What is the Amount for the 50% FBAR Penalty, What is the Violation and When Does it Occur (9/1/11)

The FBAR penalty, in part relevant to most individuals, imposes two penalty regimes - one for the willful actor and the other for the non-willful actor. Only the willful actor penalty is alternatively based upon an "amount" -- i.e., the greater of $100,000 (a set amount) or "50 percent of the amount determined under subparagraph (D)." 31 USC 5321(a)(5)(C). The referenced subparagraph (D) provides in relevant part:

(D) Amount.— The amount determined under this subparagraph is—

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(ii) in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.

The FBAR violation is the failure to file the report or the filing of a false report. The time of the violation thus would be July 1 ((The metaphysical moment in time when 6/30 ends and 7/1 begins is the time that the violation occurs.)) or, in the case of a false FBAR, on the date of filing the FBAR. See e.g., Exhibit 4.26.16-3 (07-01-2008) , in the LCCI initiative, stating: "the balance in the account at the time of the violation (the opening balance of the account on 7/1 of the subsequent year)."  The amount penalized under the 50% willful penalty thus is not the highest amount in the account during the year. This obviously can cut both ways.
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