One of the most common questions for offshore disclosure tax attorneys is what factors determine willfulness and non-willfulness in regards to the non-reporting of these accounts. This can be a highly subjective area of the law. If you need help determining willfulness for offshore disclosures in Washington DC, reach out to our office.

What is Non-Willful Conduct?

Non-willful conduct is usually due to negligence, inadvertence, a mistake, or conduct that is a result of a good-faith misunderstanding of the requirements of law. That is the definition on the IRS website – however, the Internal Revenue Code itself does not define non-willfulness. The determination of non-willfulness is critical for streamlined offshore procedure as well as all other programs or procedures.

The Result of Non-Willfulness

For taxpayers who are deemed non-willful, they get the benefit of significantly reduced penalties. For domestic streamlined disclosure, there is a 5% offshore penalty, which is based upon the highest aggregate account balance in one of the six years of the delinquent FBARs that are filed as part of streamline. Those penalties are much lower than the regular international penalties. For those who utilize the streamlined foreign procedure, there is no 5% penalty.

To prove non-willfulness, a person will have to write a detailed narrative explaining why their non-compliance was accidental or a good-faith misinterpretation. This narrative is one of the most important pieces of analysis that goes into determining whether that taxpayer was willful or non-willful.

Willful Blindness

Willful blindness refers to recklessness, which is when an individual acts in a way that shields them from confirming if they have committed wrongdoing – these actions can seem so deliberate that it nearly looks as if the individual was aiming for plausible deniability. The IRS can show willful blindness in a variety of ways, including if the taxpayer made a conscious effort to avoid learning about the reporting requirements. Willful blindness qualifies as willful conduct.

Can a Non-Willful Person Use the Traditional Voluntary Disclosure Instead?

While a non-willful person is technically allowed to join the traditionary voluntary disclosure program, it is not in their best interest because it comes with a 75% civil fraud penalty, in addition to all of the other international penalties. Under this program, it would take a lot more accounting work and tax preparation, and would require six years of amended tax returns compared to just three under the streamlined procedure. Voluntary disclosure also requires a lot of examination, which can be a lengthy and complicated process to go through.

Responsibility of Employers on Reporting Obligations

A large part of determining willfulness for offshore disclosures in DC is how much of the taxpayer’s obligation they were made aware of. Employers are not generally responsible for informing employees about applicable U.S. tax law. The laws are complicated as it is, and it becomes even more complicated when there are other countries and languages involved. As a result, if the person works overseas, there would be no duty for their foreign employer to advise them on U.S. tax law.

Even U.S. employers provide only a minimal amount of advising on tax matters, such as the W-4 form, which they sign when they first join the company and allows the employer to withhold taxes. The employer also files forms like W-2s or 1099 with the IRS. Beyond these basic applications, they have no duty to discuss any offshore reporting. Depending on the situation, the actions or inactions of an employer could potentially play a part in the narrative regarding non-willfulness.

Work with an Attorney to Determine Willfulness for Offshore Disclosures in Washington DC

Call us today for a consultation if you have unreported overseas assets that you are trying to bring to the attention of the IRS. The determination of willfulness for offshore disclosures in Washington DC can dictate which programs you are allowed to use to come into compliance and which penalties might be applied.

Attorney John Pontius

Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC,  Rockville, MD, Bethesda, MD, Fairfax, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.

Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.

Client Reviews
John helped us with a DC tax audit and succeeded in getting us a "no change" final decision. The issues were related to two flow-through entities and the use of carry-forward operating losses -- something that the DC auditors struggled to understand and with which they did not have any...
Paul A
Mr. Pontius is extremely professional and was able to take care of my tax returns which includes international bank accounts quickly and at a very reasonable price. Would definitely recommend.
I received a fee this past November from the IRS for over $800 because of an error I made on my 2016 taxes. I called my cousin, John Pontius, and he immediately knew what steps needed to be taken. Thanks to him, the fee was cleared. A 10 minute conversation...
As an American citizen living in the Middle East my local banker informed me that I needed to file FBARs and report my worldwide income to the IRS. Through the recommendation of another attorney at an international law firm, I was introduced to John Pontius. Mr. Pontius efficiently and effectively...
Kareem S
John handled a difficult IRS lien for my client. He was excellent in getting the lien released so we could close on the property. I would highly recommend John .
Bobbie M
We were seeking tax advice with managing two properties, LLC, as well as some future financial planning. John responded to my call in a timely manner and was happy to answer our questions while referring us to specialists who can manage our accounts on a more regular basis.
Janelle M
View All