In Ott, (DC MI 2/26/2020, 125 AFTR 2d ¶2020-492, a district court has held that a taxpayer who failed to file an FBAR did so willfully. It came to this conclusion because, among other reasons, the taxpayer signed his tax return under penalty of perjury, told the foreign bank not to send correspondence to his address, and failed to consult with a tax expert regarding whether to report the foreign account.
Mr. Ott, a US person, had a Canadian bank account with more than $10,000 in it during 2007. And he failed to file an FBAR that year.
Ott signed a return each year, under penalty of perjury—regardless of whether he actually read the return, certifying that he did not have an interest in foreign accounts. Accordingly, constructive knowledge of the requirement to file the FBAR was imputed to Ott.
Ott consistently stated that he was not a tax expert with any financial or legal training in tax accounting. Nevertheless, he chose to rely solely on advice he received decades ago concerning foreign investments. Ott argued that his mistaken reliance on incorrect advice proved that he was at most negligent, not willful. The evidence presented in this case, however, supported an inference of reckless conduct. Ott's failure to discuss his foreign investments with his long-time accountant Weide, for example, indicated a conscious effort to avoid learning about reporting requirements.
Using an address that matched the country of the foreign bank accounts suggested that Ott sought to avoid the detection of his account ownership. Further, sending everything to his sister allowed Ott to avoid seeing any statements concerning reporting responsibilities, including the language: "These transactions are to be reported on your annual return of income." The court found that this failure to review any of the mail sent to his sister from the brokerages constituted an act of concealment and was reckless.
Ott acted recklessly and, therefore, willfully because he kept continuous contact with his broker regarding the foreign accounts, regularly checked the account balance online, and the account balance was significantly disproportionate to Ott's claimed income.
Read more at: Tax Times blog