- 1 Aggressive FBAR and Streamlined Sales Techniques
- 2 You Are Probably Non-Willful
- 3 Are FBAR Penalties Per Form or Per Account
- 4 Willfulness is less Common
- 5 Criminal FBAR Penalties are Pretty Rare
- 6 Need Help Finding an Experienced Offshore Tax Attorney?
- 7 The Difference Between Current Year and Prior Year Non-Compliance
- 8 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 9 Golding & Golding: About Our International Tax Law Firm
Aggressive FBAR and Streamlined Sales Techniques
Several times throughout the year, our international tax lawyer specialist team is contacted by Taxpayers who were goaded into an incorrect and overpriced offshore disclosure and late foreign account filing submission. These attorneys typically offer a free initial call, and during that call, the attorneys scare the Taxpayer into believing that they have to act as soon as possible — and immediately sign with that law firm before consulting with other attorneys (this is always a bad sign). The attorney further scares the Taxpayer into believing that if they do not sign a retainer immediately, they are setting themselves up for disaster by way of willfulness penalties and criminal enforcement. By the time the Taxpayer reaches our office, they may have already spent tens of thousands of dollars for an inexperienced attorney only to learn that the attorney misrepresented the situation, prepared a sloppy submission (if it was even completed), and did not deliver on their promises. When it comes to FBAR, the issue is usually nowhere near as bad as the fear-mongers want you to believe. Let’s go through a few important facts to assist you in your research quest.
You Are Probably Non-Willful
The majority of Taxpayers who did not timely file their FBAR are non-willful and/or have reasonable cause. It was only in the past few years that the FBAR became an IRS enforcement priority, and the reality is that most taxpayers have never heard of the FBAR form until recently — and by time they have learned about the form, they are usually already many years out of compliance. In fact, even if the Taxpayer marked ‘No’ on Schedule B for prior years – it could have easily been because their CPA did not ask them about foreign accounts and/or it was an automatic reflex (or their software program may use ‘no’ as the default category). Even the IRS is aware that simply marking ‘no’ does not constitute willfulness:
As provided by the IRS:
“The following points address common situations that may apply to you:
We realize that many taxpayers failed to acknowledge their financial interest in or signature authority over foreign financial accounts on Form 1040, Schedule B. If you (or your return preparer) inadvertently checked “no” on Schedule B, line 7a, simply provide your explanation.
We realize that some taxpayers that owned or controlled a foreign entity (e.g., corporation, trust, partnership, IBC, etc.) failed to properly report ownership of the entity or transactions with the foreign entity. If you (or your return preparer) inadvertently failed to report ownership or control of the foreign entity or transactions with the foreign entity, explain why and include your understanding of your reporting obligations to the IRS and to foreign jurisdictions.
If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background such as how you came into contact with the advisor and frequency of communication with the advisor.
If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.”
Are FBAR Penalties Per Form or Per Account
On February 28th 2023, the Supreme Court in Bittner ruled that the IRS is limited to issuing penalties per form and not per account. That will typically limit penalties going back six years to $60,000 although the FBAR penalties adjust for inflation, so the $10,000 per year may be closer to $14,000 per year.
Willfulness is less Common
To reiterate what we mentioned above, most taxpayers are non-willful. But, even if the IRS initially believes you are willful, you still have the opportunity to mitigate penalties. Likewise, simply because a person is considered willful in the civil arena does not mean that they committed a criminal FBAR violation.
Criminal FBAR Penalties are Pretty Rare
Criminal FBAR penalties are rare. They tend to only rear their ugly head in situations in which Taxpayers have violated several other tax laws as well, such as evasion, criminal tax fraud, money laundering, structuring, etc.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
The Difference Between Current Year and Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.