The news today that the Manafort conviction includes failure to file an FBAR is an example of two crucial IRS principles: willful blindness is no excuse under the law, and, the IRS will always use the failure to file an FBAR against US taxpayers. The IRS concept of “willful blindness” addresses a standard US taxpayer position “I had no idea I was required to…” with regards to any filing responsibility associated with federal taxes.
The inflexible IRS position (and US tax law) is: “It is the responsibility of all US taxpayers to understand their responsibilities under US tax code. Failure to understand all aspects associated with your tax return is the responsibility of all US taxpayers.” Many cases have developed over the past several years where the IRS has invoked the “willful blindness” tactic to dismiss taxpayer arguments regarding their tax returns. The IRS position is, quite simply, if you are sophisticated enough to have an offshore financial account or signatory access you have no excuse for not understanding your responsibility to report it.
It may seem like a callous position, but it is important to understand whenever you are dealing with the IRS. This is one of the reasons it is not in a taxpayer’s interest to communicate directly with the IRS in response to requests for information or if you receive a letter of notification regarding an IRS audit.
The experienced domestic and international tax attorneys and accounting professionals at Allen Barron work with clients to help them understand IRS filing responsibilities, especially when international investments and/or financial accounts are present. FBAR compliance is strictly enforced and easy for the IRS to catch. Financial and investment institutions around the world provide direct electronic reporting to the IRS regarding specific US taxpayers, the accounts they hold or have signatory access to, as well as all balance and transaction related detail.
The fact that the Manafort conviction includes failure to file an FBAR is yet another reminder of the serious financial consequences of failure to prepare and file an FBAR. If you have offshore accounts or assets we invite you to contact Allen Barron or call 866-631-3470 for a free consultation.