Taxpayer Advocate Office Fights IRS Over Terms of Offshore Voluntary Disclosure Program The National Taxpayer Advocate (NTA) has issued a Taxpayer Advocate Directive , complaining about unfair treatment of certain participants in the 2009 Offshore Voluntary Disclosure Program (OVDP). It appears that the NTA shared the same frustration with the OVDP that many tax practitioners, including our tax attorneys, have felt over the infamous Q&A 35 published by the IRS in the Frequently Asked Questions and Answers for the 2009 program.
January 12th, 2012 | Tags: 2011 OVDI, FBAR, fbar irs tax atorney, Foreign Bank Account Reporting, IRS FBAR, Los Angeles Tax Attorney, Offshore accounts, Offshore tax, Offshore Tax Evasion, offshore tax settlement, Swiss Bank Accounts, Tax Attorneys, Tax Fraud | Category: FBAR, Internal Revenue Service, Offshore Income
The Internal Revenue Service (IRS) has recently issued several pieces of guidance related to the filing of the Report of Foreign Bank and Financial Accounts, IRS Form TD F 90-22.1 (FBAR), by pension plan sponsors.1 Who is generally required to file an FBAR? ii While the IRS has relieved some of the filing obligations, most notably the requirement for plans to file for foreign hedge fund investments for 2009 and prior years, certain filing obligations remain. Plan sponsors with foreign financial accounts should be aware of their FBAR filing obligations and should be gearing up to make filings before June 30, 2011 (and, in some cases, June 30, 2010). The following discussion is intended to provide plan sponsors and related individuals with a better understanding of the IRS's position on FBAR requirements and how this position may affect their filing obligations. Under IRS rules, U.S. persons with a financial interest in, or signature or other authority over, financial accounts in a foreign country that have an aggregate value exceeding $10,000 at any time during the calendar year are required to file the FBAR by June 30 of the following year (subject to limited exceptions). Although this filing requirement is not new, the IRS has recently made clear that its scope is much broader than previously understood.
Are there consequences for not filing an FBAR? Yes. Criminal penalties for the willful violation of FBAR requirements can, if connected with the violation of another law or if part of a pattern of illegal activity, reach $500,000 and imprisonment for 10 years. Are plan sponsors and related individuals subject to the FBAR filing requirements? In short, the answer may be "yes." The IRS has indicated that the FBAR filing requirements may extend to employee benefit pension plans an
Expert Witness Directoryg taxpayers with foreign accounts to come clean and get into compliance with the IRS. The program runs through Sept. 9, 2011. There’s been discussion of “opting out” of the program to take your chances in audit, but it’s a topic fraught with danger. Now, however, there is guidance about opting out of the program that makes much of it transparent. Because of this late date it is recommended that you properly file FBARs and the 90-day request for amnesty extension. This is the first important step. If the forms are not done properly, you will have extensive problems and will not have to think about opting out. If your forms are properly done and filed, then your situation should be discussed with someone who is experienced in these matters.
Under the OVDI, taxpayers are subject to a penalty of 25 percent of the highest aggregate account balance on their undisclosed account(s) between 2003 and 2010. If the value was less than $75,000 at all times during those years, the penalty is only 12.5 percent.
These account balance penalties are in lieu of all other penalties that may apply, including FBAR and offshore-related information return penalties. Plus, participants are required to pay taxes and interest on any monies (such as interest income on foreign accounts) they previously failed to report. Finally, they must pay an accuracy-related penalty equal to 20 percent of the underpayment of tax, plus interest.
Opting out of the program can make sense for some, though it involves taking your chances with an IRS examination. Someone should represent you with extensive experience in this. We always suggest they should at least be a CPA with years of experience in international tax. It’s even better if you use one that was with the international tax division of the IRS for a number of years. The IRS has published a separate guide detailing the rules and procedures for opting out.
Here are some of the rules:
1. IRS Summary. The IRS employee who has been handling your case summarizes it, agreeing or disagreeing with your view of penalties, and listing how extensive an audit he or she recommends.
2. Program Status Report. Before you can opt out, the IRS sends a letter reporting on the status of your disclosure and what you still must submit. If you’ve given enough data, the IRS will calculate what you would owadvice on the information provided and related topics, please contact the author.
Taxpayer Advocate Office Fights IRS Over Terms of Offshore Voluntary Disclosure Program
ReplyDeleteThe National Taxpayer Advocate (NTA) has issued a Taxpayer Advocate Directive , complaining about unfair treatment of certain participants in the 2009 Offshore Voluntary Disclosure Program (OVDP). It appears that the NTA shared the same frustration with the OVDP that many tax practitioners, including our tax attorneys, have felt over the infamous Q&A 35 published by the IRS in the Frequently Asked Questions and Answers for the 2009 program.
January 12th, 2012 | Tags: 2011 OVDI, FBAR, fbar irs tax atorney, Foreign Bank Account Reporting, IRS FBAR, Los Angeles Tax Attorney, Offshore accounts, Offshore tax, Offshore Tax Evasion, offshore tax settlement, Swiss Bank Accounts, Tax Attorneys, Tax Fraud | Category: FBAR, Internal Revenue Service, Offshore Income
ReplyDeleteLance Wallach
Shared publicly - Feb 19, 2014
The Internal Revenue Service (IRS) has recently
issued several pieces of guidance related to the
filing of the Report of Foreign Bank and Financial
Accounts, IRS Form TD F 90-22.1 (FBAR), by pension
plan sponsors.1
Who is generally required to file an FBAR?
ii While the IRS has relieved some of
the filing obligations, most notably the requirement
for plans to file for foreign hedge fund investments
for 2009 and prior years, certain filing obligations
remain. Plan sponsors with foreign financial
accounts should be aware of their FBAR filing
obligations and should be gearing up to make filings
before June 30, 2011 (and, in some cases, June 30,
2010). The following discussion is intended to
provide plan sponsors and related individuals with a
better understanding of the IRS's position on FBAR
requirements and how this position may affect their
filing obligations.
Under IRS rules, U.S. persons with a financial
interest in, or signature or other authority over,
financial accounts in a foreign country that have an
aggregate value exceeding $10,000 at any time
during the calendar year are required to file the
FBAR by June 30 of the following year (subject to
limited exceptions). Although this filing requirement
is not new, the IRS has recently made clear that its
scope is much broader than previously understood.
Are there consequences for not filing an FBAR?
Yes. Criminal penalties for the willful violation of
FBAR requirements can, if connected with the
violation of another law or if part of a pattern of
illegal activity, reach $500,000 and imprisonment
for 10 years.
Are plan sponsors and related individuals subject to
the FBAR filing requirements?
In short, the answer may be "yes." The IRS has
indicated that the FBAR filing requirements may
extend to employee benefit pension plans an
Expert Witness Directoryg taxpayers with foreign accounts to come clean and get into compliance with the IRS. The program runs through Sept. 9, 2011.
ReplyDeleteThere’s been discussion of “opting out” of the program to take your chances in audit, but it’s a topic fraught with danger. Now, however, there is guidance about opting out of the program that makes much of it transparent. Because of this late date it is recommended that you properly file FBARs and the 90-day request for amnesty extension. This is the first important step. If the forms are not done properly, you will have extensive problems and will not have to think about opting out. If your forms are properly done and filed, then your situation should be discussed with someone who is experienced in these matters.
Under the OVDI, taxpayers are subject to a penalty of 25 percent of the highest aggregate account balance on their undisclosed account(s) between 2003 and 2010. If the value was less than $75,000 at all times during those years, the penalty is only 12.5 percent.
These account balance penalties are in lieu of all other penalties that may apply, including FBAR and offshore-related information return penalties. Plus, participants are required to pay taxes and interest on any monies (such as interest income on foreign accounts) they previously failed to report. Finally, they must pay an accuracy-related penalty equal to 20 percent of the underpayment of tax, plus interest.
Opting out of the program can make sense for some, though it involves taking your chances with an IRS examination. Someone should represent you with extensive experience in this. We always suggest they should at least be a CPA with years of experience in international tax. It’s even better if you use one that was with the international tax division of the IRS for a number of years. The IRS has published a separate guide detailing the rules and procedures for opting out.
Here are some of the rules:
1. IRS Summary. The IRS employee who has been handling your case summarizes it, agreeing or disagreeing with your view of penalties, and listing how extensive an audit he or she recommends.
2. Program Status Report. Before you can opt out, the IRS sends a letter reporting on the status of your disclosure and what you still must submit. If you’ve given enough data, the IRS will calculate what you would owadvice on the information provided and related topics, please contact the author.