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Recent Federal Case Demonstrates Importance of Filing Timely FBAR for Taxpayers in Southern California and Elsewhere

Recent Federal Case Demonstrates Importance of Filing Timely FBAR for Taxpayers in Southern California and Elsewhere

A recent case out of Florida demonstrates the importance of properly complying with Report of Foreign Bank and Financial Accounts (FBAR) requirements. In United States v. Zwerner, the government filed a lawsuit seeking to recover approximately $3.5 million in civil penalties from an elderly man accused of failing to timely report his overseas assets. Although the man voluntarily disclosed his foreign financial interests on his 2007 tax return and filed an amended tax return and FBAR for the previous three years, no formal voluntary disclosure procedure such as the Offshore Voluntary Disclosure Program was yet in place. At the time, Internal Revenue Service policy reportedly considered such a disclosure to be a mitigating factor only with regard to potential criminal prosecution.


About three years after the elderly man came into compliance with the tax code, he apparently became the subject of an IRS audit. In 2013, the government filed a lawsuit seeking to collect half of the man’s highest undeclared foreign bank account balance for each of the four years. Although the IRS also attempted to penalize the man for civil income tax fraud for 2004-2006, those penalties were later abated. Following a May 2014 jury trial, the 87-year-old Florida man was ordered to pay a civil penalty equivalent to 150 percent of his highest foreign asset balance of nearly $1.7 million during the three years at issue. The aggregate $2.2 million noncompliance penalty resulted after jurors found the elderly man’s failure to timely file the FBAR in 2004-2006 was willful. It is currently unclear whether the large fines will be upheld or reduced and considered excessive during an appeal.


FBAR is an informational filing that is required by the IRS in certain situations. The FBAR is used to alert the agency to an individual’s relationship with an offshore financial account. U.S. taxpayers must file a completed FBAR if they have more than $10,000 in combined assets placed in one or more foreign financial accounts at any time during the calendar year. A taxpayer who is required to file the FBAR must also report the existence of any foreign financial accounts on his or her annual income tax return.



Understanding and complying with international taxation legal requirements can be difficult. Unfortunately, many taxpayers are unaware of FBAR and other foreign asset income tax requirements. If you think you may be required to notify the IRS about your foreign assets using the FBAR, you should discuss your circumstances with a knowledgeable international tax lawyer. William Hartsock has experience advising clients in Southern California regarding international tax law compliance. To consult with a seasoned tax lawyer, please call Mr. Hartsock at (858) 481-4844 today. You may also contact him through his website.


Additional Resources:

Zwerner: Jury Determines 150% FBAR Penalty Applies – What Next?, by Charles Rettig, Forbes.com


United States v. Zwerner, 13-cv-22082, U.S. District Court, Southern District of Florida (Miami)


Photo Credit: Alvimann, MorgueFile

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