A federal court has ruled that penalties for failing to file a Foreign Bank Account Report (FBAR) should be determined by each year of noncompliance rather than the total number of accounts per year, cutting the 89-year-old plaintiff's penalty from $160,000 to $40,000, Accounting Today reported. The case, U.S. v. Giraldi, arose from the IRS telling the plaintiff that he had filed to file an FBAR on four different bank accounts over four years. It applied the $10,000 penalty to each of his four accounts for each of the four years he didn't file.

But the judge, Susan Wigenton, ruled that the Bank Secrecy Act which outlines rules regarding FBARs, provides that, in the event of nonwillful noncompliance, as was the case with the plaintiff, the penalty should be no more than $10,000. With this in mind, she said that this fine should be applied to the plaintiff only for each year he did not file, and that this should not be multiplied by the number of foreign accounts he had.

At the same time, she left the door open to the possibility of the IRS's stacking penalties to apply to those more willful in their noncompliance. She also added that very few courts have looked at the issue of willful versus nonwillful violations of the FBAR rule, and so precedent is still immature in this area.