Lately, I keep hearing people say that ignorance of the law is no excuse and it does not constitute “reasonable cause” in the eyes of the IRS. Both notions are false with regard to the Foreign Bank Account Report (FBAR).
When rules and regulations have their basis in natural law then ignorance is no excuse. Because everyone who is morally responsible should know that it is wrong–because natural law is patently obvious to everyone to the point that a law is hardly necessary to point out what is right and wrong: murder, theft, kidnapping, and fraud are such crimes against another person that no one needs a law to know that they are serious crimes. Natural law teaches us that if we do damage to another person or to a community that we become guilty.
But what about reporting our bank accounts according to the Bank Secrecy Act (FBAR)? In this case, ignorance is indeed an excuse. But first we should understand that the ignorance of the law cuts both ways: the IRS should also know the law, and the ignorance of the law is no excuse for them not following the law. Natural law teaches us that people shouldn’t have to report their wealth to government. Natural law protects private property rights. In history, government consists of a powerful entity which uses its force either to protect or to steal from the people. Since the people want protection but they don’t want to be impoverished, they set limits on the king whom they set over themselves to govern and protect. The natural law of private property rights is thus epitomized in the saying, “A man’s house is his castle.” A person is king over his own realm, and the Crown has no right to enter, to inventory or to seize what is in the possession of the citizen. This is natural law, which is expressed in ancient law codes, including the Ten Commandments, “Thou shalt not steal”. It is also enshrined in the US constitution in the Fourth Amendment. So I contend that FBAR, FATCA, and 8938 are violations of natural law, because it requires that we inform the king of the contents our castle without the king obtaining a specific warrant based upon a reasonable suspicion of an actual crime. The requirement of providing the king with an inventory is tantamount to saying, “If and when the king hath need, he may confiscate it for the good of the realm.” Therefore, the people require that the king recognize their own right to have kingship over their own possessions. So when the law itself violates the moral principles of natural law deeply entrenched in the English-speaking peoples’ tradition of rights, it is ridiculously absurd for the government to scare-monger by telling us there is no excuse for us not knowing the law. Thus, the FBAR law itself violates natural law and is a crime against a free people. The people may turn the question back to the IRS: Why is it that the IRS is ignorant of the law? What is their excuse?
Now when it comes to FBAR, the excuse of ignorance of the law is actually enshrined into the law itself. This is what is meant by “wilful” or “non-wilful” violation. Once the law itself recognizes that the will has to be involved then it tacitly acknowledges that ignorance is indeed an excuse, as Hale E. Sheppard summarizes: “‘Ignorance of the law’ may indeed be an excuse where willfulness is a necessary element, …” Ignorance thus excludes the person from the most severe consequences of FBAR. Suppose a person has $1,000,000 in a foreign bank account for one year. The wilful FBAR penality could be as high as $500,000. But the government would have to prove several things: (1) that you had a foreign bank account with $1,000,000; (2) that you knew about the FBAR law; and (3) that you deliberately chose to ignore the law; and (4) that there is no other reasonable cause, such as, that you were in a coma or you were stranded on a desert island. Ignorance is an excellent defense, when a law has a wilful and a non-wilful penalty structure.
This very fact favors go-forward or quiet-disclosure compliance, if the person feels they must comply (I do not). The IRS fake-amnesty program called Offshore Voluntary Disclosure Initiatives (OVDI) is a very bad choice. In the OVDI, the taxpayer tacitly admits that the failure to file was wilful and therefore fesses up and accepts the 27.5% fine. This is a very bad deal for foreign residents with innocent accounts; if you were ignorant of the FBAR law and that is the reason you weren’t in compliance, then good for you. That is an excellent excuse written into the very fabric of the reporting requirement. Let’s stop letting the IRS tell us that “ignorance of the law is no excuse”. That is once again, the IRS acting in bad faith towards taxpayers.
We may add one more principle of a law, mens rea, which shows that ignorance is indeed an excuse in the case of a reporting requirement. There is absolutely no way that any person living in a foreign jurisdiction could know via natural law that they had committed a crime by not reporting their innocent bank accounts. I feel sorry for Bubblebustin who feels guilty for having opened 51 different accounts. There is nothing in natural law that would indicate that she has done anything wrong by having so many accounts. So mens rea means for many laws that the person must have committed the crime with intention:
Many serious crimes require the proof of mens rea before a person can be convicted.
In other words, the prosecution must prove not only that the accused committed the offence (actus reus) but that he (or she) did it knowing that it was prohibited; that their act (or omission) was done with an intent to commit the crime.
A maxim rich in tradition and well known to law students is actus non facit reum, nisi mens sit rea or “a person cannot be convicted and punished in a proceeding of a criminal nature unless it can be shown that he had a guilty mind”.
Thus, the principle of mens rea would require that a person must knowingly act in violation of a law, and this would apply to FBAR because the law itself makes a distinction between wilful and non-wilful violation. But I would argue that none of us living in foreign jurisdiction could possibly have mens rea because our violation is just simply one of ignorance of a reporting requirement: we did not open bank accounts to hide money and income from the United States, but to live our lives: how can the United States criminalize an act which is normal human behaviour in a Western democracy? Suppose they made it illegal to shop on Monday? Or to accept payment for work? That would be absurd. The FBAR law is indeed an absurd violation of natural law, for it is normal and right for us to have accounts in banks. I don’t care if Bubblebustin had 51,000 accounts–she committed no crime under natural law.
Rather, it is the United States government which is committing a crime against Bubblebustin and her husband. The question is whether the United States government commits this crime with mens rea: I would argue that they do. They are, according to Steven J. Mopsick, the best and brightest lawyers, from the most prestigious institutions. How could they not know the law? Their ignorance is thus no excuse.
NB: Jack Townsend discusses mens rea and FBAR in a couple of comments at his blog.
Nice reflection. I have often thought along similar lines but you summed it up.
“actus non facit reum, nisi mens sit rea” does this mean that even if one is not ignorant of the law but believes it to be unconstitutional, a violation of local sovereignty and against natural legal principles— one has no guilty concience and is innocent? I think so in some cases. FBAR FATCA, CUT, and double taxation are some of the manifest ones. Just look at what most Europeans would say when you speak about these laws: “you are crazy, you must pay your taxes here where you live… go get your head checked”.
I am glad I am relinquishing my US citizenship soon. I thought, they were kidding when I first heard about FBAR and even dual-citizens must file, even if they never visited the USA in decades. My feeling was, only communist countries like North Korea or countries like Saudi Arabia ruled by dictators can have this kind of laws. (I left USA many years ago, I don’t know that the US is now ruled by dictator Obama).
Also how many of cigar lovers know that it is illegal for US citizens to buy or smoke Cuban cigars, even in the countries we have been living for decades? I think, we can buy Cuban fruits. So what is different? I think this is state department law. The FBAR is not an IRS law but Treasury department law.
What scares most is, probably we don’t know dozens of such obscure laws and breaking them. I don’t know what drugs are illegal to buy from local drug store (ATF laws). I don’t know what food items are illegal to buy from local grocery story (may violate FDA laws). Those items may be perfectly legal in our countries but break US laws.
How a human being can possible imagine the existence of such laws? Human beings are driven by instincts, intuition and moral campus. When a law is counter intuitive and it is impossible to imagine in normal course of life, Ignorance is not only justifiable excuse but also reasonable cause.
On the other hand, IRS is willfully violating not only US constitution but also human rights but of innocent dual-citizens, who have been living abroad for decades. They have well informed (e.g. TAD issued by Tax Payer Advocate Nina Olson) and dealing with hundreds of OVDI cases of dual-citizens. The stated goal of IRS is to increase compliance, but objective they are perusing is collecting penalties knowing that it will hurt their goal of increase compliance.
Jeff wrote:
I pretty much agree with you, but my hunch would be that such an argument wouldn’t work in court unless you could convince the court that the law was indeed unconstitutional on other grounds (e.g., 4th, 5th, 8th amendments). Thus, like many of my posts, I am trying to deal with deep principles of law as opposed to whether they would be successful in court. It is important that I do this, because we must remind elected and unelected officials that unjust laws are not lawful.
In principle, then, I agree with you because a person who wishes to avoid waiving their rights would not have mens rea. For example, my relinquishment of US citizenship and my refusal to file FBAR is not a sign of mens rea. Mens rea must also take into account whether the law itself is just. If the law is not just, then a the person who violates it cannot have mens rea.
What religious connotations are there here? Or do we want to separate those from the current discussion?
Reblogged this on Stop Unconstitutional Double Taxation and commented:
Ignorance of a law that contradicts natual law is an excuse
@Jeff “What religious connotations are there here? Or do we want to separate those from the current discussion?”
The concept of natural law is often based upon the theistic world view. So, for example, the founding fathers of the United States made appeal to natural rights given by God: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
I have read so many articles on this subject that makes me sicker everytime I walk away from the computer. I have read a lot of intelligent comments on this subject but what is lacking, at least in my case, of what I would like to get out of reading these blogs is actual cases of FBAR violations by minnows such as us on their personal outcomes of fbar violaitons and and failing to report minimus dividends on 1040s from those accounts. You never find this informaiton anywhere which is the information I am looking for, at least. Thanks to all.
@ Pina1 I think the reason that you see no cases of how minnows are treated outside the OVDI is that there have been no fines against minnows yet. I believe the IRS manual instructs agents to be extremely cautious about assigning fines to minnows. Please look at this post: http://isaacbrocksociety.com/2012/02/22/irs-is-bluffing-bad-faith-negotiations-in-the-ovdi/
Thanks. After submitting the 5 late FBARs from 2006 until 2010 will the IRS most surely contact me and investigate or audit me to leverage a penalty? It’s obviously clear that there were 5 FBAR violations and the schedule did not even reflect that I had an account nor declare the interest gained, even though it was only about 50.00 per year.
With only $50 interest, that means that the government had only a trivial sum owing to them. Why would they risk a Supreme Court action by assigning a fine to you? It would be all risk, no reward for them.
Were the funds in your account gained through illegal means, say human trafficking, selling drugs, or terrorism? Were the funds laundered? If not, then the IRS really has no business at all charging a fine against your account under FBAR.
That’s what most people have said, and I hope that is true.
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*Found this while searching for FBAR articles.
not sure if the combination of admitted tax evaision and failure to file caused the appeal court to rule in favour of the IRS. If not knowing about FBARs was sufficient.
http://www.forbes.com/sites/robertwood/2012/07/22/fbar-penalties-just-got-even-worse/
@ Patricia: that is a very relevant article to this post, yes of course. Williams was an admitted tax evader. The lower court made an important decision that many people were relying on: checking “no” was no sign of wilfulness. Now that decision has been struck down by the 4th circus court.
FBAR is not the reason I expatriated. I made the decision to lose my citizenship before I learned about FBAR. But it seems the more you know, the less desirable US citizenship becomes. I will not give my bank account information to the IRS; it is against basic decency and liberty. I will not inventory my assets for the IRS in this manner. That is an affront. Therefore, it is a good thing that I had already started the process of losing my citizenship in February, 2010, since it took a year for me to receive my Canadian citizenship.
Now the biggest criminals are the folks running the US government. It is a ponzi scheme many multitudes larger than what Bernie Madoff was running. Madoff had to go to jail because the Federal government hates competition.
*Egads, I think there may be a satellite dish pointed at my house now. I just called the FBAR hotline in Detroit. They wanted my name and phone number, I said “I must have dialed the wrong number”.
I really didn’t feel like talking to Satan and giving him my phone number.
*@Banany, instinct warns me not to contact them unless absolutely necessary…chilling stuff. :/
@banany, same here and I asked why they needed that information if I was simply asking for some information about the FBAR, what was included, and how to fill out the forms. Got no answer about why my name was relevant. I think they might have call display or something similar anyway, because one remarked that I was calling from Canada in an earlier interaction. In any case, the answers they gave me were just read verbatim off the website, and no further illumination was forthcoming – though I pointed out that I too was reading the same webpage, and was still confused on some points. The answer given that 2nd time contradicted the previous answer they’d given at that ‘helpline’. The staff was testy and impatient from the first words – as if I was asking something really obvious – but they seemed unsure when attempting anything more than reading verbatim off the webpages. I also tried the e-mail ‘ask your question’, but again, got just the same direction to the website – same page I was asking about, and no further explanation.
Also had numerous time-consuming AND of course, NOT TOLLFREE attempts before that – and the long distance, not tollfree ‘international taxpayers’ number – which includes those in Canada – and which was located ‘offshore’ (Puerto Rico?). After long waits on hold, got automated voice error message, then disconnected every time. Gave up after 3-4 tries. So much for the ‘services’ we’re supposedly entitled to from the US and IRS – obviously enforcement and revenue generation through penalties – that’s their real priority. Not willing to give us tollfree access, or in-person help in embassies/consulates in Canada (site says cancelled due to budget cuts), or low income assistance or any of the other IRS services available in the US, yet there are >1 million of us here that they say must comply. What hypocritical BS.
@ Badger
Sounds like you had as much luck as me. This happened before they started the “name and phone number” routine but here’s an experience I wrote about awhile ago at Brock …
With the IRS I go round and round in telehell just trying to find a non-800 number (most 800s are undialable from Canada) with a human at the end. One time I ended up at the form warehouse talking to a worker there. He was the nicest person (I was looking for someone to complain about the FUBARs to) and he’s the only one who at least commiserated with me (he actually grasped how invasive a FUBAR is) but in the end all he could say was, “Mam I surely do wish I could help but all I can do is find the form and send it to you.”
@Em, ironic too, and laughable seeing as it is exceedingly unlikely that terrorists, money launderers and tax evaders pay good money and spend time calling the IRS FBAR helpline or other contacts looking for help. So, the IRS and Treasury really doesn’t have any intention of assisting those seeking ‘compliance’ as they claim, because ‘compliance’ doesn’t generate any penalty revenues. Look at where we are, in late August, still waiting for that ‘help’ with ‘compliance’ they promised months ago. They don’t really want compliance. Their actions speak louder than words. And even thought their words have been slightly tempered somewhat recently, who will forget all the public statements and press releases naming all of us as guilty criminals, before the fact? We were all sentenced from the outset without evidence or due process. Who would believe that they’ve changed that worldview now?
Plus, the more the onus is shifted on to us, the less they have to spend on us. We’ve got no power, so any errors that result will be down to us and expensive crossborder specialists to sort out (if we can afford to pay thousands for it). The report http://www.gao.gov/products/GAO-12-403 on the FATCA form by the GAO (Government Accountability Office) proves without a shadow of a doubt – based on the feedback from their own experts – including US tax preparers and accountants (with no axe to grind on behalf of those abroad), who pointed out that FATCA and FBAR forms and guidelines were confusing, duplicative, and errorprone. The US decided to go ahead anyway, let the mess happen, and then possibly do a ‘cost-benefit’ analysis after the fact to see if the pain and cost to taxpayer individuals was worth their time and tax money to address. It’s really worth a close read of the report – because they fully knew that it would be up to the individual to bear the burden of any fallout – and this is the impact on those trying to be ‘compliant’. They also knew that under FATCA, the statute of limitations was extended, the fines were layered on top of the FBAR ones, etc. so much much more was at stake for any individual who fell into the pitfalls inadvertently. Even the professional preparers were not familiar with the new form or clear on what it entailed. The IRS already has a report detailing that the FBAR is overbroad and confusing, see; http://www.irs.gov/taxpros/article/0,,id=250746,00.html SMALL BUSINESS/SELF EMPLOYED SUBGROUP REPORT “The Filing Requirements for the Report of Foreign Bank and Financial Accounts (FBAR) are Confusing and Extremely Overbroad FBAR reporting should be streamlined and made consistent
with the timing and methodology familiar to taxpayers. Policies should
be developed to encourage compliance, particularly with respect to
people who wish to cure inadvertent past failures to file, and
exceptions from filing should be made where reporting should not be
required.”
The US, Congress, IRS and Treasury have absolutely no will, ethical conscience or motivation to change their behaviour. They have no interest in treating us fairly or ethically. The only official who sees it, and makes that clear in public, is Nina Olsen the Taxpayer Advocate. Our only recourse then, as individuals, and to protect ourselves and our families from harm, is to sever all connection, for those of us who can see their way clear and are able to do so.
Unfortunately, the person at the FBAR help desk (313-234 6146) who answered my question (Oct.23,2012) was pleasant but gave me the wrong information. Q: Even though I follow the “new”(sic) Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer Taxpayes: 3 years of federal income tax returns , 6 years of FBAR & Streamlined Compliance Questionnaire , must I still forward FBARs to the Treasury Department in Detroit? The wrong answer was: “No. They (the delinquent FBARs) will be forwarded to us” because: you will not have filed FBARs when you sen copies to the Streamlined Compliance program.
Pleasant but poor advice for those trying to become compliant.
Sad story
http://www.myfoxhouston.com/story/23951808/2013/11/12/businessman-owes-irs-nothing-still-prison-bound
@Chris…
Success revenge! Stunning….