Willful or Non-Willful, A Label With A Big Difference


          When Tax Law is applied, there is a difference between Willful and Non-Willful conduct. To be considered Willful, a Taxpayer must choose to break the law or avoid a legal duty. This intent can lead to Criminal prosecutions and large Civil judgements. Some may try to claim that they had no prior knowledge that what they were involved in was illegal, and it was all just a simple mistake. However, the IRS often looks at a Taxpayer’s actions to determine intent.
          There was a Taxpayer who opened 2 Swiss bank accounts in the early 1970’s and never reported them on his Tax Return. He first mentioned them to his accountant in this 1990’s. The accountant said that they should have been reported since they were opened, but not to do anything now. It would all be settled when the Taxpayer died. About 20 years later that accountant died. The new accountant prepared documents to report the smaller of the 2 Swiss accounts. In time, an amended Tax Return needed to be filed to report both accounts. Upon seeing how large the difference in income was, the IRS penalized the Taxpayer, but was going to treat him as Non-Willful. Before that could be finalized, his case was transferred to another agent, who classified him as Willful.
          Here is the distinction between these 2 labels. In a Civil proceeding, a Non-Willful violation can be up to $10,000 per account per year for up to 6 years. That is painful, but not as much as a Willful violation. A penalty in that situation can be up to $100,000 or 50% of what is in the account. A Criminal case can lead to a $500,000 fine and/or 10 years in prison. These are situations that can be avoided by seeking the help of a qualified Tax Professional. Click here to read about this example: The Case in Question

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