You may have “forgotten” to file a Foreign Bank and Financial Accounts Report (FBAR). Maybe you forgot for several years. You knew about the requirement, but didn’t like the idea, and you failed to alert your accountant to your offshore tax liabilities, or even foreign bank accounts. The Internal Revenue Service has now come knocking—what do you do?
Obviously, the first step is to find a highly-qualified tax attorney really fast.
Unless an accommodation with the IRS is reached, tax litigation involving failure to file an FBAR can be serious. Willfully failing to file your FBAR can lead to a financial penalty of $100,000 or 50 percent of the unreported account—for each violation and each year of violation. Also worth noting are the possibilities of criminal tax fraud charges. Look no further than recent news concerning ongoing legal challenges and prison sentences accrued by political consultant Paul Manafort to understand how far an FBAR violation can go.
In the alternative, a “non-willful” violation of the FBAR reporting requirement can lead to a fine of approximately $10,000 for each penalty. In much of the developing case law, it is the factor of “willfulness” that makes the difference. Given the difference in the financial penalty, the IRS is working hard to make charges of “willful blindness” stick.
So what is “willful blindness?” According to Cornell Law School, it looks something like this:
“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony…”
This means if you knew, or should have known, that there was probably another document you needed to file concerning wealth held offshore, or in a foreign account, the IRS will likely pursue you for purposefully ignoring your tax obligations. The IRS does not need to prove your intent—a court and jury can presume that a taxpayer with high wealth and foreign investments is responsible for understanding basic tax reporting responsibilities.
If you know or suspect your personal or corporate tax returns have potential errors, or if your filings do not reflect appropriate documents like your FBAR or FATCA reports—speak with experienced legal counsel to learn about your options.
Trusted representation from tax lawyers experienced with defense and mitigation of criminal tax charges in Chicago
At Robert J. Fedor, Esq., LLC we provide confidential, appropriate solutions to tax litigation involving private wealth and corporate assets. Contact us or call 800-579-0997 today.