Many taxpayers had hoped that telling the IRS “I didn’t know” and submitting a streamlined disclosure application would get them through FBAR disclosures quickly and inexpensively. After all, the streamlined options reduces penalties down to 5% is the IRS accepts the streamlined application when compared to the OVDP or the full penalties of non-compliance with FBAR. Recent statements by the Department of Justice and directions on the IRS’ own website warn taxpayers that “I didn’t know” won’t suffice. Is the OVDP the safest option for FBAR compliance for US taxpayers?
Recently, at an annual meeting of the Federal Bar Association Section on Taxation in Washington, DC, Caroline Ciraolo who is the Acting Assistant Attorney General of the Department of Justice Tax Division stated: “After three very well publicized voluntary disclosure programs, nearly 200 criminal prosecutions, ongoing criminal investigations, and the increasing assessment and enforcement of substantial civil penalties for failure to report foreign financial accounts, a taxpayer’s claims of ignorance or lack of willfulness in failing to comply with disclosure and reporting obligations are, quite simply, neither credible nor well-received.”
The IRS’ has repeatedly stated on its own website that ignorance to the law (with respect to FBAR and offshore reporting) is not an excuse. In the IRS FBAR instructions, the IRS states the failure to investigates one’s responsibilities with respect to reporting offshore accounts, assets and income may actually provide evidence of “willful blindness.” The simple facts concerning the risks associated with the streamlined option are:
- The IRS has recently changed the form itself, requiring extensive background testimony by the taxpayer including educational background, financial history, travel, and the purpose for each investment and offshore account, all under penalty of perjury.
- The IRS has returned many streamlined applications with additional “questions” and in one of our own client’s case a more than casual suggestion that the taxpayer seriously consider the OVDP.
The evidence is mounting that the IRS will not accept a simply claim of “non-willful” conduct on the part of a taxpayer, making OVDP the safest option for FBAR compliance with the IRS. We invite you to contact us for a free and substantive consultation at 866-631-3470.