Facts: Peter Horowitz and his wife, Susan, U. While in Saudi Arabia, the Horowitzes understood that they were required to pay U. However, they contended that they did not know of the requirement to file an FBAR until , when they met with a tax attorney. When the Horowitzes refused to pay, the government commenced an action to collect the penalties, along with interest and additional penalties for late payment.
The district court concluded that even if the Horowitzes had lacked actual knowledge of the FBAR reporting requirement, the undisputed facts established that they recklessly disregarded the filing requirement and that this recklessness "sufficed for a finding of willfulness. Issues: 31 U. A willful civil violation has been held to include both knowing and reckless violations. Our tax litigation attorneys have found that there are two types of cases where the IRS may be willing to agree that the failure to file an FBAR is due to reasonable cause.
One fact pattern involves the increasingly rare situation where the taxpayer has notified his tax preparer such as a CPA or enrolled agent that a foreign financial account exists, but the preparer did not prepare an FBAR or otherwise inform the client of the need to do so. The other fact pattern where the IRS may agree that there is a reasonable cause is in the case of immigrants to the U. It is worth noting that someone who didn't file an FBAR may be subject to other civil penalties based upon related conduct.
Thus, for example, someone with certain types of foreign assets, including financial accounts, must also file a Form , Statement of Specified Foreign Financial Assets. The IRS doesn't need to demonstrate that the failure to file Form was willful, and the penalty can only be avoided by demonstrating reasonable cause. Download your Free Special Report. Download Now. Penalties for not filing the FBAR? There has been a nationwide disparity in FBAR non-willful penalty Court rulings, as the courts have not been consistent in how FBAR violation penalties should be applied — which also makes it difficult for the taxpayer to ascertain their chances in prevailing at the District Court level.
T he primary goal of the FBAR is to minimize money laundering and other financial crimes by requiring US persons with certain ownership, co-ownership, or signature authority over foreign accounts to report the account information to t he US government each year on the annual FBAR — nothing to do with tax.
The form is required to be filed at the same time that a taxpayer files a tax return — with two caveats:. Criminal FBAR penalties are rare, and they tend to only rear their ugly head in situations in which a taxpayer is being investigated for other crime-related issues such as money laundering, smurfing, structuring, and tax evasion. The two types of civil FBAR penalties are: willful and non-willful. While the non-willful penalties are more common — and range extensively on how they are assessed and enforced — they are generally less brutal than the willful penalty counterpart.
One rather distasteful strategy that some fear-mongering attorneys use is to scare unsuspecting taxpayers into believing that if they are willful, then they are criminals and that means they may be subject to incarceration. Civil willfulness is not the same as criminal willfulness — and in order to be criminally willful, there still must be an element of intent and the government must prove the violation beyond a reasonable doubt — which is not required for a civil willful penalty.
IRS agents and examiners have discretion to reduce or minimize the penalty. There is no direct definition of the term non-willful. There is no bright-line test that can be used to punch in the facts and derive a conclusion as to whether or not a taxpayer was non-willful. Instead, it is based on the Totality of the Circumstance analysis. Jason Freeman. To embed, copy and paste the code into your website or blog:.
A Little Background Willfulness was not in dispute in the case. The Facts The relevant facts were not in dispute. Kahn at Credit Suisse, Switzerland.
The Issue So back to the issue. Where do we go from here? Send Print Report. Freeman Law. Published In: Bank Secrecy Act. Foreign Bank Accounts.
Income Taxes. Offshore Funds. Tax Liability. Tax Penalties. Tax Planning. International Trade. Freeman Law on:. Sign Up Log in.
0コメント