Fox Rothschild LLP attorneys Patrick J. Egan and Beth L. Weisser won a significant victory in a trial against the IRS when a federal judge rejected the government’s demand for more than $1 million in penalties and also awarded a refund of a payment previously made by Fox client Arthur Bedrosian.
The verdict handed down by U.S. District Judge Michael M. Baylson is the only case to date in which the IRS has not prevailed in its attempt to collect a penalty for an alleged willful violation of the statute requiring citizens to file a Report of Foreign Bank and Financial Accounts, commonly known as a FBAR.
In 2013, the IRS concluded that Bedrosian’s failure to report one of two foreign bank accounts on a 2007 FBAR was willful. Bedrosian vehemently disputed this finding, having filed an FBAR for the year in question that acknowledged a foreign account, identified the bank, and listed one of the two account numbers.
The Fox team filed suit to demand a refund of a partial payment made by Bedrosian, arguing that Bedrosian’s actions in 2007 did not amount to a willful violation and that the penalty should be rescinded. The IRS counterclaimed to demand more than $1 million in penalties and interest. Throughout the case, the Fox lawyers argued that Bedrosian’s actions were entirely inconsistent with a willful violation of the reporting requirements.
Following a bench trial, Judge Baylson ruled in favor of Bedrosian on both of the major issues in the case. The judge declared that the government failed to prove that Bedrosian’s conduct was willful and that Bedrosian was entitled to a refund of $9,757 that had been illegally exacted by the IRS.