Search results for OVDP

Beyond The FBAR

Other Civil Penalties Lying In Wait For The Unwary Taxpayer With Undisclosed Offshore Assets

With all of the focus on FBAR penalties when it comes to foreign asset reporting, it’s easy to overlook the others, some of which can be just as onerous as the FBAR penalty itself. What other pestilent civil penalties are lying in wait for the unwary taxpayer who decides not to participate in one of the IRS’s voluntary disclosure programs and is subsequently audited?

I. Failure to File a Tax Return Penalty

The civil penalty applicable for failure to timely file returns is section 6651(a)(1). This Read More

Written by | Posted in FBAR • International • IRS • OVDP • Tax Fraud/Evasion/Crimes

Becoming US Tax Compliant Poses A Hidden Problem For Many Iranian-Americans

Along with a host of others, many US-Iranian dual nationals are now becoming aware of their US tax and reporting obligations and trying to become US tax compliant.  All fine and good.  In advising these clients, however, the professional cannot forget that Iran is a sanctioned country and that the US has some very complicated sanction rules in place with Iran.  Generally, the sanction rules prohibit US persons from engaging in most business activities with Iran unless a license is first obtained from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).

My blog post today, imparts knowledge graciously shared by George M. Clarke, a tax partner at Baker & McKenzie in Washington D.C. George and I have worked on a number of very complex tax matters together and George has an expertise in dealing with the Read More

Written by | Posted in Individual • International • IRS

The Risks of Certifying NonWillfulness

Recently, “Tax Notes Today” published an article by Andrew Velarde entitled, Streamlined Program Non-Willful Certification Can Be Hazardous, 2014 TNT 143-4 (7/25/14). The article summarizes comments made by three tax practitioners on a Bloomberg-sponsored webcast relating to the certification of non-willfulness. The practitioners were Robert F. Katzberg, of Kaplan & Katzberg; Alan Granwell of Sharp Partners; and Bill Sharp of Sharp Partners.

If there was a recurring theme to the article it was that certification of non-willfulness is risky business and not for the “do-it-yourselfer.” Very simply, false certifications can lead to steeper penalties (even greater than the onerous OVDP penalty), not to mention criminal prosecution for perjury. Read More

Written by | Posted in FBAR • OVDP

Who Decides Whether To Authorize A Taxpayer’s Certification For Transitional Treatment To The Streamlined Procedures?

Earlier this week, I spoke to an IRS Revenue Agent who shed some light on how the decision regarding transitional treatment is made for those taxpayers seeking to transition to the Streamlined Procedures from OVDP. Under the current procedures, the agent and his or her supervisor make the decision regarding transitional treatment, with involvement as necessary by the technical adviser. Practically speaking, the technical adviser does nothing more than “rubber stamp” the decision made by the examiner and the examiner’s manager.

While the process might seem straight-forward, it is not always seamless. That is where Streamlined Transition FAQ 8 comes into play. It provides some role for a central committee in those cases designated for central committee review. Unfortunately, no Read More

Written by | Posted in OVDP

Disparity In Treatment of Taxpayers Who Qualify For Transitional Relief Is Casting A Shadow On The New Streamlined Procedures

Many tax practitioners have become disenchanted with the IRS’s treatment of those who are transitioning from OVDP to the Streamlined Procedures. What is the source of this disenchantment? Very simply, the IRS is denying the nonwillful certification in a disproportionately high number of cases.

To make matters worse, the process of denial is somewhat of an enigma. In OVDP cases, the IRS has more than just the certification. It also has the Offshore Voluntary Disclosure Letter and the accompanying documents that make up the final submission. According to many tax practitioners, if the certification causes the IRS to doubt the taxpayer’s claim that he was nonwillful, then its default position is to deny transitional relief. Read More

Written by | Posted in FBAR • International • OVDP

Part Two: Can the streamlined compliance procedures be used to correct defective returns that go back beyond the most recent three tax years?

By Michael DeBlis and Virginia La Torre Jeker

Scenario Number 2: Failure to File A Tax Return in Tax Years Four Through Six

Adam is a U.S. citizen with an undisclosed offshore account. He moved to Switzerland in 2008 after taking a job with a Swiss consulting company and has lived there ever since. That same year Adam opened up a checking account at Grosser Schweizer Bank, a Swiss Bank.

Adam’s tax woes go back to 2008, when he relocated to Switzerland. He did not file any U.S. tax returns in 2008, 2009, and 2010. However, he has been fully compliant, at least as far as filing U.S. income tax returns go, since 2011. He has never filed an FBAR. Read More

Written by | Posted in FBAR • OVDP

Part One: Can the streamlined compliance procedures be used to correct defective returns that go back beyond the most recent three tax years?

By Michael DeBlis and Virginia La Torre Jeker

The issue that this article seeks to address is whether a non-willful taxpayer with an undisclosed offshore account can use the streamlined compliance procedures to correct defective tax returns that go back beyond the most recent three tax years? In other words, are the streamlined procedures limited to the most recent three years of troublesome tax returns or could they go back as far as six? Assume for purposes of this blog that the most recent three tax years are 2013, 2012, and 2011.

The issue comes up in the following circumstances. I would like to acknowledge Virginia La Torre Jeker, Esq. as being the inspiration behind this blog as well as being the “think Read More

Written by | Posted in TaxConnections

Common Pitfalls To Avoid When Calculating the FBAR Penalty

To fully understanding your legal duty with respect to disclosing a foreign account on an FBAR, it is first necessary to understand the instructions promulgated by the IRS to prepare an FBAR. A person must file an FBAR informational return if all of the following conditions are met: (1) a “U.S. person”; (2) had a “financial interest” in, or “signature authority” over, or “other authority” over; (3) one or more “financial accounts”; (4) located in a “foreign country”; (5) the aggregate value of such account(s) exceeded $ 10,000; (6) at any time during the calendar year.

Calculating the FBAR penalty is a veritable trap for the unwary. The most common mistakes that I see people make relate to the following issues: Read More

Written by | Posted in TaxConnections

How Do I Calculate My Offshore Penalty Under The Offshore Voluntary Disclosure Program?

Unlike FBAR penalties that can be asserted for multiple years (up to six under the six-year statute of limitations for FBARs), the offshore penalty is a one-time penalty. The values of foreign accounts and other foreign assets are aggregated for each year and the penalty is calculated at 27.5 percent of the highest year’s aggregate value during the period covered by the voluntary disclosure. For calendar-year taxpayers, the voluntary disclosure period is the most recent eight tax years for which the due date has already passed.

Below is an example of how the offshore penalty is calculated:

Assume that Jack holds the amounts listed in the chart below in a foreign account over the period covered by his voluntary disclosure.  He files a return but does not include the foreign account or the interest income on his return.  Nor does he file a FBAR.  Jack decides to apply to the voluntary disclosure program.  Assume further (1) that Jack deposited the $ 500,000 in his account before 2003, properly reporting it; (2) that Jack’s voluntary disclosure is accepted by the IRS; and (3) that Jack is in the 35-percent tax bracket. Read More

Written by | Posted in FBAR • OVDP

Filing Qualified Amended Returns vs. Streamlined Filing Compliance Procedures: What Is My Best Option?

On June 18, 2014, the IRS announced major changes in its offshore voluntary compliance programs. The changes include an expansion of the streamlined filing compliance procedures and key modifications to the 2012 Offshore Voluntary Disclosure Program (OVDP).

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. The modifications to the existing OVDP program provide, in part, for an increased offshore penalty from 27.5% to 50% in certain circumstances.

Options for U.S. Taxpayers with Undisclosed Foreign Accounts

Read More

Written by | Posted in Individual • IRS • OVDP

Overcoming The Pitfalls of Certifying Non-Willfulness When Applying To The Streamlined Compliance Program

Of the recent changes made to OVDP and the streamlined procedures, none have received as much attention – or created as much debate – as the new rule requiring certification of non-willfulness as a condition for gaining entry. This blog focuses on the requirement of the new streamlined procedures that the failure to report income from a foreign financial asset not be willful. This requirement cuts to the heart of penalty mitigation offered by the new procedures.

As a way of background information, in order to qualify for the streamlined compliance procedures, U.S. taxpayers must certify that “the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.” There are now two streamlined procedures: (1) the “Streamlined Read More

Written by | Posted in FBAR • Individual • OVDP • Tax Fraud/Evasion/Crimes
« Older Entries   Recent Entries »