Tag: FBAR penalty

By: Lynn K. Ching A taxpayer-friendly opinion recently issued from the Ninth Circuit Court of Appeals regarding a non-willful failure to file an FBAR. FBAR Violations Recap: Under Section 5314(a), “the Secretary of the Treasury shall require [U.S. citizens and others] … to keep records, file reports, or keep records and file reports, when the [U.S. citizen or other person] makes a transaction or maintains a relation for any person with a foreign financial agency.” Id. Under corresponding regulations to section 5314(a), United States citizens must report on an annual basis any “financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country” exceeding $10,000. The required form is the FBAR (TDF 90-22.1). A person who fails to timely file an…

By Anthony Diosdi In United States v. Francis Burga and Francis Burga as Administrator of the Estate of Mergelus Burga, No. 19-cv-03246 (N.D. Cal. 2019), and the related case, United States v. Francis Burga, No. 18-cv-01633 (N.D. Cal. 2019), the United States Department of Justice is attempting to collect unprecedented civil FBAR penalties in the amount of approximately $120 million. The Internal Revenue Service (“IRS”) assessed nearly $120 million in  FBAR penalties and interestagainst taxpayers who allegedly used Liechtenstein foundations and other foreign entities to move unreported income from the United States to offshore tax havens. The Department of Justice (“DOJ”) also alleges that the taxpayers held at least 294 bank accounts in Liechtenstein, the British Virgin Islands, Switzerland, Singapore, Japan, Panama, China, and Vietnam that were not disclosed to…

By Anthony Diosdi The Administrative Procedure Act (“APA”) governs the way in which federal administrative agencies may establish regulations. The APA also provides that federal agencies such as the Internal Revenue Service (“IRS”) may not take final actions that are arbitrary and capricious. When a person is injured by a wrongful agency act (i.e. the agency took an action which was arbitrary and capricious), the individual might consider suing the government agent responsible for the harm as well as the principal, the agency. In private law, the principal is indeed liable for the acts of an agent, and enterprise liability, the liability of an employer for the acts of its employees, is the norm. Enterprise liability, however, is not the case when the principal is the government. “Sovereign immunity,” the…

By Anthony Diosdi As reported in the August 27, 2018 edition of Tax Notes International, the Southern District of Texas’ decision of U.S. v. Flume, No. 5:16-cv-73 (S.D. Tex. 2018), “bucked the trend” and rejected constructive knowledge as sufficient to support a government position that a foreign account holder’s conduct was willful when failing to file an FBAR informational return.In Flume, the foreign account holder was a U.S. citizen living in Mexico. He had interests in Mexican and Swiss foreign accounts. The individual in this case reported his Mexican accounts on his U.S. tax returns, but did not report his Swiss accounts. The IRS assessed willful FBAR penalties against the taxpayer based on the assertion that he told the taxpayer about the duty to file FBAR informational returns as far…

By Anthony Diosdi It’s no secret, any U.S. person that has a financial interest in one or more foreign financial accounts with an aggregate value that exceeds $10,000 must file a FinCEN 114 (“FBAR”) with the IRS. It’s also no secret that the IRS has been aggressively pursuing U.S. taxpayers that have failed to disclose foreign financial accounts on FBAR informational returns. The Jobs Act of 2004 Permits the IRS to assess a penalty up to $10,000 for a nonwillful violation of the FBAR rules and a penalty up to $100,000 or 50 percent of the value of the undisclosed account for a willful violation of the FBAR rules. These FBAR penalties are assessed per year and undisclosed account. Given the way FBAR penalties are calculated, these penalties can be…