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IRS Loses FBAR Non-Compliance Case

Mike Godfrey,, Washington

18 January 2018

In its first case of 2018, the US Tax Court ruled in favor of the taxpayer in a case concerning the statute of limitations and non-compliance with the FBAR requirements.

A FBAR must be filed by a US person that has a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding USD10,000 at any time during the year. The IRS encourages taxpayers with any foreign assets, even relatively small ones, to check if this applies to them.

Scarinci Hollenbeck, the law firm that advised the taxpayer, in Rafizadeh v. Commissioner, 150 TC 1 (2018), said of the ruling: "The case considered whether the six-year statute of limitations set forth in IRC Section 6501(e)(1)(A)(ii) applied to a taxpayer who failed to file FBAR forms from 2006 through 2008."

"IRC Section 6501(e)(1)(A)(ii) provides a six-year statute of limitations if a taxpayer omits from gross income amounts attributable to one or more assets with respect to information required under IRC Section 6038D. Despite the Government's attempt to draw parallels between IRC Section 6038D and previously enacted statues, the Tax Court ultimately determined that the statute being used to assess additional taxes from non-compliant taxpayers with foreign accounts could not be used for tax years prior to 2010 because there was no IRC Section 6038D filing requirement prior to that year."

"As a result of this ruling, the taxpayer ended up owing no additional taxes. Additionally, this ruling could potentially prevent the Government from collecting millions of dollars from other taxpayers in similar situations, making it a landmark decision for the US Tax Court."

TAGS: tax | mining | law | United States | penalties | Tax

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