BY AMY L. HOLBROOK, ESQ.
US District Court of Utah breaks new ground
UPDATE 12-11-12 LINK TO OUR EXCLUSIVE INTERVIEW WITH THE DEFENDANT JON MCBRIDE HERE.
Our friend Jack Townsend, Esq. over at federaltaxcrimes.blogspot.com just published another in depth article. This one about the latest FBAR case, McBride v US. And here’s our synopsis, geared a little bit more to the layperson.
At first glance, this case is further proof that “big fish” are the ones at risk. Jon McBride engaged in a complex tax evasion scheme involving offshore accounts wih the firm of Merrill Scott, and his failure to report their existence was related to his desire to avoid paying income taxes on his corporation’s profits. He had ample warnings regarding FBAR nonfilings, including promotional materials regarding his tax evasion scheme and a newspaper article his corporate accountant sent his way upon hearing of the plan. The record also shows that McBride lied to the IRS when they began to investigate his conduct.
Almost all of our clients who have failed to file FBARs never intended to engage in tax evasion, lie to the government, or defy any law on the books. They’re in the position of being unaware of the filing requirement, not disregarding it. It’s easy for them, and us, to look at McBride’s hefty penalty—about the statutory maximum of 50% per account per year– and say that a tax evader “got what was coming to him.” (although we would never say that)
But the McBride FBAR case has definite implications for anyone failing to file:
- The court viewed the FBAR and the tax return as completely linked, not separate obligations, despite the FBAR not technically being a tax form.
- The court stated that anyone signing a tax return has knowledge, actual or imputed, of its contents, including the infamous “Question 7” on Schedule B.
- The court stated that failure of a taxpayer to inform his accountant of the accounts cannot rely on advice from the accountant as a defense.
All three of these facts affect many of our clients, who have used a program or paid preparer when filing returns without FBARs, as well as answering that they did not have foreign accounts on Schedule B. Stay tuned as we explore in more depth the possible implications of the case.