Teacher Gets Schooled by FBAR Penalties

It is no secret that failure to report crucial financial information on your tax returns can result in hefty fines and legal repercussions with the IRS, but some people still try to hide their earnings overseas. A United States schoolteacher was caught with over a million dollars in funds unreported in her United Bank of Switzerland account that resulted in a hefty $803,530 fine. Unsurprisingly, The Court of Federal Claims deemed her willfully and recklessly guilty after she tried to contest her punishment in court.

In 1999, Mindy Norman opened a foreign UBS numbered bank account allowing her to hide her financial information from the IRS. A year later, in 2000, she also waived her rights to invest in U.S. securities to further conceal her account. Later in 2008 when UBS implemented a New Business Model that informed its clients that it would soon be assisting the U.S in finding fraudulent individuals, Norman closed her UBS account and moved her money to Wegelein and Co., a now-defunct Swiss bank.

In 2009, The Offshore Voluntary Disclosure Program (OVDP) was enacted to urge the owners of offshore accounts to disclose their banking information at the promise of more lenient FBAR fines. If properly communicated and approved by the IRS, the standard fine of 50% of the unreported account balance could be reduced to 20%. Norman and her accountant opted for an alternative form of reporting called “quiet disclosure” for 2009 which included amended FBARS and tax returns for 2003-2008. Taxpayers including Norman are informed that filing this way could be risky as it could result in examination/prosecution of statements for applicable years.

Seeing as she taught both government and economics with a total of at least seven subjects, the court concluded her claims to have never read documents related to her accounts invalid. Additionally, her consistently changing testimony further shot down her arguments attempting to make her appear to have no knowledge of tax implications. Her case was dismissed, and the fine was upheld losing her half her earnings, a risky lesson to those attempting to evade the IRS.

Talley’s experienced team of tax professionals provide comprehensive tax compliance and consulting services so you can preserve, enhance and pass on to the next generation the assets and wealth that you’ve worked hard to build. We welcome the opportunity to discuss with you the current opportunities available to you. For more information, contact us today.

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