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Federal Court Imposes Willful FBAR Penalties On Long-Time CPA

In a recent decision, a federal district court found that a long-time CPA/tax-return preparer recklessly failed to file FBARs to disclose several foreign financial accounts. As avid readers of our Insights are aware, many federal courts have found that reckless reporting failures are sufficient to impose “willful” FBAR penalties—and those penalties can be quite signficant.

The case was United States v. Kronowitz. And it is yet another reminder that courts addressing FBAR reporting failures tend to look critically at the account holder’s background, including educational and professional. Account holders with tax-related backgrounds or professionals with substantial business experience are often held to a higher standard.

The Foreign Accounts

Written by Jason Freeman | Posted in FBAR Filing • FBAR Penalties

Do You Have Foreign Income?

In case you have foreign income or assets, you might be under an obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) disclosing your assets and income to the IRS. The FBAR filing requirements specifically apply to US taxpayers with financial interest in, or signature authority over a financial account or foreign bank with a value of at least $10,000 at any point.

These FBAR requirements extend to U.S. residents, U.S. citizens and various kinds of business entities, such as limited liability companies (LLCs), corporations and partnerships. Keep in mind that FBAR violations, which usually involve failure to maintain relevant financial records or failure to file an FBAR, could result in severe penalties, especially if these violations are “willful.”

Failure To File

Since 2017, any failure to file can lead to harsh sentencing; this depends on how much you or your business has in foreign financial institutions or offshore accounts. A failure to disclose and furnish the information is usually an intentional act to deceive the IRS. You have to file the FBAR paperwork, as long as your accounts have over $10,000.