In a recent district court case out of Seattle, Washington (Moore v. U.S., DC Wash. Apr. 8, 2015), a taxpayer was held liable for four year’s worth of civil penalties for failing to file Reports of Foreign Bank and Financial Accounts (FBARs) and he failed to establish reasonable cause for his failures.
The experienced international tax lawyer at Columbus, Ohio-based law firm Porter Law Office, LLC represents U.S. taxpayers residing in the U.S. and abroad in reporting their foreign accounts under one of several Internal Revenue Service (“IRS”) offshore voluntary disclosure programs, such as the OVDP.
Reasonable Cause for FBAR Failures
Moore case highlights what is not reasonable cause for FBAR penalties
An individual has reasonable cause for failing to file an FBAR when the individual exercises ordinary business care and prudence. The taxpayer in Moore claimed that he inquired with a Bahamian law firm about the tax implications of incorporating and running a business in the Bahamas. Mr. Moore was a U.S. citizen.
The problem with Mr. Moore’s argument was that he did not show the court any advice he received that made him believe he did not have an obligation to report the business’s account to the IRS. Moreover, when his Bahamian account migrated to Switzerland he met with bank representatives but declined to ask about his obligation to report the account to the IRS. Mr. Moore’s could not establish reasonable cause because he was acting with willful blindness.
Failure to Read Form Instructions and Disclose Info to Tax Preparer
Further, the court rejected Mr. Moore’s claim that the foreign accounts question on Schedule B (1040) did not apply to him because the foreign account was held in the name of his foreign corporation. By reading the instructions, Mr. Moore would have known that he should have answered “yes” to the question on Schedule B because he owned more than 50-percent of the stock of a corporation that owned a foreign bank account. Because he did not inquire any further into his tax obligations, he did not have reasonable cause for his FBAR violations.
Finally, there was no evidence that Mr. Moore disclosed the existence of his foreign account to his tax preparer. Evidence that he ignored relevant questions on Schedule B and in tax organizers was also evidence of willful conduct. In addition, the IRS’s penalty assessment procedures served all of the purposes of due process. It ensured that the individual received notice of the penalty and an opportunity to contest it.
Contact Experienced Columbus Ohio Tax Lawyer
Voluntary Disclosure and FBAR Representation
The Columbus, Ohio tax attorney at the Columbus, Ohio-based law firm Porter Law Office, LLC has in depth experience resolving difficult voluntary disclosures for reporting income from foreign investments and filing FBARs. By hiring Porter Law Office, LLC, you will be guided through your international tax compliance obligations to the best possible resolution at the least overall cost. Ohio tax lawyer Matthew R. Porter is an experienced international tax attorney who understands what it takes to overcome the legal hurdles associated with FATCA and to file delinquent FBARs under the IRS’s voluntary disclosure procedures. Schedule a free consultation today to discuss your delinquent FBAR filing options.