You may want to think about participation in the IRS’ offshore tax amnesty program (called the Offshore Voluntary Disclosure Initiative). Do you want to play audit roulette with the IRS? Some clients think they are too small to be prosecuted. They are wrong.
To the average businessperson, only the guys with tens of millions secretly stashed in Swiss bank accounts get prosecuted. Don't tell that to Michael Schiavo. He was just prosecuted for hiding money in a Swiss account back in 2003. How much money does the IRS say he hid? A whopping $90,000. That’s it.
But wait, there is more to the story. Schiavo attempted to do a quiet disclosure during the 2009 amnesty but instead of filling out the amnesty paperwork, he simply trusted that by coming forward voluntarily he could avoid criminal prosecution. He was wrong on all counts. Nothing is too small for the IRS, and nothing is too old.
“So, to save a whopping $40,624 in taxes, this guy risked a felony conviction and prison time, not to mention steep penalties that could very easily eat up the entire $90,000, and also his criminal and civil defense costs.
The smart taxpayers are the ones coming forward and not having to look over their shoulders for the next 10 years.
Time is running out. The tax amnesty runs through August but it takes at least days to jump through all the hoops. We will also fight hard to reduce the penalties down even more. Remember, the IRS can go as low as 5%.
As an expert witness Lance Wallach's side has never lost a case. People need to be careful of 419 Welfare Benefit Plans, 412i plans, Section 79 plans and Captive Insurance Plans. Most of these plans are sold by insurance agents. If you are in an abusive, listed or similar transaction plan you need to file under IRS 6707a. The participant files form 8886, and the salesmen or accountant who signs the tax returns files form 8918 if they got paid over $10,000. They are called Material Advisors and face a minimum $100,000 fine. Some plans are offshore which could involve FBAR or OVDI filings. If you have money overseas you probably need to file for IRS tax amnesty. If you want to reduce the tax we suggest that you first file and then opt out. For more information Google Lance Wallach.
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.
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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
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* Avoiding Circular 230 Malpractice Traps
and Common Abusive Small Businesss Hot
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Lance Wallach
As an expert witness Lance Wallach's side has never lost a case. People need to be careful of 419 Welfare Benefit Plans, 412i plans, Section 79 plans and Captive Insurance Plans. Most of these plans are sold by insurance agents. If you are in an abusive, listed or similar transaction plan you need to file under IRS 6707a. The participant files form 8886, and the salesmen or accountant who signs the tax returns files form 8918 if they got paid over $10,000. They are called Material Advisors and face a minimum $100,000 fine. Some plans are offshore which could involve FBAR or OVDI filings. If you have money overseas you probably need to file for IRS tax amnesty. If you want to reduce the tax we suggest that you first file and then opt out. For more information Google Lance Wallach.
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.
Captive Insurance & 419 Plans Litigation
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The IRS has recently issued guidance on the extension of the OVDI program, which provides additional information about the current OVDI program. A key facet of this new guidance is the clarification on how certain foreign retirement accounts and pension plans will be treated for the purposes of the program.
Specifically, the IRS has stated that if a taxpayer has a Canadian registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or other similar Canadian plan, the OVDI program will now permit a late election pursuant to the U.S.-Canada income tax treaty. This allows the taxpayer to defer U.S. income tax on the income earned by the RRSP or RRIF, so long as the income has not been distributed. Importantly, the allowance of the late election works to exclude the value of these retirement and pension plans from the OVDI penalty base.
Further, the recent guidance intimates that this relief may not be limited to Canadian retirement and pension plans. The IRS has stated that it will entertain inquiries as to whether certain foreign retirement and pension plans from other countries should be excluded from the OVDI penalty base.
As a reminder, in order to participate in the OVDI, taxpayers must complete the following steps:
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Captive Insurance & 419 Plans Litigation
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IRS Audits Focus on Captive Insurance Plans - Lance Wallach
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IRS Audits Focus on Captive Insurance Plans - Lance Wallach
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I received an interesting call today from someone concerned about the IRS penalties for failure to file a Report of Foreign Bank and Financial Accounts, better known as an FBAR (TDF-90-22.1 for those looking for the IRS form number). For those not already aware of the penalties, the IRS can and routinely does assess penalties of $100,000 or 50% of the highest balance of an unreported foreign bank or brokerage account. And those penalties are for each year that an account is unreported. There are ways to beat these penalties, however.
ReplyDeleteU.S. taxpayers with more than $10,000 in offshore accounts are required annually to file an FBAR form. This year, certain taxpayers must also comply with the new Foreign Account Tax Compliance Act (“FATCA”) and file a form 8938 as well. (Filing one does not eliminate the need to file the other.) Offshore accounts are pretty broadly defined and include bank accounts, certificates of deposit, brokerage accounts, many foreign retirement plans and some insurance products.
Fail to file an FBAR and the government can impose a 50% penalty for each year the account is unreported. In certain cases, taxpayers can also be charged with a felony punishable by 5 years in prison. Take a hypothetical account with a $100,000 balance opened 8 years ago. Assuming no change in the balance, the IRS can impose $400,000 in penalties on an account that only contains $100,000! (50% or $50,000 x 8 years.)
The IRS is offering a tax amnesty called the Offshore Voluntary Disclosure Program. (Yes, it too has an acronym and is sometimes called “OVDI” or “OVDP”). Program participants don’t have to worry about criminal prosecution and face a one time penalty of 27.5% of the highest balance during the years in which the accounts were not reported. (The IRS is presently looking back 8 years.)
Twenty Seven (27.5%) percent is certainly a lot of money. There are ways to reduce that penalty, however.
First, the IRS does have two lower penalty tiers – 5% and 12.5%. The criteria for these special amnesty rates can be found
What is the due date for the FBAR?
ReplyDeleteThe due date for the FBAR is June 30th of each year.
Can I put the FBAR on extension?
No. Unfortunately, there is no extension for the FBAR! The FBAR is not filed with a federal tax return. Any filing extensions of time granted by the IRS to file a tax return does not extend the time to file an FBAR.
What are the penalties for filing the FBAR (Report of Foreign Bank and Financial Accounts) late?
There are 2 different types of penalties for not filing an FBAR by the due date – Non-Willful and Willful.
Maximum Penalty Non-willful:
$10,000. No penalty shall be imposed if the violation was due to reasonable cause and the amount of the transaction or the balance in the account at the time of the transaction was properly reported
Maximum Willful violations:
The greater of $100,000 or 50% of the balance of the account at the time of the violation
Penalty Mitigation-
The law provides a ceiling for the FBAR penalty. The actual penalty is left to the discretion of the examiner. The IRS has guidelines for its employees which allow them some discretion. If the IRS determined that a taxpayer meets the following four threshold conditions, that taxpayer may be subject to a penalty less than the maximum FBAR penalty
1. The person has no history of past FBAR penalty assessments;
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The Bank Secrecy Act requires that a Form FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR), be filed if the aggregate balances of such foreign accounts exceed $10,000 at any time during the year. This form is used as part of the IRS's enforcement initiative against abusive offshore transactions and attempts by U.S. persons to avoid taxes by hiding money offshore.
ReplyDeleteThe FBAR covers a calendar year and must be filed no later than June 30th of the following year and includes any interest a U.S. person has in:
Offshore bank accounts
Offshore mutual funds
Offshore hedge funds
Offshore variable universal life insurance policies
Offshore variable annuities a/k/a Swiss Annuities
Debit card and prepaid credit card offshore accounts
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Significance of June 30th FBAR Deadline. This deadline is not affected by your 1040 extension to October 15th. Timely 2013 FBAR filing does not cure failure to file prior-year FBAR’s.
The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. The penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonmthan 50 other countries are working with Treasury t