On April 16, 2019, the Large Business and International (LB&I) Division of the Internal Revenue…
Caution: Increased FBAR Enforcement
The last month or so has unfortunately seen a lot of FBAR enforcement court rulings against US taxpayers and in favor of the government. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury can levy high penalties for each year that a timely Form FinCEN 114 (also known as the FBAR) is not filed.
In United States v. Toth (2020 D. Mass. 2020 here), the Court granted the Government’s motion for judgment that Toth was liable for the FBAR civil willful penalty. The court held that the maximum penalty is the greater 50% of the account(s) that should have been reported or $100,000 (instead of $100,000 maximum). The Government successfully proved application of the FBAR willful penalty by a preponderance of the evidence that Toth’s failure to file FBAR was willful.
In United States v. DeMauro (D. N.H. Dkt. 17-cv-640-JL 8/28/20 here), the Court approved of the government’s assessed FBAR willful penalty. The willful FBAR penalty requires that the failure to report be willful. In the FBAR civil penalty context, the Courts have held willfulness is (i) specific knowing failure to file or (ii) willful blindness or reckless disregard of the obligation to report. The Government successfully proved application of the FBAR willful penalty by a preponderance of the evidence.
In United States v. Bernstein (E.D. N.Y. 2020 here), the Court granted the Government’s motion for judgment determining that the defendants, husband and wife (“Bernsteins”), were each subject to the willful FBAR penalty. For many years the Bernsteins had foreign accounts and did not file FBARs, answered “no” on the IRS Form 1040 Schedule B Part III foreign account signatory interest question, and did not report the income from the foreign accounts. Over the years, they did not tell their accountant about the foreign accounts because they wanted to keep the accounts secret. The IRS assessed a willful FBAR penalty in the amount of $262,288. The Government successfully brought this penalty collection suit for the FBAR willful penalties.
The rulings should remind us all of the FBAR filing requirement and the government’s vigilant enforcement. The IRS has in its arsenal many ways to find out about Americans’ bank and or investment accounts they may have, how much money is in these accounts and where these people live. In addition, the US now also has tax information exchange agreements with many foreign governments. Therefore, all US persons should take the steps necessary to file your tax return(s) and report your foreign bank balances. If numerous years have not been filed, contact our office to become compliant before it is too late.
Related Posts
- IRS Announces Increased Enforcement on Form 5471
- The IRS is Hiring: Expect New Enforcement
I recently returned from the American Bar Association’s Taxation conference in Washington, D.C., which is…
- New FBAR Deadline applies to 2016 Tax Year Onwards
On July 31, 2015, President Obama signed into law P.L. 114-41, which included a number of…
Search
Categories
Recent Posts
- Increased IRS Enforcement Expected Against High-Income Taxpayers April 7, 2021
- New Favorable Court Decision: One penalty (not multiple) applies for late FBAR filing March 25, 2021
- Parag Patel to be Speaker for Estate Planning at Practicing Law Institute’s NJ Basic CLE Marathon 2021 February 16, 2021
- Parag Patel to be Speaker for Estate Administration at Practicing Law Institute’s NJ Basic CLE Marathon 2021 February 15, 2021
- New IRS Relief for Taxpayers Experiencing COVID-related Difficulties February 15, 2021
- New Tax Laws Predicted February 13, 2021
- Rare confluence of tax law and immigration law February 11, 2021
- The New DIIRSP: I like the old better February 7, 2021
- Automatic Form 5471 and 5472 Penalties in Spotlight by 2020 National Taxpayer Advocate Report January 14, 2021
- Client Case Study: Tax Savings Now January 14, 2021
- Democratic Win Means Estate Tax Law Changes January 9, 2021
- Canceled Debt: Taxable or Not January 7, 2021