The institution of FBARs (Report of Foreign Bank and Financial Accounts) on income tax returns originally left many confused on if and how offshore accounts should be reported. Now, there is plenty of information and resources to fully understand the FBAR and the need to report income if you are a U.S. citizen or resident or non-resident alien that has accounts in different countries. Although, there are still court cases where individuals are arguing non-willful evasion of the FBAR because they simply did not know the protocol to filing it. In recent news, the decision United States vs. Williams was reversed due to Mr. Williams willfully failing to file the FBARs.
Before the case was reversed in the Fourth Circuit Court of Appeals, many were hoping U.S. vs. Williams would ensure that individuals would only be liable if the IRS could prove they knew about the FBARs. the law states that willfulness can be proven by reckless conduct or repeated failures to comply with known regulations. Williams admitted to tax fraud in the case, however, was not considered willful when he failed to file FBARs. The district court claimed the IRS would have a difficult time proving willfulness for a taxpayer who did not pay his/her FBARs. In general, an individual may not be willful of the penalty simply due to lack of knowledge or misunderstanding of tax law.
The appeals court found a hole in Williams testimony. He pled guilty to tax evasion so the question is whether he knew about the FBAR violation. The appeals court found that Williams made a conscious effort to avoid learning about the FBAR, and therefore is considered to be willfully apathetic. The majority ruling found that you can be willful without a bad intent – simply willful ignorance.
Mr. J Bryan Williams will now be facing hundreds of thousands of dollars in penalties because of his failure to file FBARs for his offshore accounts. This would have been a lot easier if he simply took the time to learn how to report his offshore accounts.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.