The US Court of Federal Claims found two US Canadian taxpayers fail to file FBARs resulting in summary judgment for the IRS.  The couple’s defense was primarily based upon the fact they had engaged a “professional tax adviser” to prepare their returns and failed to review them.  The court rejected this argument and found the couple failed to exercise common business care and prudence.  The IRS’ original position is that the couple failed to learn their responsibility as US taxpayers, and this “willful blindness” did not excuse them from their obligations to file FBARs for all accounts and assets outside of the United States.

US law requires any US taxpayer, including foreign nationals living and working in the United States who has signatory authority or a financial interest in any bank or investment account outside of the US to report all of their accounts if the balance exceeds $10,000 at any point in a tax year.  The Court further found that the couple had signed their tax returns every year.  The judge noted the notice at the bottom of IRS tax returns which requires taxpayers to state, under penalty of perjury, the returns are true and accurate to the best of their knowledge.

The couple had more than $1.8 million in a Canadian bank account which they failed to report on an FBAR and file with the IRS each year.  The penalties from the IRS related to activities on the account in 2006, 2007, 2008 and 2009.  The IRS had proposed a penalty of $100,000.  The couple claimed their failure to comply with FBAR filing requirements was due to reasonable cause as they had relied upon the expertise of the tax preparation company.  They claimed the IRS was barred from collecting a penalty on this basis.

The decision handed down yesterday because two US Canadian taxpayers fail to file FBARs in 2006-2009 is yet another signal the IRS is cracking down on those who have not filed FBARs, and have not come into compliance through the OVDP or streamlined programs.  We invite you to contact Allen Barron’s experienced FBAR, domestic and international tax attorneys or call 866-631-3470 for a free consultation.  There is no excuse in the eyes of the IRS for failure to report offshore accounts on annual FBARs.

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