Failure-to-file penalties fall into two categories. “The non-willful penalty can be up to $12,459 for each negligent violation with no criminal provision for the non-willful taxpayer,” Jenkins said. “Taxpayers in the willful camp–who knew about the requirement yet still failed to file–can be liable for a civil penalty up to the greater of $124,588 or 50 percent of the account balance at the time of the violation, for each violation. Absent fraud, the statute of limitation is open for six years for a foreign failure to file. The criminal penalty ... can be up to $250,000 and five years in prison.”
Check with your wealthy client’s tax preparer to see if overseas-account filing has been addressed. “Practitioners should have questions in their tax organizer that address this issue, and they should follow up with any clients that they’re suspicious of not being in compliance,” Seltzer said.