From the Tax Law Offices of David W. Klasing – Does Willful Failure to File a Report of Foreign Bank or Financial Account (FBAR) Equal Tax Evasion?

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Failure to complete an FBAR is highly likely to lead to charges of tax evasion and/or willful FBAR penalties of up to 50% of the offshore account balance by the IRS.

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Tax Law Offices of David W. Klasing

Any U.S. citizen with a foreign bank account that in total exceed $10,000 at any one time during the calendar year are required to file an FBAR for that account(s) on FinCen form 114. Failure to do so can lead to both civil and criminal penalties. Willful violations occur where a taxpayer knows (or should know) of their obligations under FBAR and fails to file anyway. If the IRS determines that the FBARS were likely to have been intentionally not completed to hide an offshore stream of U.S. taxable income that also was likely to have been intentionally unreported for U.S. income tax purposes, charges of tax evasion and or willful FBAR penalties of up to 50% of the offshore account balance by the IRS are highly likely to follow and this risk should be taken very seriously.

HOW 'WILLFULNESS' IS DETERMINED IN FBAR CASES

In order to establish ‘willfulness’, the government must show that a taxpayer acted either knowingly or acted recklessly in failing to meet their reporting obligations under FBAR.

Forgetting to inform your accountant or tax preparer of the foreign accounts can be considered reckless. Recklessness can also exist in a situation where a taxpayer is “willfully blind” to their FBAR duties.

Actions taken by the taxpayer to conceal sources of income or other financial data can be inferred to imply that the taxpayer was willfully not reporting foreign accounts. Courts are also permitted to consider unprivileged communications between a tax advisor, like an accountant, and the taxpayer in determining willfulness.

PENALTIES FOR WILLFUL VIOLATIONS OF FBAR REPORTING REQUIREMENTS

For a willful violation, the penalty is the higher of $100,000 per violation or 50% of the amount in the account at the time of the violation. If convicted of a willful failure to file FBAR, you could face separate tax evasion penalties of up to $250,000 and up to 5 years in federal prison (per count – 5- or 6-year statute of limitations).

See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library

See the full version of this article Here

Public Contact: Dave Klasing Esq. M.S.-Tax CPA, dave@taxesqcpa.net

SOURCE Tax Law Offices of David W. Klasing, PC

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David Klasing
@dwklasing
since: 07/2009
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