MMA Fighter Challenges IRS on FBAR Maximum Willful Penalty: FBAR penalties for the willful (including reckless disregard and willful blindness) non-disclosure of foreign bank accounts can be tough. Not one to be counted out, the matter is currently up on appeal
FBAR Willful Penalty Appeal
Royce Gracie is a legend in the sport of MMA and his brand dominates across the globe.
Since his brand has a strong international presence, it would only make sense that he would have Offshore and Foreign accounts.
Round 1 – IRS Wins on Willfulness
During 2007 – 2012 Defendants (Gracie and his ex-wife) had several accounts under their control, in places such as the UAE, Switzerland and Spain. The accounts tipped over $1.4M at one point.
Despite completing tax returns, which included Schedule B – Defendants never identified their ownership or interest in the foreign accounts.
Specifically, they marked “no” to the question as whether they had an interest or ownership in foreign accounts.
In recent years, Royce Gracie and his former wife were hit with $210,000 in willful FBAR penalties for failing to report foreign accounts.
Like many before him, Gracie and his ex-wife argue that they can rely on an old 1986 regulation, that was never updated in accordance with revised FBAR rules.
The argument Is that the old regulation limits the FBAR Penalty to $100,000.
Round 2 – Defendants Acknowledged Willfulness & Seek Penalty Reduction
In their moving papers, Defendants acknowledged that they were willful, but rely on the outdated regulation in support of a penalty reduction – for the penalty to be capped at $100,000.
The IRS Disagrees
The IRS argues agains the cap, and relies on the fact that an outdated regulation does overshadow the updated FBAR rules (which do not limit the FBAR Penalty to $100,000) – even if the regulation had never been updated to match the revised the law.
*We will keep you updated on this issue.
Beat the IRS to the Punch
If you are out of compliance for not properly reporting or disclosing foreign accounts, you have several options available to you through one of the approved IRS offshore disclosure program/tax amnesty programs. With these programs, you may reduce, minimize, or even avoid penalties.
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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. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
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