Estate FBAR Penalties & the IRS
Estate FBAR Penalties: The IRS can collect Estate FBAR penalties for violations of foreign account and reporting. In recent years, the Internal Revenue Service has taken an aggressive approach against U.S. persons who are out of foreign accounts compliance.
In a District Court in Florida, the issue of FBAR penalties and Estates was presented. The issue was that if the U.S. Government has already issued FBAR penalties against an individual, and the individual dies – who is responsible for the penalties:
How can the IRS collect Foreign Account Penalties agains the Estate?
The analysis is a bit complicated, but that is the unfortunate result of having to deal with the IRS.
In the case of Schoenfeld, the government initiated an action in U.S. District Court for FBAR penalties that resulted from willful violations that occurred several years prior.
A suit was filed against the Taxpayer for failing to pay nearly $700,000 in FBAR penalties as a result of Taxpayer’s willful failure to report his UBS account (noting the U.S. entered into settlement agreement with UBS, and UBS was a notorious Offshore Tax Haven institution).
Schoenfeld’s Son Seeks to Dismiss the Suit
The son made a strong plea to the court, based on the fact that his father:
- Survived a concentration camp during World War II
- Had an elementary school education
- Worked a blue collar job as a machinist
- He had received legal advice to invest the money in Switzerland.
FBAR Penalty Recovery is a Remedial Action
Here is the kicker: Since the recovery of FBAR penalties is remedial in nature, it survives the death of the party. In addition, the court went on to explain that the purpose of the FBAR is to protect revenue that may be lost as a result of Fraud.
As a result, the Government and since the amended complaint properly related back to the initial action and may proceed for collection of penalties agains the son, not the estate (timing issue of when the suit was filed).
Is the Personal Representative or Executor Liable?
In general, when a personal representative overseas distributions from an estate, they have to be careful to follow rules. A main component for the personal rep is to ensure that any creditor claims are handled properly before distributing any assets to the heirs or beneficiaries.
If the personal representative was to distribute money that would otherwise be used to make payment for FBAR Penalties, the personal representative can be liable.
Here, since the court determined that the penalties survive the state. If the Personal Representative distributes the funds from the decedent to the beneficiaries prematurely and the estate has insufficient funds – the personal representative can presumably be liable.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.