A New York schoolteacher held more than $1.6 million in a Swiss bank account for years but failed to file the required Form FBAR (Report of Foreign Bank and Financial Accounts) with her tax return. In an audit, the IRS determined that she willfully tried to conceal the account and assessed an $803,000 penalty. She appealed to the Federal Claims Court, claiming she hadn’t always known about the account and that the penalty was excessive because her actions weren’t willful. The court upheld the penalty. She then appealed to the U.S. Court of Appeals for the Federal Circuit. What did the appellate court decide?
The appellate court also upheld the large penalty, finding that she willfully tried to hide the account by opening it under a number instead of her name, directed the bank not to invest in U.S. securities, made a large withdrawal in cash, ignored questions from her accountant about the account, and then moved the funds to another foreign bank one week after she learned that the first bank had agreed to divulge her information to the IRS.
Source: Financial Engines November Newsletter