The Court of Federal Claims, in Kimble v. United States, 2019-1590 (US Fed Cir. 2019), held that an individual’s failure to disclose a foreign bank account was willful.
The Court noted that, contrary to the individual’s argument that a taxpayer cannot commit a willful violation without actual knowledge of the obligation to file an Report of Foreign Bank and Financial Accounts (FBAR), the court has previously held that willfulness includes recklessness within the meaning of the law. Accordingly, a taxpayer signing his or her return cannot escape the requirements of the law by failing to review his or her tax return.
Here, the taxpayer knew about the foreign bank account at issue and took efforts to keep it secret by, among other things, not disclosing the account to her accountant. The individual did not review her tax returns for several tax years but represented under penalty of perjury that she had reviewed her tax returns and had no foreign accounts. The Court therefore held that the individual’s conduct was willful and that the IRS did not abuse its discretion in assessing a 50 percent penalty.
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal..