A December 2017 decision of the Court of Federal Claims in Jarnagin v. United States begs the question: Whether a Taxpayer can ever have a reasonable cause defense to the assessment of the Non-Willful FBAR Penalty. The Court concluded that a Taxpayer, who failed to read his return and correctly ascertain that a timely FBAR was due could not have a reasonable cause defense. This may have serious implications in light of the recent announcement by the IRS that the Offshore Voluntary Disclosure Program will end on September 18, 2018 and their suggestion that the Streamline Filing Compliance Procedures may also be scrapped in the future.
The Jarnagin decision involved a Taxpayers’ suit to recover $80,000 in Non-Willful FBAR penalties assessed over a four-year period for their failure to file FinCen Form 114 (FBAR). The Taxpayers were successful business people, who maintained Foreign Financial Accounts in Canada. They used a return preparer during the four-year period but did not tell the return preparer about the accounts. They argued that they were unaware of the FBAR filing obligations and that their return preparer should have raised the issue based on the information the Taxpayers furnished the return preparer. The Court disagreed.
The Court relied upon the meaning of reasonable cause found in Title 26 (the Tax Laws) under I.R.C. §§ 6651(a) and 6664(c) (1) in sustaining the penalties. Citing Moore v. Unites States, the Court concluded that “there is no reason to think that Congress intended the meaning of ‘reasonable cause’ in the Bank Secrecy Act to differ from the meaning ascribed to it in the tax statutes.” Consequently, those who have yet to come forward and make a disclosure of their Foreign Financial Accounts could face the assessment of the Non-Willful FBAR penalty for each of their accounts for multiple years. Furthermore, if the Streamlined Filing Compliance Procedures survive, routine rejection of a Taxpayer’s reasonable cause defense may become the order of the day.
Author
Anthony N. Verni
ATTORNEY AT LAW, J.D., CPA, MBA
With 20+ years of experience practicing before the IRS, I bring a rare combination of legal and financial expertise as both an Attorney and a Certified Public Accountant.
Why Trust Us
At your company name here, we adhere to a stringent editorial policy emphasizing factual accuracy, impartiality and relevance. Our content, curated by experienced industry professionals. A team of experienced editors reviews this content to ensure it meets the highest standards in reporting and publishing.
Lorem Ipsum is simply dummy text of the printing and typesetting industry.
Table of contents
Hear from relieved Taxpayers who trusted Verni Tax Law
Anthony was creative in helping me resolve some past issues in a way that they never became a problem so that is greatly appreciated and I feel confident I can now enjoy my retirement with peace of mind. Thanks for that.
Ken B.
Cebu City, Philippines
Anthony was creative in helping me resolve some past issues in a way that they never became a problem so that is greatly appreciated and I feel confident I can now enjoy my retirement with peace of mind. Thanks for that.
Douglas R.
Osaka, Japan
Anthony was creative in helping me resolve some past issues in a way that they never became a problem so that is greatly appreciated and I feel confident I can now enjoy my retirement with peace of mind. Thanks for that.
Phil Y
President, Swift & Secure Systems Inc., Boynton Beach, FL
Anthony was creative in helping me resolve some past issues in a way that they never became a problem so that is greatly appreciated and I feel confident I can now enjoy my retirement with peace of mind. Thanks for that.
Yassin and Eva, B.
President, Swift & Secure Systems Inc., Boynton Beach, FL
Have questions or need guidance?
I’m always available by phone, email, or Skype whatever’s easiest for you.
Take the first step and let me help fix the root of your tax problems.