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Monthly Archives: January 2019

Legality of IRS’ Furloughed Workers Recall Now Questioned by Senator

According to Law360, a U.S. Senate Finance Committee member on January 22, 2019 questioned the legality of the Internal Revenue Service plan to recall 46,000 furloughed workers next week, which the agency would execute if the partial federal government shutdown remains in effect.

Sen. Mark Warner, D-Va., the ranking member of the committee’s taxation and IRS oversight subcommittee, asked IRS Commissioner Chuck Rettig what circumstances led to his decision to recall furloughed workers, which is a departure from previous policy. The IRS announced Jan. 15 that if the shutdown, which began Dec. 22, remained in effect, more than 46,000 workers will be recalled from furlough on Jan. 28 to begin the tax filing season.

“It is unclear that these activities could be described as ‘emergencies involving the safety of human life or the protection of property’ that would allow for excepted employees to perform these duties while Congress has not appropriated funding for your agency,” Warner’s letter said.

The IRS said in its updated contingency plan that 46,052 employees, more than 57 percent of its workforce, would be classified as "excepted," a sizable increase from the 9,492 employees classified as such under a previous plan. The workers would be recalled to start the tax season and begin processing refunds.

A vast majority of IRS employees currently remain on furlough during the government shutdown, which began amid a stalemate between President Donald Trump and congressional Democrats over funding for a wall along the country's Mexico border.
 

The Antideficiency Act States That Only Certain Classifications of Federal Workers, Namely Those Whose Service Involves Emergencies Affecting Human Life or the Protection of Property, Can Volunteer Their Time.


In a separate letter, Warner questioned U.S. Treasury Secretary Steven Mnuchin about why some employees were recalled to process paperwork that would allow banks to provide home loans.

Democratic lawmakers have previously raised concerns over whether nonexcepted federal employees can be recalled from furlough during a shutdown without receiving pay, after Rettig announced on Jan. 7 that a significant portion of the IRS' workforce would be recalled to begin the filing season.

Is this any way to run a government?

Have a Tax Problem?  
 




 

 

Contact the Tax Lawyers at
Marini & Associates, P.A.
 
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).
 
 
 

Read more at: Tax Times blog

The IRS Computer is Continuing to Generate Notices of Levy During This Government Shutdown

For your information, the IRS computer is continuing to generate Notices of Levy, during this  IR/Government shutdown.

It's been my experience that just about every IRS fax number is not functioning, during this government shutdown and you will receive a busy signal when these IRS fax numbers are dialed. So trying to contact anyone at the IRS, by fax, is literally impossible. You can still leave phone messages, but that's not very legally proficient. 

We would advise all practitioners who receive a Notice of Levy, during this government shutdown, to file a CDP hearing request, on Form 12153, within 30 days of the date of the CP 504 Notice or Letter L1058 and send this request to the IRS via certified mail with return receipt requested. 
 
It has generally been taking between 90 – 120 days to have a CDP hearing. If the government reopens and you don't need this CDP hearing, then just revoke the request.  

Please note that the statue of limitations will be extended, during the time your client’s CDP hearing request is pending. 
 

Have a Tax Problem?  
 




 

   Contact the Tax Lawyers at

Marini & Associates, P.A. 
 for a FREE Tax Consultation Contact US at
or Toll Free at 888-8TaxAid (888 882-9243).
 
 

 
  

 
 

 

Read more at: Tax Times blog

IRS Clarifies “Willfulness” Under FBAR Rules

In Program Manager Technical Advice 2018-013, the IRS has set out the definition of "willfulness," and the standard of proof for establishing willfulness, for purposes of the penalty for willful violation of the requirements of the Report of Foreign Bank and Financial Accounts (FBAR). 
Under 31 USC 5314(a) and 31 C.F.R. 1010.350, every U.S. person that has a financial interest in, or signature or other authority over, a financial account in a foreign country must report the account to IRS annually on an FBAR. 

The penalty for violating the FBAR requirement is set forth in 31 USC 5321(a)(5). The maximum amount of the penalty depends on whether the violation was non-willful or willful.  

  • The maximum penalty amount for a nonwillful violation of the FBAR requirements is $10,000. (31 USC 5321(a)(5)(B)(i))
  • The maximum penalty amount for a willful violation is the greater of $100,000 or 50% of the balance in the account at the time of the violation. (31 USC 5321(a)(5)(C), 31 USC 5321(a)(5)(D))
    The Statute and the Regs. Do Not Define Willfulness! 

The IRS has concluded that the standard for willfulness under 31 USC 5321(a)(5)(C) is the civil willfulness standard and that it includes not only knowing violations of the FBAR requirements, but willful blindness to, as well as reckless violations of, the FBAR requirements. THE 2nd Circuit Court of Appeals' recently agreedwith this conclusion in its opinion in Bedrosian v. U.S., 3rd Cir., Case No. 17-3525, December 21, 2018 .  

 
IRS noted that the Supreme Court has made a delineation between the term willful for criminal purposes versus willful for civil purposes. It noted that in Safeco Ins. Co. of America. v. Burr, (S Ct 2007) 551 U.S. 47, a criminal case, the Supreme Court interpreted the term “willful” or “willfully” narrowly, limiting liability to "knowing violations." The Safeco court also noted that where “willfulness” is a statutory condition of civil liability, the Supreme Court has generally interpreted “willfulness” to not only include knowing violations of a standard, but reckless ones as well.  
And the district court in Bedrosian, (DC PA 2017) 120 AFTR 2d 2017-5832, noted that every federal court to have considered the willfulness standard for civil FBAR violations has concluded that the civil standard applies and that the standard includes “willful blindness” and “recklessness.”
 

IRS said that "willful blindness  is established when an individual takes deliberate actions to avoid confirming a high probability of wrongdoing and when he can almost be said to have actually known the critical facts.” The government can show willful blindness by evidence that the taxpayer made a conscious effort to avoid learning about reporting requirements.
 
And, it said, citing Vespe, (CA 3 1989) 63 AFTR 2d 89-837, that the recklessness standard is met “if the taxpayer: 

  1. Clearly ought to have known that,
  2. There was a grave risk that withholding taxes were not being paid and if
  3. He was in a position to find out for certain very easily.” 


IRS also said that the courts are uniform with regard to the standard of proof for civil FBAR penalties; the government bears the burden of proving liability for the civil FBAR penalty by a preponderance of the evidence.
 
As the court in Bohanec, (DC CA 2016) 118 AFTR 2d 2016-6757, noted, the Supreme Court has held that a heightened, clear and convincing burden of proof applies in civil matters “where particularly important individual interests or rights are at stake.” Important individual interests or rights include parental rights, involuntary commitment, and deportation.
 
However, the preponderance of the evidence standard applies where “even severe civil sanctions that do not implicate such interests” are contemplated. The court in Bohanec held that civil FBAR penalties do not rise to the level of “particularly important individual interests or rights,” and accordingly, the preponderance of the evidence standard applies.
 
IRS noted that Chief Counsel Advice 200603026 suggested that the clear and convincing standard should apply, but subsequent cases have not sustained that position.

Have Undeclared Income from an Offshore Bank Account?
 
 
Been Assessed a 50% Willful FBAR Penalty?
 
 
Contact the Tax Lawyers at 
Marini& Associates, P.A. 
 
 
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888) 882-9243

 
 

Read more at: Tax Times blog

Another Anti-Taxpayer FBAR “Willfulness” Decision

On January 7, 2019 we posted 1st Taxpayer Victory in a "Willful" FBAR Penalty Case Overturned at Appeals where we discussed that on May 1, 2018 we posted  1st Taxpayer Victory in a "Willful" FBAR Penalty Case Appealed! and now a recent
2nd Circuit Court of Appeals opinion weighed in on
two uncertainties regarding willfulness in context of FBAR violations. 
 
First, the Court held that the definition of willfulness is not particular to FBAR violations but should involve the definition applied in other civil contexts. Particularly, the Court said: 

In assessing the inquiry performed by the District Court, we first consider its holding that the proper standard for willfulness is “the one used in other civil contexts, that is, a defendant has willfully violated [31 U.S.C. §5314] when he either knowingly or recklessly fails to file [a]FBAR.” (Op. at 7.)
 
We agree. Though “willfulness” may have many meanings, general consensus among courts is that, in the civil context, the term “often denotes that which is intentional, or knowing, or voluntary, as distinguished from accidental, and that it is employed to characterize conduct marked by careless disregard whether or not one has the right so to act.” Wehr v. Burroughs Corp., 619 F.2d 276, 281 (3d Cir. 1980) (quoting United States v. Illinois Central R.R., 303 U.S. 239, 242–43 (1938)) (internal quotation marksomitted).  

In particular, where “willfulness” is an element of civil liability, “we have generally taken it to cover not only knowing violations of a standard, but reckless ones as well.” Fuges v. Sw. Fin. Servs., Ltd., 707 F.3d 241, 248 (3d Cir. 2012) (quoting Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007)). We thus join our District Court colleague in holding that the usual civil standard of willfulness applies for civil penalties under the FBAR statute. 

Second, the Court held that knowledge of the filing requirement is not a necessary element - recklessness (i.e., reckless disregard) is enough. Here, the Court said: 

This holds true as well for recklessness in the context of a civil FBAR penalty. That is, a person commits a reckless violation of the FBAR statute by engaging in conduct that violates “an objective standard: action entailing ‘an unjustifiably high risk of harm that is either known or so obvious that it should be known.’” Safeco, 551 U.S. at 68 (quoting Farmer v. Brennan, 511 U.S. 825, 836 (1994)). This holding is in line with other courts that have addressed civil FBAR penalties, see, e.g., United States v. Williams, 489 F.App’x 655, 658 (4th Cir. 2012), as well as our prior cases addressing civil penalties assessed by the IRS under the tax laws, see, e.g., United States v. Carrigan, 31 F.3d 130, 134 (3d Cir. 1994). 

The Court then gave a definition for recklessness with respect to IRS filings, providing that: 

[A] person “recklessly” fails to comply with an IRS filing requirement when he or she
 
“(1) clearly ought to have known that
  (2)there was a grave risk that [the filing requirement was not being met] and if
  (3) he [or she] was in a position to find out for certain very easily.” 
 
Id. (quoting United States v. Vespe, 868 F.2d 1328, 1335 (3d Cir. 1989) (internal quotation omitted)).” 

Bedrosian v. U.S., 3rd Cir., Case No. 17-3525, December 21, 2018
 
"The [district] court thus leaves the impression it did not consider whether Bedrosian's conduct satisfies the objective recklessness standard articulated
in similar contexts."
 
Noting that it could not "defer to a determination we are not sure the district court made based on our view of the correct legal standard," it thus remanded to the district court to render a new judgment on the issue of willfulness.
Have Undeclared Income from an Offshore Bank Account?
 
 
Been Assessed a 50% Willful FBAR Penalty?
 
 
Contact the Tax Lawyers at 
Marini& Associates, P.A. 
 
 
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888) 882-9243
 
 
 
Sources
 
The Tax Times
 
CHARLES (CHUCK) RUBIN
 

Read more at: Tax Times blog