IRS criminal investigations

Court Rules on CPA’s Failure to File FBARs


Generally, you’re required to file a Report of Financial Bank and Financial Accounts (FBAR) if the aggregate value of the assets you have stashed in foreign banks or other financial institutions exceeded $10,000 at any time during the prior year. This provision was designed to discourage taxpayers from hiding assets in known tax havens and failing to report taxable income.

Jun 23rd 2021
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Ignorance often isn’t tax bliss. In a new court case, Kronowitz, DC-FL 127 AFTR2d 2021-753, 6/3/21, a long-time CPA failed to file a FBAR for four accounts, claiming that he had no knowledge he was required to do so. But the district court in Florida still upheld the harsh penalty for a willful omission.

The Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury Department, oversees the operation. FinCEN coordinates its activities with the IRS. If a violation is deemed to be willful, you may be assessed a fine equal to the greater of $100,000 or 50 percent of the balance in the account for each violation.

The penalties can become even greater if fraud or providing false information is involved. In some cases, you might even have to serve up to five years in federal prison for an offense (up to ten years for an obstruction of justice). Willfulness is established if a taxpayer clearly knew that there was a grave risk that an accurate FBAR wasn’t filed and was in a position to find out for certain very easily.

Facts of the new case: The defendant taxpayer, a resident of Florida, was a CPA who had been preparing individual federal income tax returns for almost 60 years. From 2005 through 2010, he had authority over four foreign financial accounts with an aggregate balance exceeding $10,000. However, the taxpayer didn’t file FBARs for these foreign financial accounts, nor did he consult anyone regarding the FBAR filing requirements.

After the IRS audited the taxpayer’s returns for the tax years in question, it assessed penalties for a willful failure to file FBARs. The taxpayer argued that his failure wasn't willful or reckless.

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