Is a Tax Preparer Liable for Mistakes: Are there Penalties? In recent years, the IRS has significantly increased enforcement of offshore reporting and compliance. Even though the FBAR has been around for nearly 50 years, the IRS has been a penalty issuance spree lately. And, with the introduction of FATCA, international and foreign tax compliance has become even more complex.
In recent months, several court rulings have found that the IRS was within its right to issue willful penalties – even when the facts may seem a bit suspect.
Is a Tax Preparer Liable for Mistakes: Are there Penalties?
So, what happens to the Tax preparer(s) who did not properly report their clients (you) foreign accounts, assets, investments or income. The tax preparer is not immediately penalized by the IRS, because the ultimate responsibility for reporting and taxes falls on the filer. But, depending on the facts and circumstances surrounding the non-compliance, it can get dangerous for the tax preparer.
Did the Tax Preparer Know the Offshore Requirement?
Whether or not the Tax Preparer knew and carelessly gave bad advice, or made a mistake about offshore compliance may significantly impact the outcome.
Tax Preparer Non-Willful Example
Let’s use foreign pensions for this example: The filer visits his local tax preparer’s office. The filer brings information with him, that includes information regarding a foreign pension. The foreign pension does not distribute any money, and seems like a 401K (even if not per se equivalent).
If the tax preparer just tells the client that there is definitely no tax on the growth or reporting responsibility without conducting any due diligence, it may be incorrect. The resulting tax and reporting treatment may be impacted by several factors, such as :
- Whether it was funded when the filers was a U.S. person or not.
- Is there a tax treaty?
- Has the IRS issued any rulings on the particular type of pension?
- Is it employer based, or a person pension investment?
- Have any contributions been made while the filer was a U.S. person?
- Were the contributions included as gross income?
So on, and so forth.
And, if the tax preparer does not conduct the necessary due diligence to determine the proper tax and reporting, the tax preparer may be subject to various penalties:
- An OPR investigation
- Monetary penalties
- Loss or suspension of license
- A lawsuit by the client
Reasonable Cause or Amnesty
Mistake and bad decisions happen to good people. Just because a Tax Preparer may have misunderstood or not been aware of the reporting and tax requirements for offshore investments is usually not fatal, and may be resolved – if handled timely.
We have helped many tax preparers resolve their prior mistakes and safely bring their client into compliance.
Golding & Golding (Board-Certified Tax Law Specialist)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.