Current News | Fourth Circuit on Foreign Bank Account Reporting: Bad Facts = Bad Law
In Williams v. Commissioner, 110 AFTR 2d 2012-5639, the Fourth Circuit Court of Appeals has recently ruled that the willfullness penalty under the Foreign Bank Account Reporting (FBAR) regime can apply when the government has scant facts showing willfullness (but bad facts about the egregiousness of the taxpayer's OVERALL conduct). This is a classic example of bad facts resulting in bad law.
In a 2-1 decision, the Court found that the District Court's finding that the failure to file the FBAR forms TD F 90-22.1 was CLEARLY ERRONEOUS (a high standard) and that the taxpayer indeed showed willfullness in his failure to file, and qualified for the $100,000 penalty, when the only facts to determine "willfullness" was the omission of the information from the tax organizer for the CPA for the tax year and the signing of the tax return that included a statement that no such accounts were owned during the year.
Unfortunately for the rest of us, the taxpayer had more than $7 Million in Swiss bank accounts, which he had received as a bribe for having his employer ExxonMobil purchase large oil fields in Russia and other locations. Because of these bad facts, we are stuck with a horrible decision by an Appeals Court, from transcipts rather than real testimony, that makes the omission of the account while preparing an organizer and signing the return evidence that substantiates a "willfullness" finding in the filing of an FBAR return. In our view this could clearly show sloppiness, but intentionality is really a stretch.
Our advice? Don't mess around with the FBAR returns - they are hot and getting hotter. IRS scrutiny in this area is increasing and they are forcing other countries to provide information on your foreign accounts. We are experienced at helping clients navigate the FBAR maze to a good result. If you need a confidential attorney client consultation regarding your foreign band account reporting requirements, contact Jason Redman directly at 720.863.4849.