- 1 Willful vs. Non-Willful
- 2 Sean M. Golding, JD, LL.M., EA – Certified Tax Law Specialist
- 3 Willful vs. Non-Willful
- 4 Streamlined Non-Willful vs. Lower Standards of Willfulness
- 5 What is Willful Blindness?
- 6 What is Reckless Disregard?
- 7 Hiring a Streamlined Domestic Offshore Procedures Attorney
- 8 How to Find Experienced & Reputable Offshore Disclosure Counsel
- 9 Need a Second Opinion about Offshore Disclosure?
Willful vs. Non-Willful (2019) – Basics of OVDP & IRS Streamlined Program
Willful vs. Non-Willful is an analysis which is both simple…and complex.
Willful vs. Non-Willful
You are willful if you knew you were supposed to report and disclose your foreign income and assets but choose not to. If you decide to enter one of the IRS Offshore Voluntary Disclosure Programs, you will be required to submit to OVDP instead of the Streamlined Program. You may also be willful if you acted with Reckless Disregard or “Willful” Blindness.
You are non-willful if you were unaware of any reporting requirement and/or relied upon a CPA, Enrolled Agent, Accountant, or Tax Preparer who was unaware of any reporting requirement – but recent changes in the law may limit the ability to rely upon an “uninformed CPA.”
If you make false representations or omissions to your CPA, EA, or Accountant — you are presumably willful, despite what inexperienced Attorneys will tell you.
For more on this topic, click here: The IRS OVDP Willfulness Dilemma – Penny Wise & Pound Foolish.
Sean M. Golding, JD, LL.M., EA – Certified Tax Law Specialist
Our Managing Partner, Sean M. Golding, JD, LLM, EA is the only Attorney nationwide who has earned the Certified Tax Law Specialist credential and specializes in IRS Offshore Voluntary Disclosure Matters.
In addition to earning the Certified Tax Law Certification, Sean also holds an LL.M. (Master’s in Tax Law) from the University of Denver and is also an Enrolled Agent (the highest credential awarded by the IRS.)
He is frequently called upon to lecture and write on issues involving IRS Offshore Voluntary Disclosure.
Less than 1% of Tax Attorneys Nationwide
Out of more than 200,000 practicing attorneys in California, less than 400 attorneys have achieved this Certified Tax Law Specialist designation.
The exam is widely regarded as one of (if not) the hardest tax exam given in the United States for practicing Attorneys. It is a designation earned by less than 1% of attorneys.
Willful vs. Non-Willful
What’s the Difference?
There is no bright-line test to determine willfulness.
It is a ‘Totality of the Circumstances‘ test based on whether or not your specific facts and circumstances reflect that you knew, or should have known that you were required to disclose and report your foreign accounts and offshore income — and made the decision not to disclose.
Generally, if a person was unaware that there was a foreign account/foreign income/foreign asset reporting requirement, the client begins in the “non-willful” category, but more analysis is needed.
How to Analyze Willful vs. Non-Willful
- What is your U.S. status?
- How long have you been in the United States for?
- How many years have you filed U.S. tax returns?
- What types of investments do you have overseas?
- Do you utilize a financial planner?
- Do you have a CPA or EA?
- Is your CPA or EA experienced in international tax?
- Did your CPA or EA send you questions in writing asking about Foreign Accounts or Income?
- Did you respond truthful to the CPA or EA?
- Did you complete a schedule B?
- Are you tax compliant in the country in which the accounts are maintained?
- Did you have unreported income as well?
Filed Timely Tax Returns
It is important to note that you cannot file original tax returns with the Streamlined Domestic Offshore Procedures — only amended returns.
Streamlined Non-Willful vs. Lower Standards of Willfulness
Willfulness does not mean intent.
There can be “lower” forms of willfulness, which do not require willful or intent — these additional willful standard are referred to as:
If you have any concern of willful vs. non-willful, It is crucial that you consult with an experienced Streamlined and Offshore Disclosure Lawyer before making any submission.
What is Willful Blindness?
Willful Blindness is a form of “deliberate ignorance.” It is the concept that a person could readily obtain information, which if they did, would inform them that their actions could be criminal. Instead of seeking out the information, they “intentionally” avoid learning the information (aka burying their head in the sand).
What does Willful Blindness Mean?
It means you are “willfully” staying ignorant to a fact that would inform you that your actions are illegal.
Is Willful Blindness a Crime?
Yes. It is a substitute for willfulness. In other words, while you may have not intended to cause a crime, the fact that had you made yourself uninformed to the fact that your actions were illegal — takes you over the willfulness threshold.
What is the Mens Rea of Willful Blindness?
The idea of Mens Rea of Willful Blindness is the idea that the knowledge of the crime is presumed, due to the intentional lack of knowledge on the part of the participant.
What is Deliberate Ignorance?
Deliberate ignorance is essentially a synonym for willful blindness.
Willful Blindness Law School 101 Definition
Outside of the world of FBAR Penalties, the willful blindness standard is nothing new.
Here’s a typical example you learn in your first-year criminal law and procedures class:
David and his friends are hanging out in a seedy part of Tijuana. A Gentlemen approaches them and tells David and his two buddies that he will pay them each $1 million if they drive a car across the border.
None of the individuals ask the man why he is paying them that much to drive a vehicle for a few hours. Clearly, they should have some questions, but the money is just too good.
Therefore, David and his friends avoid asking any questions, believing if they do not ask, then they cannot know what is in the car – and that will absolve them from liability.
When they get pulled over and the police discover 50 pounds of cocaine in the car, the fact that they “didn’t know about the drugs” would not matter — since they were “willfully blind.”
What is Reckless Disregard?
Reckless disregard is a lower standard of willful. It does not require intent, but rather behavior which shows the U.S. person could have known and/or could have filed the FBAR.
How do the Courts Define Reckless Disregard?
Reckless Disregard In offshore disclosure, essentially means: “I Could have known better.”
The court in Bohanecs summarizes reckless disregard as:
“Although Defendants assert that “willfulness” encompasses only intentional violations of known legal duties, and not reckless disregard of statutory duties, no court has adopted that principle in a civil tax matter.
Where willfulness is an element of civil liability, the Supreme Court generally understands the term as covering “not only knowing violations of a standard, but reckless ones as well.” Safeco, 551 U.S. at 57.
– Recklessness” is an objective standard that looks to whether conduct entails “an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Safeco, 551 U.S. at 68 (internal quotation marks and citation omitted).
– Several other courts, citing Safeco, have held that “willfulness” under 31 U.S.C. § 5321 includes reckless disregard of a statutory duty. See United States v Williams, 489 Fed.Appx. 655, 658 (4th Cir. 2012); United States v. Bussell, No. CV15-02034 SJO(VBKx), 2015 WL 9957826 at *5 (C.D. Cal. Dec. 8, 2015); see also United States v. McBride, 908 F.Supp. 2d 1186, 1204, 1209 (D. Utah 2012).”
Hiring a Streamlined Domestic Offshore Procedures Attorney
People Can be Whomever They Want to be Online
And that is the problem.
In recent years, we have had many clients come to us after being horribly represented by inexperienced tax counsel. While we are sure it is a problem in many fields, it seems to run rampant in IRS offshore voluntary disclosure.
These Attorneys ‘manipulate’ their past legal experiences, such as working for the IRS — to make themselves sound more experienced than they are. You later find that they never worked as an attorney for the IRS, or even in the offshore disclosure department.
The IRS has nearly 100,000 employees, and just being one of them does not make an attorney qualified to be an effective and experienced offshore voluntary disclosure tax attorney specialist.
IRS Offshore Disclosure is complex enough for experienced practitioners who focus exclusively in the area of law, never mind relative newcomers who are trying to handle more than just offshore voluntary disclosure as part of their everyday tax practice.
We know, because those cases usually end up on our door-step. Examples of recent cases we had to takeover from less experienced Attorneys can be found by Clicking Here (Case 1) and Clicking Here (Case 2).
How to Find Experienced & Reputable Offshore Disclosure Counsel
Nearly all the experienced Attorneys in this field will have 5 Main Attributes:
- Board Certified Tax Law Specialist
- Master’s of Tax Law (aka LL.M.)
- Dually Licensed as an Enrolled Agent or CPA
- Around 20-Years of Private Practice experience
- Extensive Litigation, Trial and related high-stakes experience.
Understanding How Tax Prep & Legal Fees Work in Offshore Disclosure
Offshore Disclosure — Flat-Fee, Full-Service
All Non-Willful cases should be Flat-Fee, Full-Service for both Tax and Legal.
*If you were willful in not submitting the FBAR, the submission and analysis is much different depending on whether the IRS has contacted you yet, if you are under investigation, etc. — and you should speak with experienced counsel.
Need a Second Opinion about Offshore Disclosure?
Lately, with rumblings of the Streamlined Disclosure Program, aka Streamlined Voluntary Disclosure aka Streamlined Filing Compliance Procedures coming to an end, some younger and inexperienced attorneys are in disarray — and handing out terrible advice to make a quick buck — and putting clients at risk.
If you are unsure about advice you received about the Streamlined Disclosure program, let Golding & Golding offer you a second opinion, with a reduced-fee initial consultation.
Contact Us Today; Let us Help You.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)
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