Willful Failure to File FBARs – What if you Really Did not Know?

BNA - Over the past three years, the U.S. government has intensified its pursuit of taxpayers who fail to pay taxes on money held in foreign bank accounts; this includes a massive increase in criminal investigations and prosecutions.

While “willfulness” is generally recognized to be a high legal standard requiring proof that the accused acted in conscious violation of a known legal duty, IRS's published guidance and filed actions suggested the IRS believed it could do more with less.

But two recent cases—an FBAR case out of the U.S. District Court for the Eastern District of Virginia and patent infringement case out of the U.S. Supreme Court—call both assumptions into significant question.

FBAR enforcement will continue to be a powerful tool for IRS. But in cases where knowledge is a contested issue, the government will have to do more than it has previously done. Cases based upon what a taxpayer should have known or could have discovered based on knowledge of a substantial risk will not satisfy the standards established by Williams and Global-Tech.

If you really did not know, you really did not know.