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Fourth Circuit Finds No FBAR Penalty Exceptions for Voluntary Disclosure and Plea Bargains
In U.S. v. Williams, 2012 U.S. App. LEXIS 15017; 2012-2 U.S. Tax Cas. (CCH) P50, 475, the United States Court of Appeals for the Fourth Circuit held that a taxpayer could be liable for significant civil penalties for failing to report interest in foreign bank accounts. The United States brought an enforcement action to collect the civil penalties assessed against defendant taxpayer Williams, pursuant to 31 U.S.C.S. § 5321(a)(5), for his failure to report his interest in two foreign bank accounts by failing to file a completed form TD F 90-22.1 (FBAR) for tax year 2000. The U.S. District Court for the Eastern District of Virginia, at Alexandria, entered judgment in favor of the taxpayer. The United States appealed.
By way of background, the FBAR is required to be filed by U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold. The total threshold is also much lower than with Form 8938, being $10,000 at any time during the calendar year. The penalties associated with failure to file the FBAR are also more severe. If the failure to file is determined to be non-willful the penalty is $10,000, but if the failure to file is “willful,” then the penalty for violating the law is up to the greater of $100,000 or 50 percent of account balances.
In the instant case, the district court held that the United States failed to establish that Williams willfully violated 31 U.S.C.S. § 5314. But on appeal, the Court found that Williams’ signature on his 2000 federal tax return was prima facie evidence that he knew the contents of the return. Williams made a conscious effort to avoid learning about reporting requirements, and his false answers on both the tax organizer and his federal tax return evidenced conduct that was meant to conceal or mislead sources of income or other financial information. This conduct constituted willful blindness to the FBAR requirement. Williams’ guilty plea allocution further confirmed that his violation of § 5314 was willful because the taxpayer acknowledged that he willfully failed to report the existence of two foreign bank accounts to the Internal Revenue Service or the Department of the Treasury as part of his larger scheme of tax evasion, and this failure was an admission of violating § 5314. At a minimum, Williams’ undisputed actions established reckless conduct, which satisfied the proof requirement under § 5314. The district court clearly erred in finding that the taxpayer did not willfully violate § 5314.
The judgment of the district court was reversed and the case was remanded for further proceedings.
All persons charged with crimes are entitled to the protections afforded by the United States Constitution. An experienced criminal defense attorney helps to ensure that a defendant’s rights are protected before, during and after a trial. If you have been charged with or convicted of a criminal offense, you should consult with a criminal defense attorney immediately. For a confidential consultation, contact the Law Offices of Marc Neff at (215) 563-9800 or via email at firstname.lastname@example.org.
Posted in: Federal White Collar Crime