Man loses fight with IRS; highlights law for Nevada residents
A former senior executive at Mobil Oil has lost his fight with the IRS. The man is accused of not disclosing over $7 million in funds allegedly hidden in overseas bank accounts. A decision from a federal appeals court ruled in favor of the IRS recently. This case has implications in Nevada and the rest of the country and has been watched to see how federal courts would rule concerning someone who apparently knew that the money in their foreign accounts had to be disclosed to the IRS and yet did not do so.
The IRS requires any money in foreign accounts totaling over $10,000 in the prior year to be disclosed using Fbars, or Foreign Bank and Finance reports, by June 30. This rule has existed for decades, but the IRS did not often enforce it. After a sweeping investigation concerning tax evasion away from American soil, the IRS has begun to enforce the law with apparent vigor. Initially, the courts ruled in favor of the Mobil executive, effectively defeating the IRS. However, an appeals court panel eventually ruled against him.
Fines for not filing these reports can add up to astronomical figures. The Treasury Department states that those who fail to intentionally file the reports could potentially be fined $100,000 ‘per instance’ or suffer fines equal to 50 percent of the money in the account, for each year that a violation is discovered. This can potentially cause a taxpayer to go into debt because the fines can very quickly add up to more than what is actually in the account. On the other hand, those who accidentally fail to file the Fbar can still end up with hefty fines of $10,000 for each report that remains unfiled.
While many lawyers who are representing wealthy Americans accused of violating the Fbar requirement state that their clients were simply unaware, the IRS has asserted that being unaware or even failing to read their tax forms could be seen as ‘willful blindness’ that could potentially be a trigger for the fines. Such an interpretation can spell trouble for wealthy Americans who have overseas accounts and could end up with them in legal trouble. Ensuring that all of the fine print is read on tax documents could potentially help Nevada residents avoid these fines, and seeking the right advice can help avoid the often confusing rules and regulations of the IRS.
Source: Thomson Reuters News & Insight, “Ex-Mobil executive loses offshore tax fight with IRS,” Lynnley Browning, July 23, 2012