For most cases involving multiple nonwillful violations, examiners will recommend one penalty for each open year, regardless of the number of unreported foreign financial accounts. In those cases, the penalty for each year will be determined based on the aggregate balance of all unreported foreign financial accounts, and the penalty for each year will be limited to $ 10,000.

For some cases, the facts (considering the conduct of the person required to file and the aggregate balance of the unreported foreign financial accounts) may indicate that asserting nonwillful penalties for each year is unwarranted. In those cases, examiners – with the approval of the group manager – may assert a single penalty, not to exceed $ 10,000, for one year only.

For other cases, the facts (considering the conduct of the person required to file and the aggregate balance of the unreported foreign financial accounts) may indicate that asserting a separate nonwillful penalty for each unreported foreign financial account, and for each year, is warranted. In those cases, examiners – with the approval of the group manager – may assert a separate penalty for each account and for each year.

Under no circumstances will the total amount of penalties for nonwillful violations exceed 50 percent of the highest aggregate balance of all unreported foreign financial accounts for the years under examination. A nonwillful penalty will not be recommended if the examiner determines that the FBAR violations were due to reasonable cause and if the taxpayer who failed to timely file correct and complete FBARs later files correct and complete FBARs.

The rules for determining the penalty amount for a nonwillful FBAR violation can be reduced to three steps:

1. First, the examiner must determine whether the mitigation threshold conditions found in IRM 4.26.16.4.6.1 are met.

2. Second, if the mitigation threshold conditions are met, examiners should make a preliminary penalty calculation based upon the mitigation guidelines in IRM 4.26.16.4.6.2, except that the penalty for each year will be limited to $ 10,000. Unless the facts and
circumstances of a case warrant a different penalty amount, this is the penalty amount to be asserted.

3. Third, if the IRM mitigation threshold conditions are not met, the mitigation guidelines do not apply and examiners should not make a preliminary penalty calculation based upon the guidelines. Examiners, with the group manager’s approval, should assert a separate penalty for each account and for each year. However, under no circumstances will the total amount of the nonwillful penalties exceed 50 percent of the highest aggregate balance of all unreported foreign financial accounts for the years under examination.