For anyone who has clients or family members that live and work abroad, the new…
Interesting 2023 Foreign Account Cases
Foreign Account/FBAR confusion:
In Kurotaki v. United States, 132 AFTR2d 2023-6138, a Hawaii federal district court determined that a U.S. green card holder who lived in Japan and spoke no English did not willfully fail to file FBAR reports as his accountant mistranslated the English instructions into Japanese such that he believed that the filing was only required by U.S. resident taxpayers.
In United States v. Burga, 132 AFTR2d 2023-6551, a California Federal District Court concluded that a widow had become aware of most foreign bank accounts established by her late husband and could no longer use his influence or abuse as a defense to willfulness.
In United States v. Kelly, 131 AFTR2d 2023-6011, a Michigan Federal District Court rejected an argument by an anesthesiologist that he did not seek advice concerning the tax implications or reporting obligations on a Swiss bank account because he “didn’t see a need” and he “had no questions,” concluded that he willfully failed to file an FBAR. In United States v. Kelly, 132 AFTR2d 2023-6246, the court ordered him to repatriate foreign assets to pay FBAR penalties because he had insufficient assets in the U.S. to pay the liability.
In United States v. Xiao, 132 AFTR2d, 2023-5446, the US Seventh Circuit Court of Appeals agreed with an Illinois federal district court that the question on Schedule B regarding foreign bank accounts was not vague, and, accordingly, a criminal tax conviction could stand.
US Supreme Court:
In Bittner v. United States, 131 AFTR2d 2023-799, the U.S. Supreme Court by a 5-4 margin, reversed the Fifth Circuit Court of Appeals and concluded that the $10,000 penalty for non-willful failure to file the FBAR report was measured per annual filing and not per bank account; the lower courts had been divided. This is a major taxpayer (non-appealable) win.
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