Administrative Procedure Act and International Penalties: Timing Issues, Strategies for Challenging FBAR Penalties

The IRS continues to aggressively pursue penalties for failure of U.S. taxpayers to accurately file information reports on foreign assets. This is particularly true in the case of failure to file a FinCen Form 114 (FBAR), where the Service has had several high-profile court victories upholding penalties for willful failure to file.

Unlike FATCA, which requires taxpayers to disclose information on a wide range of foreign assets and is governed by the Internal Revenue Code and Title 26 of the U.S. Code, FBAR penalty assessments are governed by Title 31 of the U.S. Code rather than the Internal Revenue Code. For taxpayers facing FBAR penalties, this distinction can provide additional opportunities for challenging penalty assessments under the APA. The APA subjects federal agency actions to judicial review to prove the agency is acting within the scope of its authority.

The IRS has traditionally been protected from this level of scrutiny in its assessment and enforcement actions. Given that the source of FBAR penalties is Title 31 and not Title 26, administrative remedies under the APA may be available to a taxpayer in challenging an FBAR assessment. These remedies are separate from those generally available to challenge tax penalties, and tax counsel must be aware of potential APA arguments in strategizing a defense against FBAR penalties.

Listen as our experienced panel provides thorough and practical guidance on administrative claims and defenses potentially available to taxpayers facing penalties.

I. Significance of FBAR penalties under Title 31

II. Potential application of APA to FBAR penalty defenses

III. Strategic considerations for determining whether to make an APA argument

IV. Timing issues

V. Prior invocation of APA argument in FBAR case

VI. Designing an FBAR defense strategy

The panel will discuss these and other important topics:

• Why does the APA provide possible grounds for defending against FBAR penalty assessments that are not available to taxpayers challenging other IRS foreign-related penalties?
• Whether and at what point in the appeals process should taxpayers put forth an administrative challenge based on the APA?
• Should taxpayers go through a pre-assessment administrative review if they are considering an APA claim?
• What impact does an administrative claim under the APA have on the payment timing?

Learning Objectives

After completing this course, you will be able to:

• Identify circumstances under which a taxpayer facing an FBAR penalty assessment may pursue a defense against the penalties using the APA
• Recognize how the APA applies to FBAR assessments but not generally to other tax-related penalties
• Discern the impact of pre-assessment review and IRS appeals on a potential APA defense against FBAR penalties

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other attorneys or accountants. Specific knowledge and understanding of FBAR/FinCen 114 foreign asset information reporting requirements; familiarity with IRS audit procedures in examining foreign tax reporting, familiarity with voluntary disclosure programs.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).