After the implementation of FATCA in 2014, Sherayzen Law Office made a prediction that there would be a major increase in FBAR litigation a few years later once the IRS is able to process data obtained through FATCA and the Swiss Bank Program. This prediction is now becoming a reality as the US Department of Justice (“DOJ”) is filing lawsuits related to FBAR penalties in unprecedented numbers.
When Should the Taxpayers Expect to See Increase in FBAR Litigation?
The process has already started. The DOJ is already filing new FBAR litigation cases and it is working closely with the IRS to prepare a large number of additional FBAR cases.
In fact, the second half of 2017 and the first half of 2018 will be the period when the number of FBAR litigation cases will skyrocket, achieving a new historical high. Most of these lawsuits will likely be criminal while others will be civil, including attempts to collect FBAR penalties.
Will Non-Willful FBAR Penalty Cases Be Affected by the Increase in FBAR Litigation?
Yes, taxpayers who were assessed non-willful FBAR penalties will also be affected. We expect, however, that the majority of the new cases will be those concerning willful and even criminal FBAR penalties.
Can a Non-Willful FBAR Penalty Case Turn Into Willful FBAR Penalty Case as a Result of FBAR Litigation?
Such a possibility exists, especially in cases where the IRS imposed non-willful penalties without having sufficient information to assess willful penalties. Since the DOJ will try to argue that the cases should be tried de novo, it is possible that new information obtained during the discovery stage of a case may result in sufficient evidence for the DOJ to argue that willful FBAR penalties should be imposed.
Therefore, it is important to bring in an international tax attorney as early as possible into your case to assess the possibility of the DOJ turning a non-willful case into a willful one.
Can the Recent Increase in FBAR Penalties Influence a Taxpayer’s Exposure as a Result of FBAR Litigation?
Recently, the FBAR penalties experienced a significant increase as a result of the Congress-mandated adjustment to inflation. The increase should not affect any penalties assessed prior to November 2, 2015. The FBAR Penalties imposed after that date are likely to be affected by FBAR Litigation, because the DOJ may sue for the adjusted amount of penalties.
What Should I do If the DOJ Files Compliant Against Me in a US District Court?
If you receive a compliant from the DOJ (acting on behalf of the United States of America), you should contact Sherayzen Law Office as soon as possible for professional help. Mr. Sherayzen is an experienced international tax lawyer who can help you determine on how to best deal with the DOJ lawsuit, assess your chances of success and help you with the litigation of the case.