Concerned about FBARs? Well, take the Fifth

[JimGant]

"The taxpayer filed his 2011 individual tax return, including Schedule B. On Schedule B, the taxpayer refused to answer some questions and refused to fill in some of the values and sources of interest. However, the taxpayer correctly filled in the total amount of interest. On the return he invoked his Fifth Amendment privilege, stating that the answers to the questions he did not answer might lead to or might be incriminating evidence against him."

"The taxpayer argued that because 31 U.S.C. §5314 AND §5322 make it a crime to willfully fail to file a Report of Foreign Bank and Financial Accounts (FBAR), and the questions on Schedule B would elicit information that could be used against him to determine if he filed an FBAR, completing the required information would cause him to incriminate himself."

"Because the withheld information would trigger the duty to file an FBAR, and because failure to do so is a crime, the court held that the taxpayer showed a real and appreciable danger of self-incrimination by being compelled to answer the questions, and that his return was not frivolous by reason of invoking the Fifth Amendment privilege."

http://www.bna.com/taxpayer-wins-tax-b57982063641/

[taxout]

I can't access the opinion itself, but the summary doesn't address whether he also refused to answer the question at the bottom of Schedule B regarding the existence and location of foreign bank accounts.

Note this is just a Tax Court opinion, and one that the Government will probably appeal.

[JimGant]

but the summary doesn't address whether he also refused to answer the question at the bottom of Schedule B regarding the existence and location of foreign bank accounts

Location would only be filled in if he had checked "yes" to the question, "Are you required to file FinCen Form 114...?" He checked neither yes or no, so presumably no location was filled in either. More info on this at this link: http://www.forbes.com/sites/robertwood/2015/11/13/beware-willful-frivolous-even-self-incriminating-tax-filings/

[vaultdweller0013]

I'm curious what he wanted to gain by taking the 5th in answering these questions. Despite the judge's poorly worded (but still potentially correct) opinion, the requirement to file an FBAR is not affected by filling out (or failing to fill out) the form.

If he wasn't required to fill out an FBAR, or if he did file an FBAR, then there is little risk of answering appropriately. However, if he was required to fill out an FBAR, but did not, taking the 5th likely won't help him avoid the penalties for "willful" failure to file as "Willful Blindness" is still considered a willful failure to file. That is, the IRS would only need to show he knew FBAR reporting requirements existed in general, not that he knew the actual requirements and chose not to follow them. The act of filling out the form, should be sufficient to show this.

On the other hand, the downside of answering the 5th are twofold. First, as was shown, it is a good way to get the IRS to levy the frivolous return penalty. Even if it is overturned as in this case, it still would require your time and money to fight it. Second, I would think the IRS would treat it as a red flag and fully audit his return and do a detailed investigation on whether he is required to file an FBAR.

[watcharacters]

I can't access the opinion itself, but the summary doesn't address whether he also refused to answer the question at the bottom of Schedule B regarding the existence and location of foreign bank accounts.

Note this is just a Tax Court opinion, and one that the Government will probably appeal.

I'm sorry you can't access the opinion. That harks back to a post I made in the past about Arron Swartz. https://en.wikipedia.org/wiki/Aaron_Swartz

Government records should be open and readily accessible.

My belief is just the opposite is happening throughout the world.

[watcharacters]

but the summary doesn't address whether he also refused to answer the question at the bottom of Schedule B regarding the existence and location of foreign bank accounts

Location would only be filled in if he had checked "yes" to the question, "Are you required to file FinCen Form 114...?" He checked neither yes or no, so presumably no location was filled in either. More info on this at this link: http://www.forbes.com/sites/robertwood/2015/11/13/beware-willful-frivolous-even-self-incriminating-tax-filings/

As I see it in the final analysis, fighting a government as an individual takes either a massive amount of money or a complete lack of concern about the outcome.

From the top of the USA legal system, from federal prosecutors to lowly state, county or city attorneys, they have virtual unlimited funds to engage any any legal battle.

Companies such as Apple, Microsoft, GM and such can battle but the individual would need the help of the ACLU which many people hate but actually would help a person in this situation.

I would be curious to learn of the outcome of this battle.