DIDN’T READ FBAR INSTRUCTIONS? COURT RULES THAT’S NO EXCUSE
As this year’s tax season forges ahead and filing deadlines quickly approach, we’d like to remind our readers about the importance of getting your taxes done right. This is especially relevant for U.S. expats who typically deal with more complex international tax issues and who can be subject to penalties for non-compliance that are exceptionally high.
While the IRS tends to forego penalties when taxpayers have reasonable cause for tax return errors, it continues to narrow the circumstances which it considers to constitute reasonable cause. In a case decided just last year, a court addressed whether failing to read a form’s instructions was a valid excuse for a non-compliant taxpayer.
THE MOORE CASE
In the 2015 district court case (Moore v. U.S., DC Wash. Apr. 8, 2015), the taxpayer failed to file several years of FBAR forms and the IRS imposed the $10,000 maximum penalty for each year’s failure. The FBAR generally must be filed by U.S. citizens, including those living abroad, with a financial interest in or signature authority over one or more foreign financial or bank accounts, with more than $10,000 in aggregate value in a calendar year.
Among other things, the taxpayer argued that he had reasonable cause for not filing the form because he thought that since his foreign account was held in the name of his foreign corporation, he had no obligation to file FBAR. The Court rejected this argument and concluded that had Mr. Moore read the FBAR instructions, he would have known that he has the obligation to file because he owned more than 50 percent of the stock of the corporation that owned the foreign bank account. Failure to read the FBAR instructions was not a valid reasonable cause defense.
The Moore case shows while the IRS and the courts recognize that tax forms are sometimes complicated and mistakes can be made, taxpayers must make a reasonable effort to get their taxes done right, and that includes understanding the ins and outs of the filing rules. It also shows that the IRS will not hesitate to penalize a non-compliant taxpayer to the full extent of the law if it decides that the taxpayer should have known better.
GETTING IT RIGHT
Understanding your tax obligations and filing your taxes correctly are both essential in staying compliant and avoiding IRS penalties. At Expat Tax Professionals, we pride ourselves on getting it right each and every time. Our proven filing process ensures that all of your required forms, including FBAR filings, will be properly prepared, including those forms that are unique to U.S. citizens living abroad.
Our international experience and professional service are the main reasons your returns will be timely and accurately filed with little to no hassle. When it comes to filing taxes in the U.S., your best bet is enlisting the help of an Expat Tax Professional.
