The IRS is closing in on US taxpayers with offshore accounts thanks to the global exchange of information which has been a by-product of FATCA and the Justice Department’s pursuit of Swiss banking and financial interests. The deal between the IRS and Swiss institutions ultimately led to an agreement to provide detailed account information regarding offshore accounts directly (electronically) to the IRS. Since that time, the IRS has reached agreements with hundreds of thousands of financial institutions in over 100 nations worldwide regarding the exchange of financial account and transaction information.
One example is the inventor of “Beanie Babies” who was required to pay $53.6 million in FBAR related penalties for previously unreported offshore accounts. This amount was far higher than the actual amount of taxes the offshore accounts were intended to avoid. Recent IRS FBAR audits have been targeting much smaller amounts, including a plastic surgeon with less than $2 million in unreported offshore accounts. The writing is on the wall: The IRS has received information directly from international banks and financial institutions with personal tax identification relating to US taxpayers with a beneficial interest in any offshore account.
The core issue in these cases will often be “willfulness” on the part of the US taxpayer in their failure to disclose account information on required IRS FBARs for the years in question. Legally speaking, there is a significant argument to be made regarding the IRS’ burden of proof for willfulness. The two legal standards in question are the most rigorous “clear and convincing evidence” (as applies in US law regarding a civil fraud penalty) and the lower burden of “preponderance of the evidence.” Most courts have elected to apply the “preponderance of the evidence” standard based upon the fact that an FBAR penalty is a financial consequence and the higher burden of proof is not required as the cases do not involve crucial individual interests or rights.
The fact that the IRS is closing in on US taxpayers with offshore accounts and IRS FBAR audits have begun is unavoidable. The integrated tax, legal and accounting services provided by Allen Barron offers US taxpayers the strongest opportunity to mount a successful defense while obtaining the valuable protections of the attorney-client privilege. If you have unreported offshore financial accounts it is imperative to come into compliance with IRS FBAR reporting in an immediate timeframe. We invite you to contact Allen Barron for a free consultation at 866-631-3470 to discuss your unique circumstances and the integrated services we can provide to protect your interests and mount an aggressive defense against the IRS.