Recently, the U.S. Fifth Circuit Court of Appeals, in
BernardGubser v. IRS, et al., was asked to
overturn a recent U.S. District Court’s decision. The case
involved the appropriate burden of proof the Internal Revenue
Service (IRS) must meet when the IRS asserts a willful failure to
file penalty for the Report of Foreign Bank and Financial Accounts
(FBAR). At issue is whether the IRS must meet a clear and
convincing evidence standard to establish willfulness or whether
the appropriate measure is the lower preponderance of the evidence
level of proof.
The District Court’s dismissed the initial suit for lack
of standing. A group of taxpayers filed an amici curiae
brief with the Fifth Circuit urging the Court to reverse the
District Court’s decision due to the perceived harm that the
uncertainty of the burden of proof could cause taxpayers who made
an error in failing to file the FBAR, but who believe their
oversight was not willful. This comes at a time when an
unprecedented number of District Court cases will be filed for FBAR
violations due to the inability of many taxpayers to achieve relief
through the IRS Appeals process.
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