appeals Closed Office Files, which was issued May 1, 2012, into this IRM.

Audience

Appeals employees

Effective Date

(10-01-2012)


Susan L. Latham
Director, Policy, Quality and Case Support

8.11.6.1  (10-01-2012)
FBAR Overview

  1. The Financial Crimes Enforcement Network (FinCEN) delegated to IRS its enforcement authority for penalties imposed under Title 31, Sections 5314 - 5321 for the failure to file Form TD F 90-22.1 Report Of Foreign Bank And Financial Accounts (FBAR) . This delegation was effective April 8, 2003, by memorandum of agreement between FinCEN and IRS.

  2. Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, must be filed by US persons who have a financial interest in, signature authority, or other authority over one or more financial accounts in foreign countries with an aggregate value exceeding $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.

  3. FBAR reports are filed at the Enterprise Computing Center (ECC) in Detroit, Michigan. Filings can be researched on the Currency and Banking Retrieval System (CBRS) or on IDRS using command code (cc): IRPTRO. Penalty cases, assessments and payments are recorded on a separate FBAR database maintained by the ECC.

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

  5. FBAR penalties are an Appeals Coordinated Issue (Category of Case) and require a referral to International Operations prior to holding the first conference. International issue guidelines are available from the Appeals International Technical Specialist (ITS).

  6. The FBAR penalty case will usually be received in Appeals pre-assessment. However, upon request, Appeals will also conduct post-assessment hearings as provided in Title 31 CFR 5.4 and 900 to consider FBAR penalty liability and collection.

    Note:

    Post-assessment FBAR penalty cases are priority cases and must be worked expeditiously. Appeals requires these cases be completed and approved within 60 days of assignment. This is calculated from the Appeals Officer assigned date (ASGNDATE) to the date the ATM approves the case for closing (ACAP date).

  7. Additional FBAR Resource materials available:

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

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

    • LB&I website

    • SBSE website

    • IRS.gov

  8. This chapter describes procedures for receipt and control, interim processing and closing of FBAR penalty within Appeals.

8.11.6.2  (11-01-2011)
FBAR Administrative Case Files

  1. Appeals requires 180 days remaining on the assessment statute of limitations at the time the administrative file is received.

    Note:

    The FBAR penalty applies and is assessed separately and not jointly. There should be one individual under examination per FBAR case file.

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

    Type of FBAR case Sent by
    Post-assessed FBAR penalty

    Note:

    Verify penalty assessment by reviewing Form 13448 which should be in the case file.

    		 The FBAR Penalty Coordinator at the Enterprise Computing Center -
    pre-assesed FBAR penalty Compliance Tech Services

    Note:

    Email *SBSE BSA Compliance - FBAR Penalty Coordinator for information on the penalty assessment.

  3. The administrative file will contain the following documents:

    • A brief summary memorandum explaining the FBAR violation(s) containing statistical information which includes:

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

    • A Foreign Bank and Financial Accounts Report Related Statute Memorandum, Form 13535 signed by the designated Program Manager affirming that the information shows the FBAR violations were committed in furtherance of income tax violations, when appropriate.

    • A copy of any delinquent FBAR(s) secured by examination

    • FBAR issue workpapers

    • FBAR 30-Day Letter

      Note:

      Letter 3709 for pre-assessment

      Note:

      Letter 3708 for post-assessment

    • Taxpayers protest.

    • FBAR/Title 31 Power of Attorney Form 2848, if applicable.

8.11.6.3  (11-01-2011)
FBAR Statute of Limitations

  1. The statutes of limitations on assessment (ASED) and collection (CSED) of FBAR penalties are defined under Title 31, the Bank Secrecy Act.

  2. FBAR penalty cases may be sent to Appeals either pre-assessment or post-assessment.

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

  4. Statute of limitation must be obtained from each individual under examination.

    Note:

    Married couples under FBAR examination are treated as individual cases and an extension must be obtained from each individual under examination.

8.11.6.3.1  (10-01-2012)
FBAR Penalty Statute of Limitations on Assessment (ASED)

  1. The statute of limitations on assessment (ASED) and collection (CSED) of FBAR penalties are defined under Title 31, the Bank Secrecy Act.

    TYPE OF VIOLATION ASED
    Failure to file FBAR report (either willful or negligent) 6 years from the due date of the FBAR report (Due date is 06/30/yyyy)
    Failure to maintain required records (either willful or negligent) 6 years from the date the IRS first asks for the records

    • For requests to extend the time to assess an FBAR penalty, a Counsel FBAR coordinator should be contacted. Local Area Counsel can help in identifying the appropriate Counsel FBAR coordinator.

    • Use Title 31 statute extension form.

    • DO 25-13 provides information on who has authority to sign agreements extending the period of limitations on assessment or collection of civil FBAR penalties.

    Examples
    Example 1: In calendar year 2004, a foreign bank account owned by a U.S. person exceeds $10,000.00. The Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1) is due June 30, 2005, but the account holder does not file one. The assessment statute of limitations for failing to file an FBAR report expires June 30, 2011.
    Example 2: Same facts as in Example 1, and in addition, the account holder failed to maintain required records. An examiner requested the records on March 1, 2008. The assessment statute of limitations for failing to maintain required records expires on March 1, 2014.

    Note:

    If both types of violations have occurred, examiners can assert both the failure-to-file an FBAR report penalty and failure to maintain required records penalty on the same account for the same period. However, Compliance policy in IRM 4.26.16.4.7 allows examiners discretion over whether to assert multiple violations against one FBAR report.

8.11.6.3.1.1  (11-01-2011)
FBAR Penalty Statute of Limitations on Collection

  1. On post-assessment FBAR cases only the collection statute expiration date (CSED) will be entered on ACDS to control the statute of limitations.

  2. There are two separate collection limitation periods for FBAR cases and they run concurrently:

    • CSED Explanation
      2-year limitation on filing suit period in which the Government may file a civil action to recover an FBAR penalty.
      10-year limitation on offsetting payment period in which the Government may obtain payment of the FBAR by offsetting payments

  3. The following table provides information on when to use the 2-year or 10-year date:

    If FBAR received Statute Date Statute Code
    30 days before the expiration of the 2-year CSED enter a date 2 years from the date of assessment enter statute code FBAR2
    within 30 days of or after the 2-year CSED enter a date 10 years from the date of the assessment enter statute code FBAR10

8.11.6.4  (10-19-2007)
Establishing FBAR Penalty Cases on ACDS

  1. All FBAR Penalty cases are controlled on ACDS (Appeals Centralized Database System).

  2. The taxpayer name is the U.S. person subject to the FBAR penalty and could include:

    • an individual citizen or resident of the United States

    • a domestic partnership

    • a domestic cooperation

    • a domestic estate or trust

    • a person in, and doing business in, the U.S. (except for a foreign subsidiary of a U.S. person)

  3. Follow general guidelines for establishing the FBAR penalty case on ACDS the same way as other penalty appeal cases except for the following:

    • TYPE = FBAR

    • MFT = 00

    • FEATRCD (Feature Code) = AI, IC and IT

    • Activity Code = 545

    • AIMS indicator = E(xempt). FBAR cases are not controlled on AIMS or ERCS.

    • STATDATE (statute date) or STATCODE (statute code) will be input as follows and is dependant upon whether this is pre-or post-assessment: The table below provides information on what entries to make:

      If FBAR Penalty is: Then enter the STATDATE (statute date) CODE (statute code)
      not assessed Enter a date 6 years from the date of the violation, either the due date of the FBAR report or date on which records requested. Leave Blank
      Assessed with more than 30 days before the expiration of the 2-year CSED enter a date 2 years from the date of assessment FBAR2
      Assessed and within 30 days of the expiration of the 2-year CSED or the CSED has expired enter a date 10 years from the date of assessment FBAR10

    • Assessed Penalty - Enter the total amount of the penalty assessed by ECC.

    • Proposed Penalty - Enter the total amount of the penalty imposed for each period found on the summary memorandum.

  4. Assign the case to an Appeals employee in accordance with case assignment practices.

8.11.6.5  (10-01-2012)
Appeals Officer Procedures for FBAR Penalty Cases

  1. Upon receipt of the case the Appeals Officer verifies Case Summary Card (CSC) information requesting changes when required:

    • Entity information (address and spelling),

    • TIN to ensure correct account is controlled on ACDS.

    • MFT = 00

    • Type code = FBAR

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

    • Category Code = IC (this is systemically generated based on feature code information)

    • POA/Representative information

    • Tax periods at issue covered by the Representative's authority

    • Statute Date or Statute Code, these fields must be validated within five (5) days of receipt. See IRM 8.21.3 , Appeals Technical Employees Statute Responsibility.

    • Verify the uniform ACDS acknowledgment letter and enclosure were sent to the taxpayer

    • Prepare referral Form 13381 and forward to the International Technical Specialist (ITS) responsible for the issue. A list of Appeals Coordinated issues and the responsible ITS can be found on the International Operations/International Issue Locator website.

    • Case Activity Record (CAR) codes - mandatory codes:

      CARATS code CARATS code definition
      CR Case Received
      CF/xx Conference type/xx =

      • FF - fact-to-face

      • ML - by mail

      • NN - not necessary

      • NR - no response

      • NS - no show

      • PC - telephone call

      • VC - video conference
      DM Determination Made
      AC-FR Final Determination Made

      Note:

      Additional CARATS codes are found xxxxx and will be entered to properly document case activity.


    If corrections or updates are required at any time, which you cannot make, follow normal procedures to request them.

  2. Verify the FBAR penalty assessment status. E-mail the **SBSE BSA Compliance FBAR Penalty Coordinator for assessment verification.

  3. Post-assessment FBAR penalty cases are priority cases and must be worked expeditiously. Appeals requires these cases be approved and closed within 60 days of assignment to an Appeals Officer (assignment to ACAP).

8.11.6.6  (10-01-2012)
Payment Procedures for FBAR Case

  1. If payment is received on an FBAR penalty case:

    • Photocopy the check or money order and attach to a copy of Form 13449 Agreement to Assessment and Collection of Penalties Under 31 USC 5321(a)(5) and 5321(a)(6) (both front and back).

    • Complete Form 3210 describing all documents attached and include the taxpayers name and TIN.

    • Forward by UPS Overnight mail the payment, copy of Form 13449, and Form 3210 to the following address:

    Internal Revenue Service

    Enterprise Computing Center

    Attn: FBAR Coordinator, Tel 313-234-1175

    985 Michigan Ave

    Detroit, MI 488232

  2. DO NOT USE Form 3244, Payment Posting Voucher when processing a payment on an FBAR penalty case. See 8.11.6.7 when this occurs to resolve the problem.

  3. The information above is also available in IRM 4.26.17.4.5 Report of Foreign Bank and Financial Accounts (FBAR) Procedures.

8.11.6.7  (11-01-2011)
Problems Related to FBAR Case Payment Posting

  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 ECC for posting to the FBAR database

    • Enterprise Computing Center (ECC) will record and process the payment, using, as appropriate:

      Type of Document Title
      Form 13448 Penalty Assessments Certification Summary (Title 31 FBAR) (internal document)
      Letter 3708 Notice and Demand for Payment of FBAR Penalty (copy)
      Notice 1330 Information on Making FBAR Penalty Payment by Check

8.11.6.8  (10-01-2012)
FBAR Closing Procedures

  1. There are three types of closing for an FBAR penalty case. Determine the type of case and follow those instructions outlined in the following sections:

    • Premature Referral

    • Pre-Assessment

    • Post-Assessment

  2. It is important to know which type of FBAR case to determine the valid ACDS closing codes:

    Determination Made CLOSINGCD
    Agreed or No Change - valid only for pre-assessment case 03
    Unagreed or Partially Sustained valid only for pre-assessment case 13
    Sustained in Fullvalid only for post-assessment case 14
    Not Sustainedvalid only for post-assessment case 15
    Partially Sustainedvalid only for post-assessment case 16
    Premature Referral valid for either pre-assessment or post-assessment 20

8.11.6.8.1  (11-01-2011)
FBAR Closing - Premature Referral

  1. Appeals may have received the income tax case or international penalty case along with the FBAR case or only the FBAR case.

  2. See the table below for information on handling the case as a premature referral:

    If Premature Referral- jurisdiction is released on the Then
    Combined income tax, FBAR and International Penalty case

    • close cases together

    • return to the originating Compliance office, generally the QMS staff

    • Appeals Officer prepares Form 5402 Appeals Transmittal and Case Memo, to notify the ECC FBAR Penalty coordinator jurisdiction is released.

    Income tax case only

    • return to the originating Compliance office

    • Appeals Officer prepares Form 5402 Appeals Transmittal and Case Memo, to notify the ECC FBAR Penalty coordinator jurisdiction is released

    FBAR case only is being returned as a premature referral

    • return to the originating group

    • notify the ECC FBAR Penalty Coordinator

    • Appeals Officer prepares Form 5402 Appeals Transmittal and Case Memo, to notify the ECC FBAR Penalty Coordinator jurisdiction is released.

  3. ACDS field entries for closing the premature referral. Case level entries are:

    • Closing Code: 20 - Premature Referral (Jurisdiction Released)

    • Date Closed : Date case sent to the Quality Measurement Staff (QMS) or Group Manager

    • ACAPDATE : Date ATM signed Form 5402

    • Action : ACKCLS

    • To Date: Date case sent to QMS or Group Manager

    • From Date: entered when receipted Form 3210 is received back.

  4. No entries are required at the return level.

  5. Send the FBAR file with transmittal Form 3210 to QMS or the originating group.

  6. Send a photocopy of Form 5402 and (ACM) to ECC at the following address:

    Internal Revenue Service

    Attn: FBAR Penalty Coordinator

    P.O. Box 33113

    Detroit, MI 4232–0113

8.11.6.8.2  (10-01-2012)
FBAR Closing - Pre-Assessment Case

  1. The Appeals Officer will prepare the closing letter and Form 5402.

  2. There are two types of Agreed Pre-Ninety cases:

    • Agreed with signed waver Form 13449 Agreement to Assessment and Collection of Penalties under 31 USC 5321(a)(5) and 5321(a)(6) and itemized statement attached to Form 13449.

    • No Change case - FBAR is not sustained and signed Form 13449 is not required.

  3. An unagreed case is when the FBAR penalty is fully or partially sustained. Form 13449 is not signed.

  4. Account and Processing Support (APS) will date and mail the letter at the time the case is being closed.

  5. ACDS Closing entries :

    • Closing Codes: see table above in IRM 8.11.6.8

    • Date Closed : Date Case sent to ECC

    • ACAPDATE: Date the ATM approves the case and signs Form 5402.

    • ACTION: ACKCLS

    • To Date: Date case was sent to the FBAR Penalty Coordinator at ECC.

    • From Date: Date the receipted Form 3210 was acknowledged by ECC.

    • Revised Penalty - Def/OA:

      Agreement type Dollar entry for each tax period
      Agreed with waiver enter total amount of penalty agreed to
      No Change enter zero (0)
      Unagreed total amount of the penalty imposed

8.11.6.8.3  (10-01-2012)
FBAR Closing - Post-Assessment Case

  1. Post-assessment FBAR cases are priority cases and require expedite handling.

    • Assignment to ACAPDate = 60 days

    • ACAPDate to Date Closed = 10 days

    Note:

    Pay special attention to those cases where the FBAR assessment if more than 180 days old.

  2. The Appeals Officer will prepare the closing letter and Form 5402

  3. APS will date and mail the closing letter.

  4. ACDS field entries for closing post-assessment FBAR cases:

    • Closing Codes:

      ACDS Closing Code Closing Code Definition
      14 sustained in full
      15 not sustained
      16 partially sustained

    • Date Closed: Date case sent to the FBAR Penalty Coordinator at ECC.

    • ACAPDATE: Date the ATM approves the case and signs Form 5402.

    • Action: ACKCLS

    • To Date: Date the case was sent to the FBAR Penalty Coordinator at ECC.

    • From Date: Date receipted copy of Form 3210 received from ECC.

    • Revised Penalty amounts:

    • Type of closing Dollar entry for each tax period
      Sustained in full (14) enter total amount of penalty agreed to
      Not Sustained (15) enter zero (0)
      Partially Sustained (16) revised penalty amount

  5. The FBAR administrative file should contain the following additional documents at closing:

    • Form 13449 Agreement to Assessment and Collection of Penalties under 31 USC 5321(a)(5) and 5321(a)(6) and itemized attachment.

    • Form 5402 and settlement memorandum.

    • FBAR penalty computation, if any changes were made

    • Appeals closing letter - dated

    • Original and copy of any delinquent FBAR(s) secured by Appeals.

  6. APS sends the FBAR file by UPS Ground with Form 3210 to:

    Internal Revenue Service

    Enterprise Computing Center

    Attn: FBAR Penalty Coordinator 313-234-1175

    985 Michigan Ave

    Detroit, MI 48232

8.11.6.9  (10-01-2012)
FBAR Administrative File

  1. Prepare an administrative file at the time the FBAR cases is being closed.

  2. The following documents should be included in the closed file:

    • Form 5402 and ACM

    • Form 13449 and itemized attachments

    • copy of any checks received in Appeals

    • closing letter which has been dated

    • CARATS activity record

    • copy of any FBAR(s) received by Appeals

    • FBAR Penalty Computation spreadsheet/worksheet

    • copy of Form 13448, ECC assessment of penalty, if applicable

    • ACDS Case summary card

    • additional items identified as necessary.


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