Bedrosian v. United States

Holding

Willfulness for purposes of the FBAR civil penalty under 31 U.S.C. 5321(a)(5) requires only a showing that the taxpayer knew of the FBAR filing requirement and acted recklessly or with willful blindness, not a specific intent to violate the law.

Facts

Bedrosian held undisclosed Swiss accounts at UBS and was told by his accountant about the FBAR requirement. He filed an FBAR disclosing one account but omitted a much larger account. After the IRS assessed a willful FBAR penalty exceeding $975,000, Bedrosian sued for refund.

Reasoning

The Third Circuit adopted a civil willfulness standard encompassing knowing and reckless conduct, consistent with Safeco Insurance and the broader pattern in tax-penalty law. The court vacated the district court's finding of non-willfulness and remanded for application of the correct standard. The decision is widely cited in subsequent FBAR willfulness litigation.