Recent FBAR Court Case Summaries That You Should Know

Recent FBAR Court Case Summaries That You Should Know

New Cases For Failing to File FBAR

With the close of 2023 comes five (5) very important foreign bank and financial account reporting (FinCEN Form 114 aka FBAR) case rulings that continue to help shape the way the Internal Revenue Service may enforce penalties and fines. While technically, the FBAR is a FinCEN Form (Financial Crimes Enforcement Network) and not an IRS Form — since 2003, the Internal Revenue Service has been tasked with forcing FBAR non-compliance. Let’s look at five important cases from 2023.

(Updated from Original 2020 Publication Date).

Supreme Court Case – Bittner v. U.S. (Non-Willful Penalties)

The most important ruling that came about in 2023 was the Supreme Court ruling in Bittner. In that case, the Supreme Court ruled in favor of taxpayers on the issue of non-willful FBAR penalties. More specifically, the Supreme Court held that the Internal Revenue Service can only issue penalties based on the filing of the form and not each missed account. In the case of Bittner, this would make the difference between a 5-figure penalty and a 7-figure penalty.

Monica Toth v. United States – (Cert. Denied, Willfulness)

This case was very important because many practitioners believe the Supreme Court would accept this case to determine the extent and nature of willfulness penalties — which can reach 50% of the maximum value of the unreported accounts. There was the question of whether or not these types of penalties are considered excessive fines, but the Supreme Court denied cert.

U.S v. Burga – (Willfulness, 9-Figure Penalty)

The Burga case is very important, based on the sheer size of the penalty that was issued. The IRS determined that taxpayers were willful and issued them penalties reaching $120 million. As of November 2023, there is some dispute as to whether both taxpayers should be subject to penalties for all years based on whether one of the taxpayers had a financial interest in some of the accounts for some years.

U.S. v. Manafort (No One is Immune from the Law)

The case of Paul Manafort is important to show that the IRS and Department of Justice are going hard against anybody they believe may have wilfully violated the foreign account reporting requirements for taxpayers. In February of 2023, Manafort agreed to pay the $3.2 million in FBAR penalties for willful failure to disclose the accounts.

In United States v. Xiao (Willfulness)

The case of Xiao is important to show that reliance on tax software which may not be completely accurate and even ambiguous as to certain requirements for taxpayers to report their income and accounts is not sufficient to avoid penalties.  While this taxpayer was ultimately acquitted of some crimes he was accused of at the end of the day, the court determined that the FBAR penalties should remain.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.