The failure to comply with IRS FBAR reporting requirements was part of the recent Manafort indictment, but it doesn’t just apply to the wealthy or powerful. The failure to fully and accurately disclose offshore bank accounts, investments, assets and real property is a challenge for many US taxpayers, and the window to come into FBAR compliance is closing. Tax evasion is the same tool the US Government used to get Al Capone.
Today’s technology and international data sharing agreements between the IRS and banks and sovereign tax agencies around the world makes the job easy for the IRS.
Many news reports have erroneously described a simple process to come into compliance – simply update your FBAR forms online. This is not only inaccurate, it can and will expose you to substantial financial penalties and the possibility of criminal charges for tax evasion. Simply updating past FBAR forms is not enough. The penalty for a willful failure to file accurate FBARs is $100,000 or 50% of the aggregated balance of all offshore accounts at their highest point at any time in a tax year, regardless of their present balance.
The IRS offers two programs for those who have omitted offshore accounts, investments and assets from prior years’ tax returns:
The Offshore Voluntary Disclosure Program or OVDP – provides penalties of between 27.5% and 50% for each tax year, and an important release from criminal tax liability and prosecution
The Streamlined Domestic (Foreign) Offshore Procedures – provides civil penalties of $10,000 per year or penalties of 5% to 7% but does not relieve the taxpayer of exposure to criminal prosecution for tax evasion
Recent court cases have developed the IRS’ definition of failure to comply with IRS FBAR reporting requirements as “willful blindness.” In essence, if you are capable of having any offshore bank accounts, investments or assets you should have known there were IRS tax consequences and you had an obligation as a US taxpayer to not only know the exact laws which govern those accounts, but filed all appropriate reports and paid associated taxes. The IRS will assert willful non-compliance in the substantial majority of these cases.
Allen Barron is a leader in San Diego and the Southwestern United States in FBAR related tax issues. Janathan Allen recently spoke on a national CLE panel hosted by a New York firm providing training for attorneys, accountants, CPAs and US taxpayers regarding IRS FBAR compliance. We can help you to come into IRS FBAR compliance while making sound financial and legal decisions regarding the best program for your unique circumstances. Updating your FBAR forms will not relieve you of any financial consequences for failure to file. We invite you to contact us or call 866-631-3470 for a free consultation if you are concerned about the failure to comply with IRS FBAR reporting requirements or any domestic or international tax issue.