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You Have Foreign Bank Accounts? Questions Your Tax Preparer Should Be Asking!

My expression was a jaw dropping experience when a client of ours revealed their foreign bank account balances a month after we had filed their tax returns. A long lecture about foreign account balances, and an Amended Tax Return followed with required attachments. We quickly realized the need for the right questions in the December Tax Organizer. This was a few years ago and there have been many updates to those questions now.

Unfortunately there are many taxpayers out there who are still unaware of their filing/ reporting requirements. More details on the requirements in my post here. And many a time this is because they have not been educated of their requirements by their tax preparers. Read More

Written by | Posted in FBAR • Individual • IRS • OVDP

What Questions Your Tax Preparer Should Ask You About Your Undisclosed Foreign Bank Accounts

CPA’s and other professional tax return preparers are bound to the IRS Code Of Professional Responsibility commonly called Circular 230 which if a tax preparer violates could lead to big penalties and sanctions for that tax preparer.

What penalties could tax preparers face?

A tax preparer who is in violation of these rules could be subject to the following:

Internal Revenue Code § 6694(a) provides that if any part of an understatement of a taxpayer’s liability is due to an “unrealistic position” taken on his return, any income tax return preparer who knew (or reasonably should have known) of this position is subject to a penalty of $250. If the understatement is due to a reckless or intentional disregard of Read More

Written by | Posted in FBAR • IRS • OVDP

The Streamlined and Offshore Voluntary Disclosure Program

If a Taxpayer is concerned that his or her failure to report income, pay tax and submit required information returns was due to willful conduct and who wants more assurances that they will not be subject to criminal inability and/or substantial monetary penalties, that taxpayer should consider participating in the Offshore Voluntary Disclosure Program (OVDP) and should consult with their professional tax or legal advisers.

This Offshore Voluntary Compliance Program is a separate I.R.S. Program that waives certain serious penalties but asserts a much higher overall penalty than the Streamlined Procedure and it assures taxpayers that they will have a perfectly clean slate.

Coordination With Treatment Under OVDP

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Written by | Posted in FATCA • OVDP

What Offshore Delinquent U.S. Individual Filers Need To Know! – Part 1

I am a U.S. citizen and have resided in Canada for years and have not filed U.S. Returns. What can I do or what could happen if I do nothing?

Answer

U.S. persons including U.S. citizens or green card holders residing in Canada who are not up to date with their U.S. filing obligations should consider the available programs in an effort to become tax-compliant.

The updated streamlined procedures announced on June 18, 2014 modified changes to the 2012 streamlined program, now known as the Streamlined Foreign Offshore Program (“SFOP”) requiring the filing of 3 years of past-due returns (with required disclosures and Read More

Written by | Posted in Canada • FBAR • OVDP

Prudence And Caution: The Antidote To The Hazards of Certifying Nonwillfulness Under The Streamlined Procedures

Back on August 13, 2014, the IRS issued an update of the Internal Revenue Manual that sheds some light on what type of submissions might be ripe for audit under the streamlined procedures. For those unfamiliar with the Internal Revenue Manual, it is the “official source of instructions to IRS personnel relating to the organization, administration, and operation of the IRS.”[i] It contains instructions that IRS employees rely upon to carry out their responsibilities, such as procedures for processing and examining tax returns.

The most critical aspect of the update is an instruction that requires submissions containing five or more foreign information returns to be referred for examination.

9. To complete adjustments on Form 1040X filed under the SDO: Read More

Written by | Posted in FBAR • OVDP

Banker Charged With Offshore Tax Evasion Acquitted At Trial

Who says that every banker who is charged with aiding and abetting U.S. customers to hide their money offshore is guilty of tax evasion? This is the story of one defendant who forced the government to prove its case and came out victorious. Shokrollah Baravarian, an eighty-two year old retired senior vice president at Mizrahi Tafahot Bank Ltd. (MZTF), was found not guilty of conspiring to defraud the U.S. and helping Mizrahi clients prepare false tax returns.

The jury verdict, which came just four hours after deliberations began, “represented total vindication of Dr. Baravarian,” said Marc Harris, Baravarian’s defense attorney. It also sent a strong message to the government: pursue those that are actually breaking the laws, namely the accountholders who have willfully failed to report their offshore accounts and Read More

Written by | Posted in OVDP

4 Easy Steps For Knocking The FBAR Calculation Out of the Park

Making Sense of the FBAR Penalty Mitigation Guidelines:

This blog is intended for the taxpayer who plans on making a “quiet disclosure” of his unreported foreign financial assets and finds it necessary to estimate his FBAR liability in case of a doomsday scenario. By “doomsday scenario,” I’m referring to a situation where the IRS selects one or more years for examination, culminating in the assertion of onerous FBAR penalties.

No discussion of FBAR penalties would be complete without a discussion of the penalty mitigation guidelines. What are the penalty mitigation guidelines? Some background information is in order. FBAR penalties have varying upper limits, but no floor. For Read More

Written by | Posted in FBAR

Playing Russian Roulette With The IRS: Zwerner Learns The Cost of Hidden Offshore Accounts

Whether you have chosen to hide your account willingly or failed to file an FBAR by mistake, you may not know the full ramifications of your activities or your best course of action now. If you haven’t heard the horror stories yet, you’re about to have a couple to remember. For those who have kept an offshore account secret, there are three options: quiet disclosure, OVDP, or the streamlined offshore procedures. Some may even feel they have a fourth option: keeping the account a secret. The average person may have a hard time deciding what course of action they should take. It may not seem to matter much, but Charles Rettig gives us two frightening examples in his articles, “Jury Determines 150-Percent FBAR Penalty” and “U.S. Seeks FBAR Related Forfeiture of $12 Million!” These stories teach an important lesson, but first, let’s discuss proper offshore account Read More

Written by | Posted in FBAR • International • IRS • OVDP

From The IRS With Love – FATCA

What to Do When Your Foreign Bank Writes to You about Reporting Your Account under FATCA

Nothing can ruin the taste of your martini, shaken not stirred of course, than a letter from your foreign bank demanding that you report the account that you hold with them to the U.S. government. For many, this can scare The Living Daylights out of them, especially since this probably has the IRS written all over it. However, the IRS doesn’t have a License to Kill. Yes, they expect you to pay, but you need to understand what you’re up against first, so read on.

Why Your Friendly Foreign Bank Became Dr. No Read More

Written by | Posted in FATCA

Biggest Tax Fraud In History Ends In Sentencing of Ex-Lawyer To Fifteen Years In Prison

In a case dubbed “the biggest criminal tax fraud in history” by federal prosecutors, former lawyer Paul Daugardas was sentenced to 15 years in prison for helping wealthy clients dodge taxes. However, if you blinked, you might have missed it. Why? Mr. Daugedas was sentenced back on June 25, 2014, just a week after the IRS’s historic announcement that it had overhauled the voluntary disclosure program. Therefore, no matter how ground-breaking this story might have been, because it didn’t bear some relation to the major OVDP announcement, it was all but ignored by the media.

I’ve been following the Daugerdas saga ever since U.S. District Judge William Pauley threw out his earlier conviction and ordered a new trial. Right about now, you might be saying, “Wait. Back up. You’re telling me that Daugerdas had been previously convicted of Read More

Written by | Posted in Tax Fraud/Evasion/Crimes

A Recipe For Whipping Up The Streamlined Offshore Penalty In Three Easy Steps

Before reading this blog, I make the following disclaimer. If it is getting close to lunch time and you can hear your stomach growling, you might want to put off reading this until after lunch. Readers who disregard this warning are doing so at their own risk.

Calculating the offshore penalty within the Streamlined Domestic Offshore Procedures can be tricky. It’s not as simple as tying your shoes. Before delving into the tricky part, let’s cover three basic concepts:

(1) The offshore penalty under the streamlined domestic offshore procedures is 5%.

(2) The 5% penalty is calculated based upon the value of foreign financial assets that would have otherwise formed the basis of the civil miscellaneous penalty under the Read More

Written by | Posted in OVDP
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