The Sixth District of the US Court of Appeals upheld requirement for IRS FBAR reporting recently. The decision affirmed the actions of a US District Court which dismissed a complaint which challenged FATCA and the requirement to come into compliance with IRS FBAR disclosures. The lawsuit sought to prohibit the enforcement of IRS Foreign Bank Account Reporting or FBAR under the Bank Secrecy Act and the agreements between the US Department of Justice and banks and financial institutions around the world. These agreements require the institutions to provide detailed information concerning US taxpayers and all accounts for which they hold a “beneficial interest” around the world. As a result more than 100,000 financial institutions, investment houses, banks and sovereign tax authorities worldwide provide detailed account and transaction information directly to the IRS regarding the activities of US taxpayers.
Seven plaintiffs originally filed the lawsuit, including Senator Rand Paul. Mark Crawford is a US citizen who lives in Albania and owns an Albanian investment firm and is a partner in a Copenhagen bank. The Copenhagen bank refused to accept US taxpayers accounts due to the reporting requirements of FATCA forcing him to turn away US clients. The other 5 plaintiffs were also US citizens who lived abroad. Each claimed a personal or professional impact of FATCA and IRS FBAR requirements and sought to enjoin the enforcement of US laws.
US taxpayers are required to report all offshore accounts, investments and assets on the IRS FBAR since 2009. The failure to comply with IRS FBAR reporting requirements results in steep penalties of $100,000 or half of the highest accumulated value of all offshore accounts at the time of each violation, whichever is highest. The IRS has offered two disclosure programs for those who have failed to report accounts on prior FBARs including the Offshore Voluntary Disclosure Program or OVDP and the Streamlined Domestic (or Foreign) Offshore Procedures. The primary difference between the two programs is based upon the “willfulness or non-willfulness of the taxpayer.” The lawsuit challenged the willfulness penalty and several other aspects of FATCA and IRS FBAR reporting requirements.
The fact a US Court of Appeals upheld requirement for IRS FBAR reporting and the dismissal of the plaintiff’s lawsuit by the US District Court reaffirms the immediate necessity to come into compliance with IRS FBAR reporting. Allen Barron provides the integrated international and domestic legal, tax and accounting services to help you to accomplish these requirements, as well as the protections of the attorney-client privilege. We invite you to contact us or call 866-631-3470 for a free consultation.