Source: https://www.goldinglawyers.com/fbar-willfulness-lower-threshold-2018-irs-ends-ovdp-on-928/
Timestamp: 2019-04-24 04:02:24+00:00

Document:
5 Criminal-Like Penalty Means Higher Standard of Proof, Right?
7 Shouldn’t It At Least Be Clear and Convincing Evidence?
11 What This FBAR Decision Means To You?
12 If I was Only Willful for a Few Years, Do I Need OVDP?
14 What Happened to OVDP?
16 Ready to Hire an OVDP Attorney?
The IRS continues to tighten the noose around anybody caught willfully failing to report or disclose foreign accounts or income.
This is very important for any individual who may have willfully (even recklessly aka Reckless Disregard) failed to report foreign accounts, assets, income, or investments.
This is because the IRS OVDP “Program” ends on September 28, 2018.
Moreover, the IRS also has recently enacted several International Tax Enforcement Groups dedicated to investigating and discovering undisclosed foreign money.
Finally, in reviewing the recent Taxpayer Advocate’s summary about foreign informational return penalties, it is clear that the IRS has no intention of slowing down their international tax enforcement activities – especially in situations in which a person was willful, as the number of people penalized for foreign accounts and business interests continues to grow.
The Standard of Proof is “Preponderance of The Evidence” which is the LOWEST Legal Standard permitted under law.
The balance of the penalty as of February 20, 2015 was $1,061,181.09. Jury selection is currently scheduled for June 6, 2018.
Defendants cite no case in which a court has held to the contrary. Rather, despite the clear distinction the Supreme Court has drawn between willfulness in the civil and criminal contexts, the cases Defendants principally rely on are criminal cases.
United States v. Sturman, 951 F.2d 1466, 1476 (6th Cir. 1991) (applying the standard for willfulness articulated in Cheek v. United States, 498 U.S. 192 (1991), “voluntary, intentional violation of a known legal duty,” to criminal violations of 31 U.S.C. § 5314).
Criminal-Like Penalty Means Higher Standard of Proof, Right?
Preponderance of the Evidence is the lowest standard of proof, and typically is considered just more than 50%. This standard of proof is significantly less than the Clear and Convincing Evidence (~75%) or Beyond a Reasonable Doubt (~95%) standards.
Herman & MacLean v. Huddleston, 459 U.S. 375, 387 (1983). See also United States v. Regan, 232 U.S. 37,46-47 (1914) (holding that a civil action by the government to collect a monetary penalty “is to be conducted and determined according to the same rules and with the same incidents as are other civil actions”).
Shouldn’t It At Least Be Clear and Convincing Evidence?
Nope. As further provided by the court: The Supreme Court noted in Huddleston that where Congress has not specified a standard of proof, the Court has applied the clear and convincing evidence standard in civil matters only “where particularly important individual interests or rights are at stake,” such as in cases involving termination of parental rights, involuntary commitment, and deportation. 459 U.S. at 389.
Observing that “imposition of even severe civil sanctions that do not implicate such interests has been permitted after proof by a preponderance of the evidence,” the Court held that the preponderance of the evidence standard applied to an action involving an alleged fraud in the sale or purchase of securities. Id. at 389-90. In doing so, the Court described the preponderance of the evidence standard as the one “generally applicable in civil actions.” Id.
Using these principles, every court that has answered the question before me has held that the preponderance of the evidence standard governs suits by the government to recover civil FBAR penalties.
The clear and convincing evidence standard is the same burden the Service must meet with respect to civil tax fraud cases where the Service also has to show the intent of the taxypayer at the time of the violation.
Courts have traditionally applied the clear and convincing standard with respect to fraud cases in general, not just to tax fraud cases, because just as it is difficult to show intent, it is also difficult to show a lack of intent. The higher standard of clear and convincing evidence offers some protection for an individual who may be wrongly accused of fraud.
The court provided: That Defendants may be liable for a substantially larger sum of money for a willful FBAR violation than if the Government had pursued a civil tax fraud action does not warrant a higher standard of proof.
As Huddleston and Grogan indicate, it is the type of interest or right involved that triggers a higher standard of proof, not the amount in controversy; courts have not viewed cases involving “even severe civil sanctions” to implicate “important individual interests or rights” to warrant a higher standard of proof.
Fishman Transducers, Inc. v. Paul, 684 F.3d 187, 193 (1st Cir. 2012) (holding that preponderance of the evidence standard applies to proof of willfulness for the purpose of obtaining more than single damages or profit disgorgement in trademark action).
Moreover, the Chief Counsel’s statement that “[c]ourts have traditionally applied the clear and convincing standard with respect to fraud cases in general” (ECF No. 106-1 at 3) does not account for differences in how courts treat fraud under federal statutes and the common law, respectively.
The court noted that Defendants do not point to case law holding that the clear and convincing evidence standard applies to civil FBAR penalty cases.
What This FBAR Decision Means To You?
It means most circuit courts are coming to the conclusion that Willful FBAR penalties should be issued when the conduct is merely Reckless, and the Government only has to show Preponderance of the Evidence…despite the IRS’ own Chief Counsel acknowledging that Clear and Convincing Evidence should presumably be the standard.
The IRS Offshore Voluntary Disclosure Program is coming to an end, and set to terminate on September 28, 2018. Technically, that means you must have submitted your “Phase 1” documents before the September date (See FAQ 24).
The IRS is taking the position that OVDP is just not as popular as it used to be. And that is probably true. Many individuals think they can enter into the streamlined program even if they are willful because the chance of getting caught is relatively low (which is also true).
In reality, the main behind the IRS terminating the OVDP Program is because there is a good chance the IRS already has your information, thanks to the more than 300,000 Foreign Financial Institutions already reporting your information to the IRS in accordance with FATCA.
So, while the IRS is doing away with the OVDP, the chance of getting caught and penalized by the IRS has increased significantly.
Ready to Hire an OVDP Attorney?
Once you are ready to hire an OVDP Attorney, it is very important to separate fact from fiction. Here is a recent article involving the different pitfalls, scams and sales pitches you need to watch out for: Attorney Fees for OVDP – Separating Fact From Fiction.

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