How it works
Willful means a voluntary, intentional violation of a known legal duty, and courts have extended it to reckless disregard: not knowing because you chose not to find out. Non-willful means negligence, mistake, or a good-faith misunderstanding. The distinction decides which IRS program applies (streamlined for non-willful, voluntary disclosure for willful) and how large the penalties are. Courts have found willfulness where taxpayers answered no to the Schedule B foreign account question while holding foreign accounts, ignored professional warnings, or hid accounts from their preparers.
Why it matters
Certifying non-willfulness when the facts say otherwise makes the situation worse: the certification is sworn, and the IRS can use it. The assessment is a legal judgment that should be made with counsel before anything is filed.
Example
A taxpayer told his preparer he had no foreign accounts while wiring money to one each year. That pattern supports willfulness, and the streamlined procedures are unavailable to him. A taxpayer who inherited an account, never used it, and did not know it existed is non-willful.
Related: Voluntary Disclosure Practice, FBAR penalties. Read more: writing the non-willful certification.
