The Government’s Warning to Taxpayers
On August 27, 2019, a federal grand jury indicted Brian Booker, a former CPA, for failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) and making a “a false ‘Streamlined Submission’ in conjunction with the Streamlined Domestic Offshore Procedures.” See DOJ Press Release. This is the first federal indictment of any taxpayer for allegedly making false statements in connection with the IRS’s Streamlined Domestic Offshore Program.
As many practitioners may know, the Bank Secrecy Act (“BSA”) and Foreign Account Tax Compliance Act (“FATCA”) impose certain reporting obligations on taxpayers with respect to offshore financial accounts, offshore business interests, or other particular offshore assets. In 2012, the IRS adopted the Streamlined Domestic Offshore Program (“SDOP”). The SDOP provides a method for taxpayers to voluntarily disclose their non-willful failure to report offshore financial interests as required by the BSA and FATCA. A requirement of the SDOP is that the taxpayer must certify under penalty of perjury that he or she did not willfully fail to report the undisclosed interests. The IRS defines non-willful conduct as “conduct that was due to negligence, inadvertence, or mistake, or conduct that was the result of a good faith misunderstanding of the law.”
According the indictment, Mr. Booker, a former CPA, “owned a cocoa trading company that was organized under the laws of the Republic of Panama.” From 2011 through 2013, Mr. Booker allegedly failed to disclose his interest in financial accounts located in Switzerland, Singapore, and Panama on FBARs. He also allegedly filed false individual income tax returns for tax years 2010 through 2012 that failed to report to the IRS all of Booker’s foreign bank accounts.
But of particular interest, Mr. Booker filed a “Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures (IRS Form 14654).” The government alleges that in his submission “the defendant certified under the penalties of perjury that he ‘learned about the FBAR filing requirements in 2008’ and that he ‘mistakenly believed that only personal financial accounts had to be reported on the FBAR.’ The defendant also certified under the penalties of perjury that he was eligible for treatment under the Streamlined procedures and that his failure to report all income, pay all tax, and submit all required information returns, including FBARS, was due to non-willful conduct.” See Indictment ¶¶ 39–41.
This is the first instance that the government has charged a taxpayer with making a false certification of non-willful conduct under the SDOP. Thus, taxpayers and practitioners should now be on notice that the government will prosecute false certifications of non-willfulness under the SDOP. Each determination of non-willful conduct is based on the facts and circumstances of a case. Should you have any questions regarding exactly what conduct constitutes “willfulness”, such questions should be handled by a competent tax attorney to ensure you do not follow in Mr. Booker’s footsteps.
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