Second Court Bars IRS from Assessing FBAR “Willful” Penalty in Excess of $100,000

Another court just slammed the Internal Revenue Service (IRS), limiting the “willful” FBAR penalty to $100,000.  Another taxpayer victory took place last week in United States v. Wadhan, (Civil Action No. 17-CV-1287-MSK District Court, District of Colorado July 18, 2018).

The Wadhan’s failed to file or filed inaccurate so-called FBARs for 2008, 2009, and 2010.  The IRS assessed numerous penalties for multiple FBAR violations, many of which were flat amounts of $100,000. But for three violations, the IRS assessed penalties of $1,108,645.41 for 2008, $599,234.54 for 2009, and $599,234.54 for 2010.  The Wadhan’s argued that the penalties for years 2008, 2009 and 2010 must be capped at $100,000.

The Court agreed.  Its reasoning is very well laid out and detailed. The holding is congruous with the Western District of Texas’ determination on the same issue discussed in my blog post about the first case limiting the IRS to a $100,000 cap for a willful FBAR penalty, United States v. Colliot, No. 16-CA-1281-SS, 2018 WL 2271381 (May 16, 2018).

Attorneys and their clients facing FBAR problems should take heart.  Just because the IRS takes a stand on something, it does not mean that the position is automatically correct or that it cannot be challenged.

Let’s see how Wardhan and Colliot ultimately play out.  I’ll keep you posted on developments.

Published July 25, 2018 

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