Fourth Circuit Overturns Taxpayer Victory, Imposes Willful Failure to File Civil Penalty
Late last week, the Fourth Circuit issued an opinion in U.S. v. Williams. Although the unpublished opinion is not binding precedent, it is important guidance for anyone dealing with an FBAR issue.
At the time J. Bryan Williams failed to file his 2000 Form 90.22-1 (“FBAR Form”), he was represented by tax counsel and knew that the IRS was aware of his Swiss bank accounts. Because of this fact, the United States District Court for the Eastern District of Virginia found that: (1) Williams “lacked any motiviation to willfully conceal the accounts from authorities because they were already aware of the accounts and (2) his failure to disclose the accounts was not an act undertaken intentionally or in deliberate disregard for the law, but instead constituted an understandable omission given the context in which it occured.”
In overturning the decision, the Fourth Circuit noted that Schedule B to Williams’ tax return directed Williams to “see instructions for exceptions and filing requirements for the FBAR Form”. As a result, Williams was on notice that he had an FBAR filing obligation. Williams’ testimony that he “never paid any attention to any of the written words” did not excuse his noncompliance. Instead, it was evidence of his reckless conduct, which was sufficient for imposing the willful failure to file penalty (for each violation, $100,000.00 or 50% of account balance, whichever is higher).
All U.S. taxpayers with unreported foreign financial accounts should seek the advice of qualified tax counsel concerning FBAR reporting issues.
Stephen J. Pieklik of the Pittsburgh tax law firm Williams Coulson has succesffuly advised many clients with respect to foreign financial account matters, including the 2009 Offshore Voluntary Disclosure Program, the 2011 Offshore Voluntary Disclosure Initiative, and the 2012 Offshore Voluntary Disclosure Program.