FBAR First Time Abate ("FTA") Relief for First Year Delinquent FBAR Filings (6/3/24)

I have just focused on the IRS’s adoption in the IRM of First Time Abate (“FTA”) opportunity for failure to file an FBAR. First Time Abate has long been available even without a showing of reasonable cause for a first-time failure to file, failure to pay, and/or failure to deposit penalties. The FBAR FTA, however, is more limited.  The relief is described:

IRM 8.11.6.2(20) (09-27-2018), FBAR Overview [link here; go to (20)]

First Time Abatement (FTA) - Effective with the Calendar year 2016 FBAR, FTA is available to the taxpayer who failed to file the FBAR the first time an FBAR was required to be filed by the taxpayer. At the time of publication, procedures have not been established with FTA.

I am not aware that the procedures have yet been established.

Note the restricted wording. FTA will apply only for the year that was the first year the FBAR was required. So, for example, if the taxpayer failed to file FBARs for years 1-4, the IRS might abate the penalty for year 1 but then assert the penalty for years 2-4. So, effectively, the FTA relief will apply to only the first year, but not any other year. By contrast, the income tax FTA can apply to a year even after the taxpayer has failed to file in earlier years so long as the relevant penalties were not asserted in earlier years.

Thus, as a practical matter, the benefit from this FTA would be for persons failing to file in year 1 but then timely filing in the following years.

Also, just as the income tax FTA, I doubt that FBAR FTA will apply to the FBAR willful penalty. However, with possible FTA relief facially available for one delinquent year, if timely filings were made in later years, an agent might not pursue the complex investigation required for asserting a willful civil or criminal FBAR penalty. (This is analogous to criminal fraud cases where willfulness is usually shown in a multi-year pattern.) Note that, whether or not FTA could apply if the delinquency is willful, if the willful penalty were to apply in other years, the penalty might not be affected at all. For example, assume failure to file in years 1-4. Even if year 1 would not be penalized under FTA, years 2-4 could and, since the willful penalty is calibrated to the high year aggregate balances, the quantum of the  penalty would not be affected if years 2-4 included the aggregate high balances; all it would mean is that the penalty is spread over 3 years rather than 4. But, in any event this latter comment may not be meaningful if the IRS does not grant FTA to a multi-year pattern of willfulness.