Willful Violations and the FBAR
The Report of Foreign Bank and Financial Accounts (FBAR) is generally required for United States citizens and residents that have an interest in foreign accounts. A failure to properly report these assets can result in fees and other penalties, including imprisonment.
The severity of the penalty generally depends on the details of the violation. Willful violations come with more severe penalties than non-willful.
What is a willful violation? A willful violation is, essentially, an intentional attempt to hide the asset from the government. There is a presumption of innocence.
In order to support an allegation of wrongdoing, the government must establish that a violation was willful by showing the taxpayer committed “a voluntary intentional violation of a known legal duty.”
The law states the government must prove their case, but it does not state which burden should be applied. There is confusion as to whether the “preponderance of the evidence” standard or the higher “clear and convincing evidence” standard should apply. The higher the standard, the more protection afforded to the accused. Thus far, most courts have used the less strenuous preponderance of the evidence standard.
What types of penalties come with willful violations? A willful violation can come with a financial penalty of $100,000 or 50 percent of the balance of the account in question, whichever is greater. A non-willful violation generally comes with a maximum penalty of $10,000 per account.
The severity of penalties combined with the frustration surrounding which burden will apply to these cases highlight the need for legal counsel when navigating these issues. If you are concerned about how these laws could impact you, it is wise to seek legal counsel. You can better ensure your legal rights are protected by reaching out to an attorney experienced in foreign tax compliance issues for guidance.
