Bedrosian Case Reinforces Reckless Standard for Failure to File FBAR12 / 07 / 2020
Bedrosian v. United States, 2020 U.S. Dist. LEXIS 228208 (E.D. Pa. 12/4/20)
In this case, the Federal court had occasion to consider whether or not a taxpayer's conduct was "reckless" when it came to the failure to file the FBAR form, to report foreign bank accounts. At issue is the reckless standard.
The taxpayer sued in 2015, for a refund of $9,757.99 that he paid to the IRS for his allegedly "willful" violation of the FBAR filing requirement, only to find the Goverment "counter-claim" for the full amount of the penalty it had assessed in the amount of over $ 1 million.
Factors that the court considered included:
1. That the taxpayer's cooperation with the U.S. Government which had negated willfulness did not actually begin until after he was exposed as having hidden foreign bank accounts;
2. That while he had reported one of his accounts on a FBAR filed in 2007, he sent 2 letters to his Swiss bank directing closure of 2 accounts, with that second account closed down, and moved to another unreported account, with funds not repatriated to U.S.
3. Taxpayer saw an article in the WSJ about federal government tracing mail coming into the U.S., and thus the possibility of the U.S. finding out about his second account;
4. His Swiss accounts were subject to a "mail hold" to prevent mail with regard to the second account from being sent (and the account being detected by US authorities);
5. Taxpayer aware of the significant amount of money held in his foreign bank accounts such that a close examination of the form he filed would have revealed he was not fully disclosing the amount he was failing to report.
A similar approach will apply in other penalty contexts when willful and reckless standards are to be applied. If you have any questions about the assessment of any penalty or adverse audit action when it comes to the omission in reporting of foreign accounts or trust, please contact Mr. Tufts at 407-647-7887.