When the IRS goes back to work, they will be overwhelmed. The employees will be bitter and frustrated. They will want to make deals to clear their inventory. By being proactive and ready, taxpayers can help themselves by helping the IRS resolve cases.
 

According to Law360, a U.S. Senate Finance Committee member on January 22, 2019 questioned the legality of the Internal Revenue Service plan to recall 46,000 furloughed workers next week, which the agency would execute if the partial federal government shutdown remains in effect.

Sen. Mark Warner, D-Va., the ranking member of the committee’s taxation and IRS oversight subcommittee, asked IRS Commissioner Chuck Rettig what circumstances led to his decision to recall furloughed workers, which is a departure from previous policy. The IRS announced Jan. 15 that if the shutdown, which began Dec. 22, remained in effect, more than 46,000 workers will be recalled from furlough on Jan. 28 to begin the tax filing season.

“It is unclear that these activities could be described as ‘emergencies involving the safety of human life or the protection of property’ that would allow for excepted employees to perform these duties while Congress has not appropriated funding for your agency,” Warner’s letter said.

The IRS said in its updated contingency plan that 46,052 employees, more than 57 percent of its workforce, would be classified as "excepted," a sizable increase from the 9,492 employees classified as such under a previous plan. The workers would be recalled to start the tax season and begin processing refunds.

A vast majority of IRS employees currently remain on furlough during the government shutdown, which began amid a stalemate between President Donald Trump and congressional Democrats over funding for a wall along the country's Mexico border.
 

In a separate letter, Warner questioned U.S. Treasury Secretary Steven Mnuchin about why some employees were recalled to process paperwork that would allow banks to provide home loans.

Democratic lawmakers have previously raised concerns over whether nonexcepted federal employees can be recalled from furlough during a shutdown without receiving pay, after Rettig announced on Jan. 7 that a significant portion of the IRS' workforce would be recalled to begin the filing season.

Is this any way to run a government?

For your information, the IRS computer is continuing to generate Notices of Levy, during this  IR/Government shutdown.

We would advise all practitioners who receive a Notice of Levy, during this government shutdown, to file a CDP hearing request, on Form 12153, within 30 days of the date of the CP 504 Notice or Letter L1058 and send this request to the IRS via certified mail with return receipt requested. 

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In Program Manager Technical Advice 2018-013, the IRS has set out the definition of "willfulness," and the standard of proof for establishing willfulness, for purposes of the penalty for willful violation of the requirements of the Report of Foreign Bank and Financial Accounts (FBAR). 
Under 31 USC 5314(a) and 31 C.F.R. 1010.350, every U.S. person that has a financial interest in, or signature or other authority over, a financial account in a foreign country must report the account to IRS annually on an FBAR. 

The penalty for violating the FBAR requirement is set forth in 31 USC 5321(a)(5). The maximum amount of the penalty depends on whether the violation was non-willful or willful.  

• The maximum penalty amount for a nonwillful violation of the FBAR requirements is $10,000. (31 USC 5321(a)(5)(B)(i))
• The maximum penalty amount for a willful violation is the greater of $100,000 or 50% of the balance in the account at the time of the violation. (31 USC 5321(a)(5)(C), 31 USC 5321(a)(5)(D))
  The Statute and the Regs. Do Not Define Willfulness! 

The IRS has concluded that the standard for willfulness under 31 USC 5321(a)(5)(C) is the civil willfulness standard and that it includes not only knowing violations of the FBAR requirements, but willful blindness to, as well as reckless violations of, the FBAR requirements. THE 2nd Circuit Court of Appeals' recently agreedwith this conclusion in its opinion in Bedrosian v. U.S., 3rd Cir., Case No. 17-3525, December 21, 2018 .  

 
IRS noted that the Supreme Court has made a delineation between the term willful for criminal purposes versus willful for civil purposes. It noted that in Safeco Ins. Co. of America. v. Burr, (S Ct 2007) 551 U.S. 47, a criminal case, the Supreme Court interpreted the term “willful” or “willfully” narrowly, limiting liability to "knowing violations." The Safeco court also noted that where “willfulness” is a statutory condition of civil liability, the Supreme Court has generally interpreted “willfulness” to not only include knowing violations of a standard, but reckless ones as well.  
And the district court in Bedrosian, (DC PA 2017) 120 AFTR 2d 2017-5832, noted that every federal court to have considered the willfulness standard for civil FBAR violations has concluded that the civil standard applies and that the standard includes “willful blindness” and “recklessness.”
 

IRS said that "willful blindness  is established when an individual takes deliberate actions to avoid confirming a high probability of wrongdoing and when he can almost be said to have actually known the critical facts.” The government can show willful blindness by evidence that the taxpayer made a conscious effort to avoid learning about reporting requirements.
 
And, it said, citing Vespe, (CA 3 1989) 63 AFTR 2d 89-837, that the recklessness standard is met “if the taxpayer: 

1. Clearly ought to have known that,
2. There was a grave risk that withholding taxes were not being paid and if
3. He was in a position to find out for certain very easily.” 

IRS also said that the courts are uniform with regard to the standard of proof for civil FBAR penalties; the government bears the burden of proving liability for the civil FBAR penalty by a preponderance of the evidence.
 
As the court in Bohanec, (DC CA 2016) 118 AFTR 2d 2016-6757, noted, the Supreme Court has held that a heightened, clear and convincing burden of proof applies in civil matters “where particularly important individual interests or rights are at stake.” Important individual interests or rights include parental rights, involuntary commitment, and deportation.
 
However, the preponderance of the evidence standard applies where “even severe civil sanctions that do not implicate such interests” are contemplated. The court in Bohanec held that civil FBAR penalties do not rise to the level of “particularly important individual interests or rights,” and accordingly, the preponderance of the evidence standard applies.
 
IRS noted that Chief Counsel Advice 200603026 suggested that the clear and convincing standard should apply, but subsequent cases have not sustained that position.