ON FBAR WILLUL NON-FILING AND WILLFUL BLINDNESS – THE RUMSFELD DISCLAIMER

Former Defense Secretary Rumsfeld:
“I do hope that at some point in my lifetime, and I am now in my 80s, so there are not many years left, the U.S. government will simplify the U.S. tax code so that those citizens who sincerely want to pay what they should, are able to do it right, and know that they have done it right.”

The Tax Wars Blog

In United States v. Williams, (2012), the Fourth Circuit Court of Appeals reversed the District Court’s holding that Williams’ failure to file an FBAR that was due June 30, 2001 was a non-willful failure to file because the government already knew of the account prior to the filing deadline; and, therefore Williams had no deceitful motive for not filing despite answering “No” to the foreign bank account question on Schedule B of Form 1040 for that year.

The Fourth Circuit in reversing stated in part, “It (willfulness) can be inferred from a conscious effort to avoid learning about reporting requirements.” This effort to avoid learning is referred to as, “Willful Blindness.”

The IRS in the Internal Revenue Manual (IRM 4.26.16.4.6.3-6, discusses “Willful Blindness,” and states, in part:

6. Under the concept of “willful blindness”, willfulness may be attributed to a person who has made a conscious effort to avoid…

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