Willful or Just a Mistake? What an Ongoing FBAR Case Teaches Expats About Protecting Themselves

There's an FBAR case working its way through the courts right now that's worth paying attention to - not because the facts are exotic, but because they're not. It involves a taxpayer who did most of the right things: he moved to the US, he hired a firm that specializes in international tax, he handed over his financial records. And the IRS still assessed penalties against him as a willful violator, which is the difference between owing tens of thousands of dollars and owing hundreds of thousands.

What makes the case useful is that it shows exactly where the government draws the line between an innocent reporting mistake and reckless behavior. And once you see where that line sits, the steps you can take to stay on the right side of it become clear - and they're not complicated.

The Facts of the Case

The taxpayer is a Canadian businessman with a substantial track record - multiple companies, significant wealth, decades of international business. In Canada, he held three personal bank accounts, along with accounts belonging to Canadian companies he majority-owned and accounts held by trusts he was treated as owning.

He then moved to the US and became a permanent resident, which made him a US taxpayer with a full slate of foreign account reporting obligations. To handle it, he hired a US accounting firm that specializes in international tax work. That's the prudent move, and it's what we'd tell anyone in his position to do.

In 2015, two of his personal accounts were left off his FBAR. In 2016, the trust and company accounts were missed, along with one personal account. The IRS audited both years, concluded the failures were willful, and assessed penalties accordingly.

Why Willfulness Changes Everything

The FBAR - Form 114 - captures foreign financial accounts, and the reporting net is wider than most people expect. It covers your own foreign bank accounts once the aggregate crosses $10,000 at any point in the year. It covers accounts held by a foreign company you own more than 50% of, because that gives you a financial interest in them. It covers accounts held by a trust where you're treated as the owner. And it covers accounts you don't own at all but have signature authority over - if you're the CFO or treasurer of a foreign entity and can move money in and out of its accounts, that's reportable, even with zero equity.

Miss something and get caught, and the penalty depends entirely on which side of the willfulness line you land on.

Non-willful violations carry a penalty of roughly $10,000 per year, adjusted for inflation. The Supreme Court settled an important piece of this in United States v. Bittner in 2023, confirming the penalty applies per annual report rather than per unreported account. Before that decision, the government's position was that someone with eight missed accounts across one year faced eight separate penalties - a reading that produced some genuinely absurd numbers.

Willful violations are a different universe. The penalty is the greater of roughly $100,000, inflation-adjusted, or 50% of the account balance at the time of the violation - and it applies per year. For the taxpayer in this case, that's the difference between a $20,000 maximum exposure across both years and penalties running into the hundreds of thousands.

Willful Doesn't Only Mean Hiding Money

This is the part that catches people off guard. When most people hear "willful," they picture deliberate concealment - someone moving money offshore specifically to keep it away from the IRS. That behavior is certainly willful, and it's what drives the high-profile cases. But willfulness in the FBAR context also includes recklessness. If you didn't take a reasonable approach to meeting your filing obligations, the government can treat that as willful without ever proving you intended to hide anything. That's the theory the IRS is running here: not that this taxpayer was concealing accounts, but that he should have known better and didn't act like it.

Sophistication is part of that argument. This is a wealthy businessman with a long international track record and real financial literacy. Wealth alone doesn't make someone willful - that's not how the analysis works, and no single factor decides these cases. But it's a factor in the basket, and the contrast matters. Take a client who has never held a dollar outside the US, moves to Costa Rica, opens a local account that tops out at $11,000, doesn't hire an international tax specialist, and forgets to file. That situation looks meaningfully different from someone running a dozen international businesses with accounts across multiple countries. The second person is presumed to understand how financial accounts and tax reporting work in a way the first one plausibly doesn't.

The second piece of the government's argument is about how he actually worked with his accountants - specifically, that he failed to communicate what they needed and failed to review what they filed.

Both Sides Have a Real Argument

The taxpayer's position is straightforward, and parts of it are genuinely strong. He hired specialists. He gave them his detailed financial records. He wasn't hiding anything, which cuts against the concealment theory of willfulness.

His most interesting argument concerns the trust and company accounts. There's an email trail between him and his accountants showing back-and-forth confusion about whether those accounts were reportable. His point: if the specialists he hired weren't certain how the rules applied, how could he - a non-tax professional - be expected to get it right? The rules genuinely aren't clear in places, and that's a fair thing to say out loud.

The IRS response is where it gets uncomfortable. Yes, some of these accounts involved legitimately murky rules. But the three personal bank accounts weren't murky at all. Nothing about a personal foreign bank account is a close call, and those simply weren't filed. That's a different category of failure than the trust question.

And the email record cuts both ways. His accountants sent him organizers requesting foreign account information. He didn't complete the FBAR sections. Without that information, the accounts didn't make it onto the form - and he didn't review the return before it was filed to notice they were missing.

So you end up with a case that has clearly non-willful elements and clearly reckless-looking ones sitting side by side. Where it lands is still unresolved. But you can see it going either direction, and that's precisely why the practical lesson matters more than the outcome.

Three Steps That Protect You

The first is to hire a professional who actually does this work. This is your foundational argument as a reasonable person: the rules are genuinely complex, so you engaged someone who specializes in them rather than guessing. Talk to a few firms. Find someone with real experience in your situation and a relationship you can work with over time.

The second is to give them everything they ask for - and then some. If your accountant sends you a questionnaire asking about foreign accounts, fill it out completely. If you're unsure whether something belongs on it, include it and ask. Over-disclosing to your own advisor costs you nothing and protects you enormously.

Here's why that matters in practice. A client of ours holds an account outside the US containing gold bars, which raised a real question: is that a foreign bank account requiring FBAR reporting, or a foreign asset that falls outside it? We went back and forth and ultimately concluded that on his specific facts, it wasn't reportable. That conclusion is fact-dependent and shouldn't be read as a general rule. But the important part is the paper trail. If the IRS ever disagrees, there's clear documentation that he hired a specialist, disclosed the asset, and followed professional advice. It would be very difficult to call that reckless. Now run the alternative: he decides on his own that gold in a foreign vault isn't reportable, never mentions it, leaves it off the questionnaire - and turns out to be wrong. That's exactly the ammunition the government used in the Robbins case.

The third step is to review your return before it goes out. Take the information you provided, compare it against what actually appears on the FBAR and the return, and ask questions about anything that doesn't match. For our clients, we record a short video walking through the filing so there's a plain-language explanation of what they're looking at. If you open your FBAR and have no idea what you're seeing, that's not a reason to sign it anyway - call your accountant and ask them to walk you through it. You're the one signing, and the responsibility for accurate filing ultimately sits with you.