A federal district court found that a long-time CPA and tax preparer recklessly failed to file Reports of Foreign Bank and Financial Accounts (“FBARs”) for his four foreign financial accounts. As a practicing CPA, he clearly ought to have known that he was failing to comply with the FBAR requirements with respect to his foreign accounts.
Mr. Kronowitz, a U.S. citizen, was a CPA who had been preparing individual federal income tax returns for clients for almost 60 years. For the tax years 2005-2010, Kronowitz had an interest in, or authority over, four foreign financial accounts with an aggregate balance over $10,000 ("reportable interest"). However, Kronowitz did not file FBARs disclosing these foreign financial accounts. In addition, he never conducted any independent research or consulted with another practitioner about the FBAR filing requirements.
Following an examination of Kronowitz's 2005-2010 tax returns, the IRS determined that Kronowitz failed to file FBARs disclosing his interest in the foreign accounts for tax years at issue and assessed civil FBAR penalties for willful failure to file FBARs.
Kronowitz did not dispute that he had an obligation to file FBARs for tax years 2005-2010, or that he failed to do so. However, Kronowitz argued that his failure wasn't willful or reckless.
The district court found that Kronowitz recklessly failed to file FBARs because, as a CPA and seasoned return preparer, he clearly ought to have known that he was required to file an FBAR, and if he didn't know whether he was required to file an FBAR, he was in a position to find out for certain very easily.
The district court rejected Kronowitz's attempt to establish that his failure to file FBARs was not willful or reckless, but was due to his declining health and memory loss.
The Court Found That Kronowitz Failed To Show That
His Declining Health And Memory Loss Affected
His Behavior And Cognitive Abilities To Such An Extent
That His Failure To File FBARs Was Not Reckless.
Instead, the court found that Kronowitz's failure to file FBARs was reckless because, if he had taken the time to conduct independent research, or consult with a more knowledgeable tax practitioner, he could have, very easily, discovered that he had an obligation to file FBARs for the years at issue.