Because the FBAR technically is part of the bank secrecy act (Title
31) rather than the income tax code (Title 26), it contains traps
for those who are used to tax law. Unlike income tax forms, FBAR
forms must be received by the due date, not just mailed by it. There
is no electronic filing, and forms must be mailed to a special
address in Detroit rather than a taxpayer's usual IRS service
center, although they may also be hand-delivered to a local IRS
office. Unless Congress changes the law, the normal FBAR due date
will remain June 30, which is out of sync with the normal tax
deadlines of April 15 and October 15 (for those on extension).
Taxpayers who want to challenge FBAR penalties cannot do so in Tax
Court, where they don't have to pay the tax, penalties and interest
up front, notes Chamberlain Hrdlicka's Sheppard. Instead, taxpayers
must pay the total liability -- which can be huge as a result of the
penalties -- and sue for a refund in U.S. District Court. Also
surprising to taxpayers (and perhaps their advisers) is that FBAR
penalties are not dischargeable in bankruptcy. These little-known
traps were highlighted in two recent cases, Williams v. Commissioner
and United States v. Simonelli.
Last, most taxpayer data is protected under stringent IRS rules that
make unauthorized sharing a felony. FBAR forms are not protected
under those rules; instead, they are governed by a different privacy
act and may readily be shared with other law enforcement agencies,
according to Miller & Chevalier's Clarke.