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Cross-border clients who aren’t caught up on their foreign-account tax filings in the U.S. can breathe a small sigh of relief, but should aim to comply as soon as possible.

The U.S. Supreme Court ruled Tuesday that penalties for non-wilfully failing to file, or inaccurately filing, a Report of Foreign Bank and Financial Accounts (FBAR) Form 114 apply to each report, not each account.

Clients who are considered U.S. persons for tax purposes may be required to file FBARs if they also hold accounts in Canada. If a U.S. person’s non-U.S. accounts total more than $10,000 at any time during a tax year, an FBAR form must be completed detailing all foreign accounts they hold or have signing authority on. (All figures in U.S. dollars.) These accounts include bank accounts, investment accounts and registered accounts.

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The Supreme Court case Bittner v United States concerned a dual citizen of Romania and the U.S., Alexandru Bittner, who filed five FBAR forms late, and was then required to correct them. The five forms involved 272 accounts.

The maximum penalty for failing to file or inaccurately filing an FBAR is $10,000, and the U.S. government took the view that the penalty applied on a per-account basis, bringing the total penalty to $2.72 million.

Bittner argued his penalty should be applied on a per-form basis, therefore totalling $50,000. The Supreme Court agreed with Bittner in a 5-4 ruling, citing in part the fact that “many experienced accountants were unable to anticipate the government’s current theory” of applying penalties on a per-account basis. As such, the justices wrote, “we do not see how ‘the common world’ had fair notice of it.”

This is a “good decision for U.S. taxpayers so as to reduce penalty exposure,” wrote Kim Moody, CEO and director of Calgary-based Moodys Private Client and Moodys Tax, in a LinkedIn post. “Bottom line, though, is that non-compliant U.S. taxpayers should get compliant.”