Article Posted on 05/29/2019
Taxpayer that have money in foreign accounts are subject of Willful FBAR Penalty. The penalties are huge because the IRS is trying to stop people from hiding money overseas. The following case is an example.
In this case the taxpayer owned investment accounts in Switzerland and France. She didn't report any investment income from the accounts on her returns, nor did she file Reports of Foreign Bank and Financial Accounts (FBARs). After learning about the IRS's efforts to uncover secret foreign accounts, the taxpayer applied to the Offshore Voluntary Disclosure Program (OVDP). However, she decided to withdraw from the program and "take her chances" after seeing the proposed penalty.
Obviously the IRS caught her because by starting the voluntary program they knew she had foreign investments. Her penalty. For willful failure to file was $697,229—an amount greater than the regulatory maximum of $100,000. She appealed and The Court of Federal Claims upheld the penalty, concluding that the taxpayer's reckless conduct amounted to a willful failure to file.