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IRS Not Entitled to Summary Judgment; Willfulness of Failure to File FBAR

Shame on the IRS. Court rules that whether the individual willfully failed to submit an accurate FBAR was an inherently factual question that could not be resolved by summary judgment, since this deals with intent of the taxpayer.

The IRS was not entitled to summary judgment on the issue of a taxpayer’s willful failure to disclose a foreign financial account because questions of fact existed. Failure to timely file a Report of Foreign Bank and Financial Accounts (FBAR) for each foreign financial account in which a taxpayer has an interest of over $10,000 results in exposure to a civil penalty that varies depending on the taxpayer’s level of culpability. Nonwillful violations of the reporting requirement result in a penalty not to exceed $10,000, willful violations can lead to a penalty that is the greater of $100,000 or fifty percent of the balance in the account at the time of the violation. A reasonable cause exception exists for nonwillful violations, but not for willful ones.

The determinative issue for the government’s penalty claim was the individual’s intent. Whether the individual willfully failed to submit an accurate FBAR was an inherently factual question that could not be resolved by summary judgment. Genuine disputes existed as to what the individual knew regarding his reporting requirements and when, including the advice given by his accountant. The individual’s testimony regarding the information provided to him by his accountant and what he actually did with that information would be relevant to a determination of the individual’s intent.

  1. Bedrosian, DC Pa., 2017-1 ustc ¶50,225
Other References:

  • 31 USC 5311-5330
  • CCH Reference – 2017FED ¶36,555.027
  • CCH Reference – 2017FED ¶36,555.33
  • Tax Research Consultant
    • CCH Reference – TRC FILEBUS: 9,104

 

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