IRS FBAR Voluntary Disclosure Initiative, opt out to reduce tax

by Lance Wallach


The 2012 OVDI, which is still open, is patterned after the 2011 OVDI, but increases the maximum Report of Foreign Bank and Financial Accounts (FBAR)-related penalty from 25 percent to 27.5 percent of the highest account value at any time between 2003 and 2010. The 2012 OVDI does not have a stated expiration date. In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures.
Under the Bank Secrecy Act, U.S. residents or a person in and doing business in the U.S. must file a report with the government if they have a financial account in a foreign country with a value exceeding $10,000 at any time during the calendar year. Taxpayers comply with this law by reporting the account on their income tax return and by filing Form 90–22.1, the FBAR. Willfully failing to file an FBAR can be subject to both criminal sanctions (i.e., imprisonment) and civil penalties equivalent to the greater of $100,000 or 50 percent of the balance in an unreported foreign account — for each year since 2004 for which an FBAR wasn't filed.
The 2009 OVDP brought in at least 14,700 U.S. taxpayers (disclosing accounts in more than 60 countries) through the front door of IRS Criminal Investigation and untold thousands through a process of quietly amending returns and filing delinquent FBARs with the government. For eligible taxpayers who applied the OVDP provided the certainty of no criminal prosecution and civil penalty relief — they were required to pay back-taxes from 2003 to 2008, interest and a 20-25 percent penalty on the delinquent taxes. The IRS also imposed a 20 percent FBAR-related penalty equal to the highest aggregate value of the financial account between 2003 and 2008. In limited situations, the FBAR-related penalty could be reduced to five percent of the account value or $10,000 per tax year. If they got a great CPA with experience to help them, the fine was a lot less.
The 2011 OVDI, brought in an additional 12,000 eligible taxpayers who filed original and amended tax returns and agreed to make payments (or good-faith arrangements to pay) for taxes, interest and accuracy-related penalties. The 2011 OVDI FBAR-related penalty framework required a 25 percent “FBAR-related” penalty equal to the highest value of the financial account between 2003 and 2010. Only one 25 percent offshore penalty is to be applied with respect to voluntary disclosures relating to the same financial account. The penalty may be allocated among the taxpayers with beneficial ownership making the voluntary disclosures in any way they choose. . Participants in the 2011 OVDI also had to pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. Subject to certain limitations, financial transactions occurring before 2003 were generally irrelevant for those participating in the OVDI. With good advice many people paid a lot less.
There are many considerations before a taxpayer should determine whether to pursue a voluntary disclosure of prior tax indiscretions. When reviewing the OVDP and the OVDI, many made decisions based on whether they could be considered a realistic candidate for a criminal prosecution referral by the IRS or prosecution by the Department of Justice. (If so, the determination to participate was relatively quick and easy). In other cases, the questions included:
  • Was there a possibility of reducing that prospect by filing amended or delinquent returns and FBARs in lieu of a direct participation in the OVDP/OVDI?
  • What would be the potentially applicable penalties upon an examination of such returns and FBARs?
  • Could the government actually carry their burden of demonstrating that the taxpayer “willfully” violated the FBAR filing requirements?
  • What would be the cost to the taxpayer of voluntary disclosure through OVDI versus remaining outside the program? Should they apply and then opt out?
Since the OVDI asserted an offshore penalty based on foreign financial accounts and asset valuations, for many with smaller financial account values the aggregate offshore penalty determination, even for multiple years, was actually less outside the OVDI.
The ability of a U.S. taxpayer to maintain an undisclosed, “secret” foreign financial account is fast becoming nonexistent. Foreign account information is flowing into the IRS under tax treaties, through submissions by whistle blowers, and from other taxpayers who participated in the 2009 OVDP and the 2011 OVDI who have been required to identify their bankers and advisers. Additional information will become available as the Foreign Account Tax Compliance Act (FATCA) foreign financial asset reporting (Form 8938 and new IRC § 6038D) become effective.
It is likely that the U.S. will require foreign financial institutions doing business in the United States to disclose account holders having relatively small accounts and earnings. There have been rumors of discussions regarding accounts having a high balance of the equivalent of $50,000 at any time between 2002 and 2010. U.S. persons having interests in foreign financial accounts should not find comfort in a belief that their foreign financial institution will somehow refrain from disclosing very small accounts in the current enforcement environment.
Taxpayers having undisclosed interests in foreign financial accounts must consult competent tax professionals before deciding to participate in the 2012 OVDI. Others may decide to risk detection by the IRS and the imposition of substantial penalties, including the civil fraud penalty, numerous foreign information return penalties, and the potential risk of criminal prosecution. Although the 2012 OVDI penalty regime may seem overly harsh for many, the decision to participate should include an economic analysis of the taxpayer's projected future earnings from funds held offshore. Some people have left the U.S. to try to avoid the fines.
Another option is to apply for amnesty and then opt out and go to appeals. We think that for most people this will result in paying a lot less taxes. According to a CPA who was in management for 37 years with the IRS international division you may want to first apply for amnesty to avoid the criminal prosecution. Then you should compare the taxes that you owe with the deal that you usually get in appeals. You go to appeals as a result of opting out. In all of the situations that this ex IRS agent has seen, opting out gets you a much better IRS deal. If you want to reduce your taxes by using this strategy you need someone who is an expert in it with years of experience. I suggest you use a CPA who was in the international division of the IRS. If he also had experience with the appeals division you have the perfect professional to help you. The person that I interviewed for this article has this experience, and has been successful helping people.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit http://www.taxadvisorexpert.com.



The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

24 comments:

  1. Thanks for sharing useful information. Indeed IRS Settlement was a big pain and it almost screwed my future, poor credit score and all worse that can happen. Still i was lucky to find few experts that helped in my irs debt settlement, irsmedic.com were experts and help me in IRS settlement quickly. I was helped, hope you will too.

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  2. www.taxaudit419.com to help fbar ovdi file opt out reduce fbar ovdi tax
    With the April 17 deadline to file income tax returns now upon us, U.S. taxpayers with foreign financial assets are finding out that they need to file some extra forms this year.

    The Foreign Account Tax Compliance Act, FATCA for short, requires any taxpayers to disclose on their tax returns for the tax year 2011 the location and amount of their foreign assets in excess of $50,000, or $100,000 for married couples.

    The new requirement is in addition to the obligation to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR.


    Alan I. Appel


    The new FATCA requirement to disclose foreign assets means certain taxpayers who have foreign assets and income need to consider enrolling in the IRS’s Offshore Voluntary Disclosure Program, according to Bryan Cave LLP attorney Alan I. Appel. He chairs the U.S. Activities of Foreigners and Tax Treaties Committee of the American Bar Association’s Section of Taxation and is also an adjunct professor of law at New York Law School.

    “Right now, there are several aspects of FATCA,” he said in an interview last week. “For the first time with tax returns that are due on April 17, taxpayers are required to file a Form 8938 disclosing specified foreign financial assets.”

    The FBAR, which is filed with the Treasury Department rather than the IRS, is not the same as FATCA but “a very close cousin,” according to Appel.

    “Then we’ve got the question of FATCA for swap transactions under [Section] 871(m),” Appel pointed out. “We also have a 30 percent tax on withholding payments to foreign financial institutions and non-financial foreign entities.” The latter is not an immediate concern since it does not go into effect for over a year, but it is still raising a lot of red flags.

    “The FATCA withholding doesn’t go into effect until Jan. 1, 2014, and that’s designed to have foreign banks and other foreign entities that have U.S. taxpayers who have accounts be disclosed,” said Appel. “These foreign banks, which are called foreign financial institutions, or FFIs, and also foreign entities that are not banks—called non-financial foreign entities, or NFFEs—have to enter into a compliance agreement with the IRS starting Jan. 1, 2013, that they’ll agree to basically [disclose] the names, Social Security numbers and account balances of U.S. [account holders] every year,” said Appel. “And if they don’t enter into this agreement and they invest in U.S. stocks or securities, or have any U.S. source income, then there’s going to be a 30 percent withholding tax on all payments, including interest, rents, royalties, and things like that.”

    While those provisions don’t take effect until Jan. 1, 2014, Appel believes they are already having a major chilling effect on the rest of the world.

    ReplyDelete
  3. With the April 17 deadline to file income tax returns now upon us, U.S. taxpayers with foreign financial assets are finding out that they need to file some extra forms this year.

    The Foreign Account Tax Compliance Act, FATCA for short, requires any taxpayers to disclose on their tax returns for the tax year 2011 the location and amount of their foreign assets in excess of $50,000, or $100,000 for married couples.

    The new requirement is in addition to the obligation to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR.


    Alan I. Appel


    The new FATCA requirement to disclose foreign assets means certain taxpayers who have foreign assets and income need to consider enrolling in the IRS’s Offshore Voluntary Disclosure Program, according to Bryan Cave LLP attorney Alan I. Appel. He chairs the U.S. Activities of Foreigners and Tax Treaties Committee of the American Bar Association’s Section of Taxation and is also an adjunct professor of law at New York Law School.

    “Right now, there are several aspects of FATCA,” he said in an interview last week. “For the first time with tax returns that are due on April 17, taxpayers are required to file a Form 8938 disclosing specified foreign financial assets.”

    The FBAR, which is filed with the Treasury Department rather than the IRS, is not the same as FATCA but “a very close cousin,” according to Appel.

    “Then we’ve got the question of FATCA for swap transactions under [Section] 871(m),” Appel pointed out. “We also have a 30 percent tax on withholding payments to foreign financial institutions and non-financial foreign entities.” The latter is not an immediate concern since it does not go into effect for over a year, but it is still raising a lot of red flags.

    “The FATCA withholding doesn’t go into effect until Jan. 1, 2014, and that’s designed to have foreign banks and other foreign entities that have U.S. taxpayers who have accounts be disclosed,” said Appel. “These foreign banks, which are called foreign financial institutions, or FFIs, and also foreign entities that are not banks—called non-financial foreign entities, or NFFEs—have to enter into a compliance agreement with the IRS starting Jan. 1, 2013, that they’ll agree to basically [disclose] the names, Social Security numbers and account balances of U.S. [account holders] every year,” said Appel. “And if they don’t enter into this agreement and they invest in U.S. stocks or securities, or have any U.S. source income, then there’s going to be a 30 percent withholding tax on all payments, including interest, rents, royalties, and things like that.”

    While those provisions don’t take effect until Jan. 1, 2014, Appel believes they are already having a major chilling effect on the rest of the world.

    Lance Wallach

    Lance Wallach, Managing Director, is the
    nation's leading expert on employee benefit plans,
    tax problem resolution and IRS audit defense.

    Mr. Wallach is a member of the AICPA faculty of
    teaching professionals & a renowned national
    expert in many court cases. He is the author of
    many best selling financial & law books, including:

    * "Wealth Preservation Planning" by the
    National Society of Accountants

    * "The CPA's Guide to Federal & Estate
    Gift Taxation" published by Bisk

    * The AICPA's "The team approach to Tax,
    Financial & Estate planning."

    * "The CPA's Guide to Life Insurance" by
    Bisk CPEasy

    * Avoiding Circular 230 Malpractice Traps
    and Common Abusive Small Businesss Hot
    spots by the AICPA, author/moderator
    Lance Wallach

    ReplyDelete
  4. File an Individual FBAR - BSA E-Filing System

    ReplyDelete
  5. fbar ovei help fbar ovdi opt out to reuc tax fbar ovdi ex IRS agnets to help with fbar ovdi

    ReplyDelete
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    IRS FBAR Voluntary Disclosure Program Updates
    By Lance Wallach, CLU, CHFC

    Firm's Profile & ArticlesFirm's Profile & Articles

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    For years the IRS has been pursuing – the disclosure of information regarding undeclared interests of U.S. taxpayers (or those who ought to be U.S. taxpayers) in foreign financial accounts.

    Lance Wallach

    On June 26, 2012 the IRS released IR-2012-64/65 and updated Frequently Asked Questions (FAQs) providing updated guidance regarding the currently pending offshore voluntary disclo

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  7. The caption on a new DOJ press release, here: Florida Doctor Sentenced for Federal Tax Crimes, with a subcaption: Doctor Maintained Multiple Offshore Bank Accounts at UBS and Other Foreign Banks That Concealed More Than $60 Million in Income and Assets.

    Key excerpts:
    Dr. Patricia Lynn Hough, of Englewood, Florida, was sentenced today to serve two years in prison and three years supervised release by U.S. District Court Judge John Steele in Fort Myers, Florida, for conspiring to defraud the Internal Revenue Service (IRS) by concealing millions of dollars in assets and income in offshore bank accounts at UBS and other foreign banks, and for filing false individual income tax returns which failed to report the existence of those foreign accounts or the income earned in those accounts, the Justice Department and the IRS announced. Hough was also ordered to pay $15,518,382 in restitution and $42,732.27 for the costs of prosecution . Hough was convicted by a jury on Oct. 24, 2013.
    According to court documents and court proceedings, Hough owned two Caribbean-based medical schools, Saba University School of Medicine located in Saba, Netherlands Antilles, and Medical University of the Americas located in Nevis, West Indies. Hough conspired to defraud the IRS with her husband, Dr. David Fredrick, who is awaiting trial. They carried out the conspiracy by creating and using nominee entities, including a foundation, and by using undeclared accounts in their names and the names of nominee entities at UBS and other foreign banks to conceal assets and income from the IRS. Both schools and the associated real estate were sold on April 3, 2007, for more than $35 million, all of which was deposited into undeclared accounts in the names of the nominee entities. The majority of the proceeds from the sale were not reported to the IRS on their tax returns and no tax was paid. In total, between 2003 and 2008, Hough and Fredrick failed to pay more than $15 million in taxes.
    The evidence at trial further proved that Hough and Fredrick used emails, telephone calls and in-person meetings to instruct Swiss bankers and asset managers to

    ReplyDelete
  8. The former vice president of a Tel Aviv bank was charged with conspiracy to defraud the IRS. Prosecutors say that Shokrollah Baravarian, former vice president of the Los Angles branch of Mizrahi Tefahot bank, helped Americans conceal undeclared bank accounts in Israel. Mizrahi Tefahot is a large Israeli bank that has many Jewish American customers.

    Opening an account in Israel is legal if the account is properly reported. Most offshore financial assets must be reported annually on a taxpayer’s income tax return and on a Foreign Bank Account Report form – FBAR for short. Willful failure to file an FBAR is a felony and in most cases, the IRS imposes heavy civil penalties for unreported foreign accounts. Those penalties can be up to the greater of $100,000 or 50% of the highest historical account balance. In certain cases, the IRS will impose penalties for multiple years.

    To avoid criminal and the highest civil penalties, taxpayers must demonstrate that their failure to file FBAR forms was not willful. Using nominee accounts is a huge red flag for the IRS and almost always results in a “willful” determination by the government. In Baravarian’s case, the IRS says that he helped bank customers open accounts using pseudonyms, code names and the names of nominee entities set up in the British Virgin Islands and the island of Nevis.

    In announcing the indictment, Deputy Attorney General James Cole said the Justice Department remains committed to investigating “ undeclared bank accounts in Israel.” He says that prosecutors will continue ” to find and prosecute those who help U.S. taxpayers evade taxes through offshore accounts located anywhere in the world.”

    The allegations against Baravarian suggest the criminal wrongdoing extends to the bank itself. According to the indictment, many records were not kept in the Los Angeles branch but in Israel itself. A banker from Israel would periodically fly to Los Angeles to visit U.S. clients. Prior to entering the United States, however, the names of the account holders would be redacted.

    Baravarian faces trial later this year. If convicted, he faces 5 years in prison and a $250,00 fine. In our experience, bankers facing trial in the United States usually cut deals with prosecutors. In exchange for a lighter sentence, the bankers agree to disclose the names of their U.S. customers and testify against them.

    Time is running out for Americans and other U.S. taxpayers with unreported foreign accounts. Both undeclared foreign income and accounts can land you in serious trouble. With FATCA and its requirement for all foreign banks to begin reporting accounts with ties to the United States just weeks away, taxpayers are running out of options.

    FBAR Reporting Options
    At this point, taxpayers have limited choices: Enter the IRS FBAR amnesty program (Offshore Voluntary Disclosure Program) and pay some penalties but avoid audits and possible prosecution; work with an experienced FBAR penalty lawyer, accountant or ex pat tax service and try to negotiate penalties or do nothing and hope not to get caught. Some folks think they can quietly file back FBAR forms or simply close their foreign accounts but both those options actually increase your chances of trouble.

    Mizrahi Tefahot is not the only Israeli bank under scrutiny from the IRS and Justice Department. Accounts at Bank Hapoalim and Bank Leumi are also being examined. The indictment against Baravarian suggests that suspect account transfers from China to Israel and between Switzerland and Israel have been identified.

    ReplyDelete
  9. New FBAR Filing Requirements for 2014
    new fbar filing requirements for 2014 Pic1
    As you, the American with investments abroad, get ready to prepare your 2014 tax return, there are important new FBAR filing requirements for 2014. Some of these FBAR filing requirements are cosmetic and others could get the misinformed in hot water.

    Note: If you have no idea what an FBAR is, you might check out my general article on filing requirements for those living, working, or investing abroad. If you want to learn how to legally avoid the FBAR, click here.

    First, let me tell you how your accountant or CPA thinks. The foundation of tax preparation for professions is SALY…prepare the return the Same As Last Year to reduce the risk of an audit.

    So, when your preparer pulls out your file, he or she will be thinking SALY and will reach for the same old forms to file. When new FBAR filing requirements for 2014 are announced, but don’t get much press, tax preparers without many Expat clients can get caught unprepared.

    It may be up to you to educate your preparer on the FBAR and these New FBAR filing requirements for 2014. Here they are:

    Not one to bury the lead: IRA owners don’t need to file an FBAR in 2014!

    For those of you with Offshore IRA accounts, the IRS has finally come out and said that IRA owners and beneficiaries do not need to file an FBAR. Whether an offshore IRA needed to file an FBAR was never clear, so we all aired on the side of caution and filed it year after year. Well, that burden has been lifted (see below).

    The cosmetic change is that the name of the form has changed. The official name of the FBAR changed from Treasury Form TD F 90-22.1 to FinCEN Form 114. I’ll bet not many people even noticed, as we all refer to it as the FBAR.

    The big change to the FBAR for 2014 is that it must now be filed online. No more paper allowed. So, when your preparer pulls out your file and grabs the same old forms, you may be in for penalties.

    That’s right, if you or your preparer are unaware of the change and mail in SALY, you could face significant penalties for filing late…or not filing at all. So, be sure to talk to your tax man or woman!

    Note: the deadline for the electronic FBAR filing did not change and remains June 30. If you file your FBAR with your personal return on April 15, all is well. If you procrastinate and get an extension for your personal return until October 15, your FBAR is still due on June 30. That’s right, the extension of time to file your personal return does not apply to the FBAR.

    ReplyDelete
  10. International Tax Disputes

    The Internal Revenue Service has committed to renewed efforts to pursue international violations of the tax laws by individuals and businesses. In order to address what it considers to be an area rife with abusive tax avoidance behavior, the IRS is aggressively pursuing international tax violations through use of both civil audits and criminal investigations and prosecutions.

    The IRS has announced specific plans to focus on combating international tax fraud and tax evasion by expanding its programs of information sharing and cooperation with nations around the world. The IRS’s most recent efforts in this area have been against U.S. taxpayers who maintain unreported foreign bank accounts. The IRS’s and DOJ’s public campaign to identify U.S. taxpayers with accounts in UBS and other foreign banks has been extensively chronicled by the media.

    The IRS has also announced that it will focus its efforts on increasing audits of U.S. persons and businesses that make payments to foreign individuals and businesses to ensure the U.S. taxpayers are properly reporting and withholding taxes from those payments. The IRS also plans to increase audits and investigations of U.S. individual and business taxpayers with foreign sourced income, foreign bank accounts and foreign trusts. To accomplish these goals, the IRS announced it plans to hire as many as 800 new employees to focus solely on international tax compliance issues.

    At Marini & Associates PA, we specialize in representing the following taxpayers with international tax issues:

    U.S. citizens living and working abroad

    U.S. citizens with foreign-sourced income

    U.S. taxpayers with international trusts

    Non-U.S. taxpayers with U.S.-sourced income

    U.S. businesses with operations in other countries

    International businesses with U.S. tax

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    Report of Foreign Bank and Financial Accounts (FBAR)
    If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). See the ‘Who Must File an FBAR’ section below for additional criteria.
    Current FBAR Guidance
    FinCEN introduces new forms
    On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website. The system allows the filer to enter the calendar year reported, including past years, on the online FinCEN Form 114. It also offers an option to “explain a late filing,” or to select “Other” to enter up to 750-characters within a text box where the filer can provide a further explanation of the late filing or indicate whether the filing is made in conjunction with an IRS compliance program.
    On July 29, 2013, FinCEN posted a notice on their internet site that introduced a new form to filers who submit FBARs jointly with spouses or who wish to have a third party preparer file their FBARs on their behalf. The new FinCEN Form 114a, Record of Authorization to Electronically File FBARs, is not submitted with the filing but, instead, is maintained with the FBAR records by the filer and the account owner, and made available to FinCEN or IRS on request.
    Filing deferral for certain individuals with signature authority only, effective through June 30, 2015
    FinCEN Notice 2013-1 extended the due date for filing FBARs by certain individuals with signature authority over, but no financial interest in, foreign financial accounts of their employer or a closely related entity, to June 30, 2015.

    ReplyDelete
  12. Tidbits from the IRS on Offshore Account Issues (6/7/14)
    I understand from practitioners that the IRS has indicated the following. This is second hand, so those desiring to implement strategy based on the following might make their own inquiries to the IRS.

    1. Readers may be aware that some or all Swiss Category 2 banks are requesting the U.S. depositor to supply proof of U.S. tax compliance. That proof can be used to mitigate the Swiss Category 2 bank's penalty in the program with the U.S. DOJ. In my limited experience with such requests, the banks may ask for various forms of proof (from the IRS preclearance letter into OVDP to the Form 906). The U.S. depositor is not required to provide that proof to the Swiss bank, of course.* The question has arisen, however, what if anything to provide the Swiss bank if the request comes after the U.S. depositor has submitted the request for preclearance but has not yet received the IRS letter of preclearance. I understand that the IRS believes banks will accept the preclearance request letter and perhaps a letter from the taxpayer or the representative to the bank that the preclearance request letter was filed and has not yet been acted on. I am sure the bank will make a follow through request for something more definite.

    2. Clients concerned about the interim period between deciding to do something (whether OVDP or streamlined) might make a preclearance letter request for OVDP and then, if streamlined is appropriate, withdraw from OVDP. The advantage of filing the preclearance where the ultimate choice to do OVDP is not made is that the process of dealing with the issue, having been started with the preclearance letter, should be some protection if the IRS starts an audit later before the alternative strategy is implemented. If, after filing the preclearance letter, the client decides to pursue another strategy, the client should withdraw by letter advising of the withdrawal submitted before the due date for the intake letter to CI. The letter should be clear that the client is withdrawing. (Note, withdrawal is not the same as opting out; hence, unless the client qualifies for and completes streamlined procedure, the client will not have assurance of no criminal prosecution.) As I received the information, this withdrawal process might work also for later determining to proceed in some other way under 2011-13. Both the streamlined and the 2011-13, here, routes offer considerable uncertainties, but perhaps these uncertainties may be mitigated by the upcoming changes in the program that Commissioner Koskinen announced were coming. See IRS Commissioner Koskinen Announces that Changes -- Liberalizations -- Are In the Offing for OVDP 2012 (Federal Tax Crimes Blog 6/4/12), here.

    3. If the client does not withdraw, the case will be processed under OVDP under normal procedures with the right to opt out.

    ReplyDelete
  13. Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules
    Record Numbers Living Abroad Renounce U.S. Citizenship over IRS Reporting Requirements

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  14. For years the IRS has been pursuing – with mixed success – the disclosure of information regarding undeclared interests of U.S. taxpayers (or those who ought to be U.S. taxpayers) in foreign financial accounts. On June 26, 2012 the IRS released IR-2012-64/65 and updated Frequently Asked Questions (FAQs) providing updated guidance regarding the currently pending offshore voluntary disclosure program (the initial terms of the 2012 OVDP were set forth in IR-2012-5 released on January 9, 2012). The OVDP follows on the success of the 2009 Offshore Voluntary Disclosure Program (the 2009 OVDP) and the 2011 Offshore Voluntary Disclosure Initiative (the 2011 OVDI), which were announced many years after the 2003 Offshore Voluntary Compliance Initiative (OVCI) and the 2003 Offshore Credit Card Program (OCCP). Such initiatives typically offer reduced penalties in exchange for taxpayers voluntarily coming into compliance before the IRS is aware of their prior tax indiscretions. In part, the success of such initiatives often depends on the perception that they will be followed by strong government tax enforcement efforts.

    Under the Bank Secrecy Act, U.S. residents or a person in and doing business in the United States must file a report with the government if they have a financial account in a foreign country with a value exceeding $10,000 at any time during the calendar year. Taxpayers comply with this law by noting the account on their income tax return and by filing Form 90-22.1, the FBAR. Willfully failing to file an FBAR can be subject to both criminal sanctions (i.e., imprisonment) and civil penalties equivalent to the greater of $100,000 or 50% of the balance in an unreported foreign account— for each year since 2004 for which an FBAR wasn’t filed.

    Generally, taxpayers who have undisclosed offshore accounts or assets and meet the requirements of IRM 9.5.11.9 are eligible to apply for IRS Criminal Investigation’s Voluntary Disclosure Practice and the 2012 OVDP penalty regime. The OVDP is available to taxpayers who have both offshore and domestic issues to disclose. The Voluntary Disclosure Practice requires an accurate, and complete voluntary disclosure. Consequently, if there are undisclosed income tax liabilities from domestic sources in addition to those related to offshore a

    ReplyDelete
  15. ← SOME SWISS BANKS ARE MORE THAN ENCOURAGING U.S. CLIENTS TO ENTER THE OVDP – THEY ARE OFFERING FINANCIAL INCENTIVESWILL-O -HE
    This predicament is not an uncommon occurrence. Many taxpayers may have had a foreign bank or brokerage account and reported the income
    Is not currently being civilly examined by IRS and is not currently the target of an IRS criminal investigation.
    Has not been contacted by IRS about the delinquent FBARS.
    Does not need to file delinquent or amended tax returns to report and pay additional tax.
    How do you file delinquent FBARS under the Delinquent FBAR Submission Procedures?

    E-file the delinquent FBARS as provided in the FBAR filing instructions using the BSA E-Filing System. You generally cannot paper file the FinCEN Form 114 which replaced the TD 90-22.1 form which had been filed with the Department of the Treasury in Detroit.
    On the first page of the E-filing input screens there is a drop down menu where the filer must indicate the reason for filing late. The most common reason for those who have reported all income will be, “Did not know I had to file,” but there are other selections including “Other,” for which an explanation must be provided in limited space.
    If for some reason you are unable to file electronically, you may contact FinCEN’s Regulatory Helpline at 1-800-949-2732 or 1-703-905-3975.
    Will I be penalized for filing late?

    No. The IRS in its announcement of the Delinquent FBAR Submission Procedures states:

    “The IRS will not impose a penalty for failure to file delinquent FBARS if you properly reported on your U.S. tax return, and paid all tax on, the income from foreign financial accounts reported on the delinquent FBARS and you have not been previously contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARS are submitted?”

    Will my income tax returns or FBARS be audited?

    The IRS announcement regarding Delinquent FBAR Submission Procedures states:

    “FBARs will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.”

    While the announcement does not mention income tax returns, presumable the same no-automatic-audit rule will apply. If an audit later reveals that income was not reported on the account, the taxpayer will face potentially severe FBAR and income tax civil and criminal sanctions.

    How many years of delinquent FBARS must I file?

    File delinquent FBARS for the years open under the Statute of Limitations for assessing FBAR civil penalties. Normally that will be six years because the Statute of Limitations is six years from the due of the delinquent FBAR, (June 30). Unlike the Statute of Limitations on income tax assessments, the FBAR Statute begins to run even if no FBAR was filed. Thus, a 2007 FBAR, due June 30, 2008 would not be required to be filed now because the Statute of Limitations expired on June 30, 2014. Assuming the 2013 FBAR was timely filed, one would file for the years 2008 through 2012.

    Can my CPA prepare and e-file the FBAR for me?

    In most cases yes, if it is clear that all income earned on the account was reported. Caveat: There is no di minimis rule; even nominal unreported income will disqualify a taxpayer from using the Delinquent FBAR Submission Procedures and relegate him to employing the OVDP or Streamlined Offshore Compliance Procedures.

    Unless it is clear that no income went unreported, taxpayers should probably first consult with an experienced OVD

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  16. discuss FBAR and penalties for failure to file FBAR frequently, but it’s not too often that we take you beyond the initial assessment of penalties and into the minds of the Judge and jury members. For some who are familiar with FBAR filing requirements, it may stand to reason that if you had failed to file an FBAR, or Form TD F 90-22.1, in previous years when you held qualifying foreign financial accounts that you were liable for civil or financial penalties despite your reason for not having filed.

    If so, then your reasoning would be incorrect. A great many taxpayers are so willing to accept the ‘terms of their punishment’ by a body of US Government like the Department of Treasury, because, “They must know what they’re talking about.” It has been this mindset among taxpayers combined with a prehistoric laissez-faire attitude of the courts since – up until recent years – FBAR filing requirements and the laws surrounding them were rarely enforced. For this reason, only extreme cases of international tax evasion ever saw the inside of a court room.

    In fact, the US Department of Treasury may try to impose penalties for any and every reason that an FBAR was filed. That alone, though, does not make you guilty of having willfully disregarded your responsibility as a US Expat or Stateside Citizen or Green Card Holder with foreign financial accounts. The truth is that an accusation of intentionally not reporting qualifying accounts (foreign financial accounts with an individual or aggregate total of at least $10K any time during the year) is much like being accused of any other crime in the United States, so there are 2 fundamental truths:

    You are innocent until proven guilty, and
    The burden of proof is on the prosecution.

    So, why – after all this time – are the courts only now beginning to get involved and establish case law in regard to FBAR? To answer this question, you only need to be partially aware of the extremes taken by the Department of Treasury, the IRS, and the Department of Justice in the name of bringing international tax evasion to an end. While there are undisputedly billions of dollars of revenue in unfiled taxes and legitimate Failure to File FBAR penalties, not a tremendous amount of these violators are being discovered at this point.

    Keep in mind that only the first wave of requests to foreign banks (and only in certain countries) for information regarding US Citizens and Green Card Holders has been sent by the IRS, and those requests are for information at least 5 years old. With 5-10 year old accounts as the only piece of evidence, the IRS, Department of Treasury, and the Department of Justice are simply trying to make examples out of those who have been identified from recently submitted records. It’s quite possible that the majority of United States Citizens and Green Card Holders who are being assessed with maximum penalties are those who honestly had no idea until this year that it was even a requirement.

    With such a wide variety of circumstances all being assigned the same motive, it’s no wonder that the Circuit Court is taking the time to remind US Citizens of their rights obtained at birth – the right to a speedy trial, the right to an impartial jury of one’s peers, and all the protections in the Constitution against unlawful presumption of guilt, undue process, and other ‘railroad type’ tactics utilized as a standard practice in other countries

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  17. Enlarge Image »
    The Internal Revenue Service has turned its attention to U.S. citizens living in and outside of the United States, with foreign financial assets — including in Israel — that have not been reported on their tax returns.

    U.S. law requires that taxpayers file a Report of Foreign Bank and Financial Accounts (FBAR) for all foreign financial accounts that exceed $10,000 at any point during the calendar year.

    In the eyes of the IRS, failing to file tax returns and an FBAR is not kosher, and penalties can be severe. The ability to fly under the radar screen is over, and anyone who thinks he or she is not likely to get caught should think again. Failure to report foreign accounts can result in financial penalties of up to 50 percent of the account balance for each year of the violation, or worse — potential jail time for tax evasion.

    Pursuant to the Foreign Account Tax Compliance Act (FATCA) passed in 2010, many countries, including Israel, are entering into an intergovernmental agreement with the United States, which will require foreign financial institutions to report to the IRS all information that is required under the law. Among the information required is the taxpayer’s name, address and account balance as of the last day of the year.

    FATCA requires foreign banks to report to the IRS all assets belonging to U.S. citizens, regardless of whether they are living at home or abroad. These filing obligations have been in existence for many years; however, the existence of FATCA and related intergovernmental agreements increase the likelihood that the IRS will receive information from a foreign government or foreign financial institution regarding foreign accounts held by U.S. citizens.

    Recently, some prominent U.S. taxpayers have been caught and are facing jail time (for example, billionaire H. Ty Warner, the creator of Beanie Babies). But it’s not only the prominent and super-wealthy that need to be careful. For example, if your child studied abroad in Israel, you may have set up a bank account there for him or her and he or she will need to report any income held in Israel on the U.S. tax return. If not, your child could face penalties.

    Or, say you have a family member in Israel whom you visit often so you set up a bank account for yourself in Israel — you better make sure to report that money.

    What if you failed to report this foreign money in past years? The penalty for willful failure to file the FBAR report is the greater of $100,000 or 50 percent of the account balance. The penalty applies year after year and is not limited to the account balance itself. You need to consider taking action now before the IRS has your name. U.S. citizens who have overseas accounts and who have failed in previous years to file U.S. tax rer names, Social Security numbers and foreign bank account information.

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  18. On June 18, 2014 the IRS made MAJOR changes to the Offshore Voluntary Program.
    What's the bottom line....The New 2014 STREAMLINED OVDP program is the way to go for about 90% of non-compliance individuals.

    If you made a mistake and didn't intentionally (i.e., willfully) fail to pay those taxes or you didn't file those FBARs then the STREAMLINED PROGRAM is for you.

    If you live in the United States then a 5% penalty will be assessed on your qualifying foreign assets.

    However, you do need to act quickly. Starting on August 4, 2014, if your foreign bank shows up on the naughty list then you will not be eligible for the streamlined program and you will be forced into the OVDP traditional program with a minimum of a 27.5% penalty on all your foreign assets.

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  19. IRS Logo program differ from the IRS’s longstanding voluntary disclosure practice or the 2009 OVDP and 2011 OVDI?
    The Voluntary Disclosure Practice is a longstanding practice of IRS Criminal Investigation whereby CI takes timely, accurate, and complete voluntary disclosures into account in deciding whether to recommend to the Department of Justice that a taxpayer be criminally prosecuted. It enables noncompliant taxpayers to resolve their tax liabilities and minimize their chance of criminal prosecution. When a taxpayer truthfully, timely, and completely complies with all provisions of the voluntary disclosure practice, the IRS will not recommend criminal prosecution to the Department of Justice for any issue relating to tax noncompliance or failure to file Report of Foreign Bank and Financial Accounts (commonly known as an FBAR reported on FinCEN Form 114, previously Form TD F 90-22.1).
    This current offshore voluntary disclosure program is a counterpart to Criminal Investigation’s Voluntary Disclosure Practice. Like its predecessors, the 2009 OVDP, which ran from March 23, 2009 through October 15, 2009, and the 2011 OVDI, which ran from February 8, 2011 through September 9, 2011, it addresses the civil side of a taxpayer’s voluntary disclosure of foreign accounts and assets by defining the number of tax years covered and setting the civil penalties that will apply. Unlike the 2009 OVDP and the 2011 OVDI, there is no set deadline for taxpayers to apply. However, the terms of this program may change at any time. For example, the IRS may increase penalties or limit eligibility in the program for all or some taxpayers or defined classes of taxpayers or decide to end the program entirely at any time.
    4. Why should I make a voluntary disclosure? Taxpayers holding undisclosed foreign accounts and assets, including those held through undisclosed foreign entities, should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties, and generally eliminate the risk of criminal prosecution for all issues relating to tax noncompliance and failing to file FBARs. In contrast, taxpayers simply filing amended returns or filing through the Streamlined Filing Compliance Procedures do not eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in identifying those with undisclosed foreign financial accounts and assets. Moreover, increasingly this information is available to the IRS under tax treaties, through submissions by whistleblowers, and from other sources and will become more available under the FATCA and Foreign Financial Asset Reporting (IRC § 6038D).

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  20. Owning or having signature authority over an offshore account isn’t illegal but failing to tell Uncle Sam about it can land you in prison. During the last several years, almost 200 people have been prosecuted for failure to file an FBAR form. Short for Report of Foreign Bank and Financial Accounts, the willful failure to file an FBAR is punishable by up to 5 years in prison.

    Last week, Georges Briquet pleaded guilty to obstructing the IRS. Prosecutors say he had unreported accounts at Swiss banks Clariden Leu and UBS. Clariden Leu was a subsidiary of Credit Suisse AG. According to the Justice Department’s Tax Division, Briquet moved to the United States and later acquired citizenship here.

    It appears a plea agreement was in place allowing Briquet to plead guilty to the lesser charge of obstruction, which is punishable by 3 years in prison. If the prosecutors’ allegations are true, he could have been charged with several counts of failure to file FBAR forms as well as charges of filing false tax returns.

    A prepared statement by the Justice Department claims that Briquet was audited and lied to the IRS revenue agent about his Swiss accounts. Later he would repeat those same lies to a criminal division special agent.

    Most people caught with unreported offshore accounts are not criminally prosecuted. The IRS estimates that millions of Americans, expats, green card holders and dual nationals have failed to file FBAR forms yet only a few are prosecuted. What makes this case unique, however, are the lies that Briquet apparently made at different times to the IRS. That conduct earned him a felony obstruction charge and possibly three years in prison.

    For most folks with unreported accounts, the biggest dangers are civil penalties but those penalties can be huge. The IRS routinely hands out penalties of 50% of the highest historical account balance. Sometimes, the IRS even imposes the penalties for more than one year meaning your entire account can be wiped out.

    For example, lets say that you had $300,000 in a Swiss account in 2013. Fearing the IRS was cracking down, you moved all but $50,000 of the money back to the United States in 2014. The typical civil penalty is $150,000 representing half the highest balance and not half of the current balance.

    The IRS has been selectively prosecuting taxpayers across the United States hoping that the publicity will convince people to come forward. Their strategy seems to be working. Since 2009, over 50,000 taxpayers have participated in the IRS various Offshore Voluntary Disclosure Programs (amnesty). Untold thousands more have come into compliance by making quiet disclosures.

    If you have an unreported foreign account, time is quickly running out to come into compliance. If all taxes have been paid and the only violation is a failure to file an FBAR, it may be possible to avoid all penalties. For other taxpayers, one of the amnesty programs may be a better fit. Doing nothing, however, is not an option.

    ReplyDelete
  21. Owning or having signature authority over an offshore account isn’t illegal but failing to tell Uncle Sam about it can land you in prison. During the last several years, almost 200 people have been prosecuted for failure to file an FBAR form. Short for Report of Foreign Bank and Financial Accounts, the willful failure to file an FBAR is punishable by up to 5 years in prison.

    Last week, Georges Briquet pleaded guilty to obstructing the IRS. Prosecutors say he had unreported accounts at Swiss banks Clariden Leu and UBS. Clariden Leu was a subsidiary of Credit Suisse AG. According to the Justice Department’s Tax Division, Briquet moved to the United States and later acquired citizenship here.

    It appears a plea agreement was in place allowing Briquet to plead guilty to the lesser charge of obstruction, which is punishable by 3 years in prison. If the prosecutors’ allegations are true, he could have been charged with several counts of failure to file FBAR forms as well as charges of filing false tax returns.

    A prepared statement by the Justice Department claims that Briquet was audited and lied to the IRS revenue agent about his Swiss accounts. Later he would repeat those same lies to a criminal division special agent.

    Most people caught with unreported offshore accounts are not criminally prosecuted. The IRS estimates that millions of Americans, expats, green card holders and dual nationals have failed to file FBAR forms yet only a few are prosecuted. What makes this case unique, however, are the lies that Briquet apparently made at different times to the IRS. That conduct earned him a felony obstruction charge and possibly three years in prison.

    For most folks with unreported accounts, the biggest dangers are civil penalties but those penalties can be huge. The IRS routinely hands out penalties of 50% of the highest historical account balance. Sometimes, the IRS even imposes the penalties for more than one year meaning your entire account can be wiped out.

    For example, lets say that you had $300,000 in a Swiss account in 2013. Fearing the IRS was cracking down, you moved all but $50,000 of the money back to the United States in 2014. The typical civil penalty is $150,000 representing half the highest balance and not half of the current balance.

    The IRS has been selectively prosecuting taxpayers across the United States hoping that the publicity will convince people to come forward. Their strategy seems to be working. Since 2009, over 50,000 taxpayers have participated in the IRS various Offshore Voluntary Disclosure Programs (amnesty). Untold thousands more have come into compliance by making quiet disclosures.

    If you have an unreported foreign account, time is quickly running out to come into compliance. If all taxes have been paid and the only violation is a failure to file an FBAR, it may be possible to avoid all penalties. For other taxpayers, one of the amnesty programs may be a better fit. Doing nothing, however, is not an option.

    ReplyDelete
  22. Today, the Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes. Additionally, the IRS revealed the collection of more than $4.4 billion so far form the two previous international programs.hat the penalty is disproportionate may opt instead to be examined.

    The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax.


    Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio's All Things Considered, and others. Lance has written numerous books including Protecting Clients form Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small buisness Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, or visit www.taxadvisorexpert.com.

    fbar tax amnesty ovdi opt out to save taxes www.taxadvisorexpert.com for help with all of this

    ReplyDelete
  23. Today, the Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes. Additionally, the IRS revealed the collection of more than $4.4 billion so far form the two previous international programs.hat the penalty is disproportionate may opt instead to be examined.

    The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax.


    Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning. He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio's All Things Considered, and others. Lance has written numerous books including Protecting Clients form Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small buisness Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, or visit www.taxadvisorexpert.com.

    fbar tax amnesty ovdi opt out to save taxes www.taxadvisorexpert.com for help with all of this

    ReplyDelete

  24. This is what happened on the last day of July this year (2015): President Obama signed into law H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act (The Act). An unlikely vehicle for deadline changes, but it did make some really important changes to Tax Law & Revenue Provisions, including:


    FinCEN Form 114 (FBAR) filing and extension deadlines;
    Tax Filing Deadlines;
    Changes to consistent basis reporting between the estate and the person acquiring the property from the decedent.
    Point #3 above modifies due dates for Trust returns: Foreign trusts with US Owners and transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, which is Form 3520-A and Form 3520.

    New FBAR Extension and Due Dates:
    The Act changes the deadline for the FBAR from June 30th to the April 15th, which is the due date for an individual who is resident in the United States. In addition to this, the FBAR can be extended for a period of six months ending October 15th, just as an Individual tax return.

    For those who are not resident in the United States and have to file a US tax return, there is an automatic 2 month extension until June 15th {Under § 1.6081-5}. Under the Act now this extension is available to their FBAR filing as well.

    For those who are filing an FBAR for the first time, the Act specifically states that, "[f]or any taxpayer required to file [an FBAR] for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary."

    These due dates are applicable to those returns filed after December 31st, 2015.

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