A federal jury in South Bend, Indiana convicted James Simon of filing false tax returns and of failing to file FBARs. As regular readers of this blog know, the willful failure to file an FBAR is a felony. Following his conviction, Simon appealed. In a lengthy opinion, the US. Seventh Circuit Court of Appeals upheld Simon’s conviction despite his claims that he relied on published IRS instructions.
James Simon is no ordinary tax cheat. According to the court, he is a Certified Public Accountant, a professor of accounting and an “entrepreneur whose business dealings require a flowchart to unravel.”
FBAR Filing Requirement
The Bank Secrecy Act of 1970 requires taxpayers to report foreign financial assets (bank accounts) annually. Offshore bank and brokerage accounts are reported on a Report of Foreign Bank and Financial Accounts – FBAR for short. FBARs must be filed by June 30th of each year.
Prosecutors say that Simon had signature authority over foreign accounts in 2005, 2006 and 2007. Although admitting he failed to timely file his FBARs, Simon says the government’s 2009 amnesty program granted him a “retroactive extension.” He claims the “Frequently Asked Questions” section of the IRS’ 2009 Offshore Voluntary Disclosure Program (amnesty) website extended the filing date to June 30th, 2011.
FBAR Filing Deadlines vs IRS Amnesty Guidance
FAQ 9 on the IRS’ website did indeed say that if all taxable income was reported, a taxpayer could have file back FBARs without the fear of penalties.
A 3 judge appellate panel noted the case was one of first impression involving written guidance from the IRS that appears to fly in the face of Justice Department guidelines. And James Simon was caught in the middle.
Unfortunately for Simon, the court sidestepped the issue by noting the IRS guidance only referred to civil penalties. Said the court, “We need not address the thorny issue of whether an IRS Notice can retroactively wipe out criminal liability for an already completed crime because, as we discuss below, Simon is not one of the persons to whom the IRS granted retroactive relief. That is, even if we assume solely for the purpose of this appeal that the IRS has the power to retroactively relieve criminal liability by publishing FAQs or Notices, we agree with the government that Simon was not in the class of persons to whom the relief was granted.”
The court also dodged the issue by noting that Simon was already under audit and thus not eligible for the amnesty program.
What’s our opinion? If the IRS and Justice Department want people to come forward under the amnesty program, the government needs to live up to the spirit of the law. Previously, we reported how some folks with accounts at Bank of Leumi were booted from the amnesty program after they had come forward and after they were accepted into the program.
Technically, the IRS was in that Bank Leumi case and the Court is correct in this case. That doesn’t inspire confidence in the program, however. Should we prosecuting people with unreported accounts if they reported their offshore income and paid the tax? Should we exclude people from amnesty after they are accepted simply because one unit of the IRS doesn’t communicate with the other? The obvious answer to both questions is “no”.
In well over 99% of cases the IRS lives up to both the letter and spirit of the law. Unfortunately that law – the Bank Secrecy Act – provides for huge criminal and civil penalties for folks who do not timely file FBARs. If you owe more than 1 year of back FBARs, contact an experienced tax attorney immediately. The risks are simply too high to ignore.
If you need more information about FBAR reporting issues, we offer no cost consultations. All inquiries are protected by the attorney – client privilege too. For more information, contact attorney Bethany Kroes at 414-223-0464 or by email at You may also contact the author at (414) 704-6731 or by email at
Post by Brian Mahany, Esq.