Court Holds Taxpayer Can be Liable for Both Willful and Non-Willful FBAR Penalties (Jan. 27, 2022)

A California district court has found that a taxpayer may be held liable for both willful and non-willful FBAR penalties stemming from the same set of facts. InU.S. v. Hughes, the taxpayer was noncompliant with FBAR filing obligations for a number of years. In some of the years, the court found that the violations were willful, while in others, the taxpayer did not act willfully. The case also confirmed that the government is only required to prove "willfulness" by a preponderance of the evidence, which is the lowest standard of proof. The court in theHughes case found that the taxpayer could be found non-willful in some years even though the taxpayer did have some tax and accounting experience. The case is important because some circuits have now ruled that taxpayers who are found to be "non-willful" in their FBAR violations will have their penalties limited on a per-form, rather than a per-account, basis (other circuits have come to the opposite conclusion). Therefore, the taxpayer who fails to properly file an FBAR can significantly reduce the penalties for noncompliance if they can prove the violation was not willful. For more information on willful versus non-willful FBAR violations, see Q .