FBAR FAQ - IRS Common Questions & Answers, Certified Tax Specialist (Golding & Golding)

FBAR FAQ – IRS Common Questions & Answers, Certified Tax Specialist (Golding & Golding)

FBAR FAQ – IRS Common Questions & Answers, Certified Tax Specialist

FBAR Frequently Asked Questions: Ever since the implementation of FATCA (Foreign Account Tax Compliance Act), FBAR (Report of Foreign Bank and Financial Accounts) reporting has become a major concern for U.S. Taxpayers with foreign accounts. As such, it is important to understand what the purpose of the FBAR is – along with the technicalities in preparing the form.

              

FBAR FAQs

Golding & Golding are highly-respected International Tax Lawyers and FBAR (Report of Foreign Bank and Financial Account) Lawyers who have worked with thousands of individuals and businesses with FBAR compliance related issues in accordance with IRS and DOT rules and regulations.

Watch Out for Fear Mongering

Many unscrupulous law firms, CPAs and Lawyer/CPAs are providing the public with misinformation about the FBAR form in order to try and scare them into retaining these firms for FBAR representation, only to be left in a worse position than when they started.

Sean M. Golding, JD, LL.M., EA – Certified Tax Law Specialist

Our Managing Partner, Sean M. Golding, JD, LLM, EA is the only Attorney nationwide who has earned the Certified Tax Law Specialist credential and specializes in IRS Offshore Voluntary Disclosure Matters.

In addition to earning the Certified Tax Law Certification, Sean also holds an LL.M. (Master’s in Tax Law) from the University of Denver and is also an Enrolled Agent (the highest credential awarded by the IRS.) 

He is frequently called upon to lecture and write on issues involving IRS Offshore Voluntary Disclosure.

Out of more than 200,000 practicing attorneys in California, less than 400 attorneys have achieved this Certified Tax Law Specialist designation.

The exam is widely regarded as one of (if not) the hardest tax exam given in the United States for practicing Attorneys. It is a designation earned by less than 1% of attorneys.

*Click Here to Learn about how Attorneys falsely market their services as “specialists.”

The Most Common FBAR Filing FAQ

What is an FBAR Statement?

An FBAR statement is a Report of Foreign Bank and Financial Accounts form. It is electronically filed annually with the Department of the Treasury online. Before the current year, the FBAR form had to be filed no later than June 30th of the current tax year in order to report the accounts for the prior tax year (File in 2018 to report the 2017 Maximum Account Balances). The law has changed, and FBARs are due in April, with an automatic extension through the October filing extension date.

Is it more than $10,000 per account, or in Total?

An FBAR is required to be filed when a person or business (explained below) has an annual aggregate total of foreign accounts that exceeds $10,000 on any day throughout the year. It does not matter if all that money is in one account or if a person had 11 accounts with $1000.00 in each account.  Once your overseas foreign accounts exceed $10,000, it is now time to report all of the foreign accounts. 

You are required to report the maximum balance throughout the year. If you do not have the maximum balance available, you can mark the box that notes the Max balance is unavailable — or alternatively you can use the best value you have, and then note that information on the FBAR.

What if the Money is not mine?

Even if the money is not yours, but you have signature authority over the foreign account – you are required to report the account on the FBAR. This also includes accounts in which you are a joint account holder but the money is not yours – it still must be reported.

Who or What is a U.S. Taxpayer?

This question can get more and more complex depending on who you speak to and what the context of the question is. To that end, if you are either a U.S. citizen, Legal Permanent Resident, or Foreign National Subject to US tax such as a visa holder (if you meet the Substantial Presence Test), then you should most likely file the annual FBAR form.

*If you are unsure whether you should file the form or not, you should speak with an experienced International Tax Lawyer to evaluate your particular situation.

I Live Overseas, Does that Matter?

Unlike a FATCA Form 8938 — which is similar to the FBAR — the requirements for filing the FBAR do not change solely because you live overseas. In other words, if you still meet the requirements for having to file a tax return (even if you do not have to file a tax return because you did not meet the minimum threshold requirements for earning income sufficient to file a tax return) you still have to file the FBAR – no matter where you live.

I Relinquished my Green Card/Legal Permanent Residency 

Unfortunately, just because you relinquished your green card does not mean you are exempt from filing an FBAR. If you are considered a long-term resident of the United States and/or meet the substantial presence test you may still be responsible for filing an annual FBAR statement. 

*You should speak with an experienced FBAR lawyer to discuss this in more detail.

I did Not have to File a Tax Return?

This can also get confusing, but it is important to remember that the FBAR is not filed with your tax return. Rather, while your tax return is filed directly with the Internal Revenue Service (by mail or online), your FBAR is filed online electronically directly with the Department of Treasury. Even if you do not meet the threshold requirements for filing a tax return, if your annual foreign account balances exceed $10,000, you should still file the FBAR.

The Money in the Foreign Accounts is not Mine?

This is not unusual. It is very common in foreign countries to have children or other individuals with a Power of Attorney over another person’s account – even when the money does not belong to the POA holder. To that end, if a person’s name is on the account, they should still file an FBAR statement. There is a section of the FBAR reserved for individuals who have signatory authority or other type of authority on the account, but the money is not theirs.

I do not want to Report my Foreign Parents’ Name on the FBAR

We understand the importance of privacy. Generally, there are ways around reporting the information the FBAR where you disclose certain information but not all the requested information (while still being FBAR compliant). 

The Money is from an Inheritance

It is important to remember that the FBAR is a reporting form. In other words, the Department of Treasury wants to know whether you have the money overseas — so that the DOT can track it.  The source of the money is less important to the degree that the Department of Treasury does not really care whether you received it from an inheritance, whether you earned it overseas, or whether you have full access to that money at the current time – for FBAR purposes at least.  Rather, they just want to know where the money is being held in whose name is associated with the account.

Thus, even if the money was inherited, you are required to report the account information on the FBAR. If you fail to do so and get stuck in the IRS/DOT crosshairs as a result of the foreign financial institution reporting the account in accordance with FATCA, it will be much harder to explain the situation at that time versus simply filing the FBAR timely or entering into OVDP or the Streamlined Program.

**That does not mean you should file a late FBAR without entering one of the approved programs (please see below).

My Accounts are in the name of a Foreign Corporation 

This is where the FBAR starts to get more complicated. The most important thing to remember is the concept of the FBAR is to promote financial transparency. Therefore, it does not really matter how you structure the business, if in the end the money is yours, then you should file the FBAR.

This can be distinguished from a company in which you are merely an employee and have signatory authority, which would require a comprehensive analysis of the business and your rights to the business and money before determining whether you should file.

My Name is not on the Company…But I “Own” The Company

We get it. You opened the company offshore using other people’s names. In other words, even though your name is not directly on the corporate documents or other documents required to form the business in the foreign jurisdiction of choice…the money is yours.

This is the type of situation in which you should speak with an experienced FBAR lawyer before taking any action. Why? Because while technically the money is not yours to the degree that your name is not on the company, if the IRS or US government was to pierce the corporate veil and learn of your ownership (whether in fact or implied) you may be looking at tax evasion and tax fraud charges.

Alternatively, by claiming interest or ownership of the account in which your name is not directly associated may also open a Pandora’s box. This is the type of situation which may be best remedied through an offshore disclosure program – which is why you should wait to take any action before speaking directly with an experienced offshore disclosure lawyer

My Accounts are in the name of a Foreign Holding Corporation

It does not matter that the accounts are in a Foreign Holding Corporation – this is not sufficient to avoid filing the FBAR statement. Otherwise, a US taxpayer could simply open a BVI Holding Corp and put the holding Corp. as the owner of the account and thus not to have the file the FBAR – even though all of the account money belongs to the US taxpayer – which is directly contradictory to the purpose of the FBAR.

If you are the “true owner” of the money, then filing the FBAR is technically required.

My Accounts are in the name of a Foreign PFIC Corporation

The same thing goes for a Passive Foreign Investment Company. Depending on which country you are in and how the country titles the foreign company, these companies come in all shapes and sizes. Back in the 80s, they were used primarily to avoid detection by the United States government of foreign account and asset information. There is no exception to filing an FBAR simply because you transferred your money into the PFIC. 

My Accounts are in the name of a Foreign Trust

As you can imagine, foreign trusts are not immune from having to file an FBAR statement either – in addition to possibly having to file a 3520 and 3520A. Whether the purpose of the foreign trust was “harmless,” and/or you thought you could avoid U.S. detection or possibly to form the foreign credit shelter trust or foreign asset protection, a foreign trust does will not negate your requirement to file an FBAR. If the accounts are in a foreign trust, in which you are the owner of the foreign trust then you have to report the account on the FBAR.

What Types of Accounts must be Reported on an FBAR?

Essentially, any account that is maintained at a foreign financial institution must be reported on the FBAR – but this does not mean every income generating asset has to be included. Here’s an example: if you have a Foreign Bank Account at a Foreign Financial Institution it has to be reported on the FBAR. Conversely, if you have a foreign rental property that is earning foreign rental income, while the foreign rental income must be reported on your tax return, and the account in which the income that is generated is placed into must be reported (assuming you otherwise meet the FBAR filing requirements) —  the home itself does need not be reported on the FBAR.

Do I have to report my Life Insurance Policy?

This is another complex area of the FBAR. Essentially, if the life insurance policy (or life assurance policy as it is called in many countries) has a surrender value or sale value insofar as you could sell the policy on the open market – it should most likely be reported on the FBAR.

In situations like this where there is a reporting requirement, it is better to err on the side of caution.

Reporting on the FBAR vs. Paying Tax on the Money

This is a question we receive often, and so a distinction must be made. Just because you are reporting a foreign account on an FBAR does not mean there is a taxable event taking place. For example, the money may have been inherited, received as a gift and/or earned with income tax already having been paid on the earnings.

Thus, the key issue to remember with an FBAR is that the FBAR is a reporting requirement for you to update the Department of Treasury with your foreign accounts that you maintain overseas; it has nothing to do with whether there is a taxable event taking place.

Remember, the FBAR is a “Reporting” requirement for purposes of “Disclosure.”

I do not know my Maximum Account Value?

When you are reporting on the FBAR, you are supposed to provide the maximum value of the account balance for the year. Depending on which country you are in, and whether the account provides you statements (or if it is a passbook account) that information may not be readily available. When that information is not available, you may either click the box that reads maximum account balance unknown or you may also consider using the balance that you have available, and explaining why you cannot obtain the maximum value in the box provided on the first page of the FBAR.

Can If I file a Late FBAR Statement?

This is a very complex issue. Technically, you are not allowed to file a late FBAR statement. There is some exception for direct filings in situation where there is no unreported income. Other people submit a Quiet Disclosure (in which they secretly file prior FBARs and amended tax returns) which can result in extremely high fines and penalties.

The Internal Revenue Service a Department of Treasury are taking foreign account compliance very seriously and it is a major priority for the IRS. If you have not filed your FBAR statements, you have three main alternatives: Reasonable Cause Statement, Streamlined Disclosure, or OVDP (these are briefly discussed below)

Late FBAR Filings and a Reasonable Cause Statement

If you have not filed your FBAR timely, the first option is to submit the FBAR late accompanied by a Reasonable Cause Statement. The failure to file an FBAR can have extremely high penalties. Therefore, if you opt for the reasonable cause statement as opposed to one of the approved programs discussed below, then you are essentially submitting the account information and asking for forgiveness from the IRS for any penalty.

Two things to keep in mind his first, the IRS is not very sympathetic, and second, if the IRS disagrees with your reasoning — you have now disclosed all of your account information to the IRS with no protection from penalties or criminal investigation.

For more information about Reasonable Cause, please Click Here for a summary provided by Golding & Golding.

Late FBAR Filings and the Streamlined Program

Under the streamlined program, a person will amend their tax returns for three (3) years as well as file six (6) years of unreported past FBAR statements (assuming that they are a U.S. taxpayer for six years; if they have only been a US taxpayer for four (4) years they would only file four (4) years of past FBAR statements). This program is reserved for taxpayers who were non-willful (in other words, they were unaware of the requirement to file FBAR and report their foreign income).

For more information about the Streamlined Program, please Click Here for a summary provided by Golding & Golding.

Late FBAR Filings and OVDP

OVDP is the Offshore Voluntary Disclosure Program. It is a program designed for individuals, businesses and trusts that knowingly intentionally failed to report their foreign account information and foreign income earnings. The program requires the applicant to file eight (8) years of past FBAR statements along with eight years of original and/or amended tax returns.

For more information about OVDP, please click here for a summary provided by Golding & Golding.

Is the FBAR the same as an 8938 form?

No. While the forms are similar, they do have key differences. The 8938 (Statement of Specified Foreign Financial Assets) is filed with your tax return and has different threshold requirements (much higher than the $10,000+ for an FBAR), which will be dependent on whether the taxpayers are filing married filing jointly, married filing separate, single — as well as whether they reside in the United States or overseas.

               

We hope this summary will assist you understand the general concepts and requirements of filing an annual FBAR statement. This list is by no means comprehensive and if you have a specific question which was either not answered here (or is unclear) please feel free to contact our firm.

Below we have provided a summary of the FBAR filing process:

FBAR Penalties

FBAR Penalties for inaccuracy, late filing, and non-filing, can be severe. When it comes to FBARs, the IRS has extensive authority to issue penalties ranging upwards of 50% value of your account, per year. This is in addition to Form 8938 Penalties – which are similar, but not the same as FBAR Penalties.

With that said, there are legitimate methods for reducing, avoiding and waiving FBAR Penalties, which we will summarize below — with the main options being OVDP, Streamlined and Reasonable Cause.

FBAR Penalty Basics

The FBAR aka FinCEN 114 (Report of Foreign Bank and Financial Accounts) is one of the most dreaded International IRS Tax forms out there. 

Moreover, depending on the facts and circumstances surrounding the failure to report the form, a person may find himself or herself subject to extremely high monetary fines and penalties, including a penalty that reaches a 100% value of the unreported foreign accounts and assets (in a multi-year audit) and/or by themselves subject to a criminal investigation for tax fraud or tax evasion.

Instead of boring you with the history of the FBAR (it dates back nearly 50 years, with renewed interest in accordance with the introduction and enforcement of FATCA), we are going to focus on the Good, the Bad and the Ugly of FBAR penalties.

At Golding & Golding, we limit our entire tax law practice to IRS Offshore Voluntary Disclosure, including FBAR Penalties.

FBAR Penalties

FBAR Penalties represent a major part of our IRS Offshore Voluntary Disclosure practice. While we have authored several articles and blog postings on issues involving FBAR penalties, FBAR Filings, and FBAR Frequently Asked Questions (FAQ), we feel that by providing you a Summary Review Guide to FBAR Penalties in general — it may assist you better answer the following questions:

  • What is an FBAR?
  • What is the purpose of and FBAR?
  • What are FBAR penalties?
  • Which FBAR penalties will I be subject to?
  • Most importantly — How can I avoid, limit or reduce FBAR Penalties?

FBAR

An FBAR is a Report of Foreign Bank and financial Form aka FinCEN 114. Unlike FATCA (Foreign Account Tax Compliance Act), which is a relatively new law, the FBAR rules and regulations has been around since the 1970s. It was only recently, with the development (2010) and enforcement (2014) of FATCA that FBAR filing has become such a big deal. While the FBAR was initially developed and enforced through FINCEN, the IRS has the power to enforce FBAR penalties against individuals and businesses. 

Filing an FBAR

Once you understand the purpose of an FBAR, you will realize that it is not a difficult form to prepare and file. While the 5471 form is lengthy, and the 8621 Excess Distribution calculation is hard, the FBAR is more of an annoyance and invasion of financial privacy than it is a “hard” form to prepare.

Essentially, The FBAR must be filed annually, by any individual who has ownership, joint ownership or signature authority over either one account (or several) accounts, investments, life insurance policies — when the annual aggregate total value of all the accounts combined exceed $10,000 on any day of the year.

In reality, pretty much any type of foreign account must be included on the FBAR. While there may be some exceptions, the majority of the accounts must be reported. Therefore, whether it is a foreign bank account, foreign investment account, foreign savings account, foreign life insurance policy, foreign mutual fund, foreign pension (Superannuation, CPF, EPF, PPF) or any other foreign account that has an account number, it should be filed.

Since filing the FBAR is merely a reporting requirement, it does not necessitate that any tax will be levied as a result of the filing, Thus, it is better to err on the side of caution and include all of your accounts on the FBAR.

*This is not a guide to understanding what accounts may be required on the FBAR, it is a summary for you to understand what happens when you did not file the FBAR and what penalties you may be subject to. For more information about FBARs in general, please refer to our Frequently Asked Questions page.

What Are FBAR Penalties?

When a person fails to properly file an annual FBAR statement, and the IRS discovers or uncovers the non-filing, the U.S. Government has the right to penalize the individual for failing to properly file the FBAR.

The law is found in the Internal Revenue Code (aka Tax code) Title 31 USC 5321. This is the code section that authorizes the U.S. government to enforce FBAR penalties against any individual that fails to properly comply with the filing an annual FBAR. As crazy as it sounds, the penalties for your failure to properly file this form are borderline obscene.

Non-Willful

The IRS has the authority to penalize you upwards of $10,000 per violation, per account for violations that were non-willful. In other words, if you didn’t even know you were supposed to file the form and report your annual maximum balance on an FBAR statement, the IRS can still penalize you upwards of $10,000 per account, per year.

Sounds absurd, right?

Take this Example: David is a Legal Permanent Resident (Green Card recipient) who relocated to the United States for work when he was 42 years old. David was transferred by his company to the United States initially on an L-1 visa due to his proficiency in science and management. David earned several million dollars during the first 20 years of his career, which he staggered over seven different accounts. These accounts earn about $50,000 a year in passive income.

Under the current state of the law, David could be penalized upwards of $70,000 per year for the six years of unreported FBARs – that is a whopping $420,000 penalty solely because he was unaware of the rule. He will also have to pay taxes, fines and penalties on the unreported income — along with additional fines for unreported FATCA form 8938.

*The reason it is six (6) years instead of three (3) years is due to a nuance in the law statute of limitations which states that when a person has more than $5000 of unreported foreign income, the statute of limitations is expanded from three (3) years to six (6) years.

**The FBAR is only one of several forms David did not file which can lead to additional penalties, including FATCA 3520, 3520-A, 5471, 8621, and FATCA Form 8938.

Willful

If the IRS reserves the power to penalize you $10,000 per violation, per account, per year for a non-willful violation – would you like to take a guess at what the penalty would be if they think you were fraudulent?

Answer: The penalty can reach $100,000 or 50% of the account value – whichever is greater.

Therefore, in a multiyear audit, you could easily be penalized 100% value of the account balances. But, at least you can take some solace in the fact that the IRS has reduced the maximum penalty from 300% down to 100%. In other words, using the six-year statute of limitations explained above, in prior years, the IRS could penalize you 300% value (50% per year, for a total of six years). At least now, the penalty is limited to everything you have…and nothing more.

What is the Legal Standard for Willful and Non-Willful?

Despite the fact that the IRS can levy obscene-level penalties against you, it is also good to know that the IRS has not established a set, bright-line rule (clearly defined test) that you can use to determine whether you are willful or non-willful.

There are not as many cases as you would think that have referenced Willful and Non-Willful with respect to FBARs, but there are some guidelines to keep in mind:

Willful does NOT mean Intent or Knowledge

In other words, in order for the IRS to prove willfulness, the IRS does not need to show that you knew you were required to file the FBAR. That would make it too difficult for the IRS – therefore, the IRS has essentially lowered the threshold for themselves to prove Willfulness. This begs the question — what else qualifies as Willful?

Willfulness Can Mean Willful Blindness

What does Willful Blindness even mean? It means that if you knew that you should have known you were required to file an FBAR, then you could be held to a willful standard. 

Here is an example of Willful Blindness:

* Let’s say you were minding your own business and an individual walked up to you and told you they will give you $1 million if you drove their vehicle past a known DEA drug point. Without any question as to why they are offering to pay you this much money to essentially drive a car, you accept the offer and drive the vehicle up-to the checkpoint. Unfortunately, you are unlucky and the car is checked, and the cops discover 200 pounds of uncut cocaine was in the car. You could not argue that you did not know there were drugs in the car (no knowledge), because who pays another person $1,000,000 to drive their car past a drug checkpoint? In other words, you should’ve known there was something amidst… and by not asking, you are willfully blind.

Reckless Disregard

Unlike willful blindness, reckless disregard appears to be an even lower standard of willfulness. At least with willful blindness, you should’ve known to ask, but you knowingly didn’t ask…because you didn’t want to know. With reckless disregard, according to the IRS, while you may have believed you didn’t have a filing requirement, your belief was so “ridiculous” that the IRS would never believe you are so stupid. Talk about a walking contradiction…

In a recent California District Court decision (Which could still go up on appeal — U.S. vs. Bohanecs) the court relied upon the reckless disregard standard in making its decision – which can be found here. It is important to note that in the Bohanecs, the facts reflected that the Bohanecs were pretty sophisticated…in addition to stupid.

**One very important thing to takeaway from the Bohanecs case, is not just that the threshold to prove willfulness does not require “actual knowledge,” but just as important is that even though willful FBAR penalties are essentially criminal nature, since they are not being enforced in a criminal setting, the government was not required to meet the criminal standard of beyond reasonable doubt.

In other words, if the IRS wants to issue you criminal level penalties in a civil setting, they do not have to reach the level or burden of proof required in a criminal setting — and the standard essentially boils down to someone being…stupid.

Put it this way: With the way the IRS is always increasing enforcement of international tax related matters, it is safe to say that if the IRS believes in any way, shape or form that you knew, should’ve known, intentionally blind-to-the-fact, or were just stupid to the fact that you should have been reporting the FBAR, you are probably in for a dogfight with the IRS — because they will presumably try to enforce willful penalties against you.

Why Are FBAR Penalties So High?

This is a good question, to which there is no real proven substantive answer.

Sure, the IRS will argue that is to reduce financial crimes, minimize offshore monies being diverted to illegal operations such as drugs and terrorism, and eliminate offshore tax havens – but these facts have yet to be proven. While the IRS touts that it has recovered more than $10 billion in the offshore disclosure program, it has not indicated that it has achieved any reduction in the above-referenced illegal activities as a direct result of the heightened penalties. In reality, many of these people were just scared individuals who probably did not meet the threshold for Willful, and either did not want to “Chance it” with the Streamlined Program, or too nervous (understandably so) to Opt-Out.

In reality, the IRS knows that this is a money grab. In other words, the IRS is aware that yes, there are some major players in the offshore tax world who were caught with hundreds of millions of dollars offshore, and will now be forced to pay very stiff penalties in order to avoid Jail – but that is not the majority of people the IRS catches.

The IRS must be aware that the majority of individuals who have “offshore” accounts did not create these accounts for any illegitimate purpose. Rather, the majority of these individuals either worked overseas, were originally from overseas before relocating the United States and/or have family overseas. Thus, it would make perfect sense that these individuals would maintain offshore or foreign accounts.

For these individuals it is a very scary ordeal.

Turning Non-Willful Violations into Willful Violations

When the IRS can simply bootstrap a non-willful violation into a willful violation, just by showing that a person should’ve known they should have been reporting their foreign accounts (or the IRS believes they were too “stupid” not to know) – what protection do individuals really have against the willful penalties?  Since the IRS refuses to provide a specific bright-line test for taxpayers to determine if they were willful or not — the IRS is intentionally keeping the U.S. taxpayers in the dark.

While there are some situations in which it will be obvious that the person was reckless or willfully blind, there will be many more scenarios/situations in which the person may not have been willfully blind or reckless – but the IRS disagrees and wants to push forward with willful penalties. 

Our conclusion is simple: the penalties are so high, in order to catch the big Whales. And, while many small fish may also get caught in the Offshore Disclosure net, the IRS does not a believe in “Catch and Release.”

Can I be Criminally Prosecuted for FBAR?

Yes.

The IRS has the absolute right to initiate a criminal investigation by assigning your matter one of the IRS special agents to pursue a full-fledged criminal investigation to determine whether you were willful in your failure to report your foreign accounts on an FBAR.

The reality is, the IRS does not always initiate a criminal prosecutions – in fact the chances of them doing so are relatively low. Out of the millions upon millions of violations each year, coupled by the millions of civil audits the IRS launches each year that may uncover an FBAR non-filing, the IRS only prosecutes anywhere from 3000 to 7000 criminal prosecutions each year.

That is not to say that the IRS does not pursue many more criminal investigations, but less than 10,000 each year will reach the point in which the IRS wants to prosecute an individual and place him or her in prison. Usually because the individual is forced to succumb to a pre-indictment resolution – even when they believe they were non-willful.

Offshore tax evasion enforcement is a major priority for the IRS. Each year, the IRS publishes a dirty dozen tax scam list for individuals to be cautious of, and offshore tax evasion is always in the top three spots on the list.

In fact, the U.S. Government has developed specific programs that are specifically designed to combat offshore tax evasion and tax fraud.

Swiss Bank Program

For example, in 2013 the government created the Swiss bank program, which as provided by the DOJ “The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Terrorist Financing and Financial Crimes

As the policy development and outreach office for TFI, the Office of Terrorist Financing and Financial Crimes (TFFC) works across all elements of the national security community – including the law enforcement, regulatory, policy, diplomatic and intelligence communities – and with the private sector and foreign governments to identify and address the threats presented by all forms of illicit finance to the international financial system.

TFFC advances this mission by developing initiatives and strategies to deploy the full range of financial authorities to combat money laundering, terrorist financing, WMD proliferation, and other criminal and illicit activities both at home and abroad. These include not only systemic initiatives to enhance the transparency of the international financial system, but also threat-specific strategies and initiatives to apply and implement targeted financial measures to the full range of national security threats. Primary examples of these roles in advancing this mission is TFFC’s leadership of the U.S. Government delegation to the Financial Action Task Force, which has developed leading global standards for combating money laundering and terrorist financing and its role in specific efforts to counter threats like proliferation, terrorism and the deceptive financial practices of Iran.

Office of Foreign Assets Control (OFAC)

The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States. OFAC acts under Presidential national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze assets under US jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments. 

FinCEN (Financial Crimes Enforcement Network)

This statute establishes FinCEN as a bureau within the Treasury Department and describes FinCEN’s duties and powers to include:

  • Maintaining a government-wide data access service with a range of financial transactions information
  • Analysis and dissemination of information in support of law enforcement investigatory professionals at the Federal, State, Local, and International levels
  • Determine emerging trends and methods in money laundering and other financial crimes
  • Serve as the Financial Intelligence Unit of the United States
  • Carry out other delegated regulatory responsibilities

**Authorities Delegated to FinCEN pursuant to TREASURY ORDER 180-01 

This Treasury Order describes FinCEN’s responsibilities to implement, administer, and enforce compliance with the authorities contained in what is commonly known as the “Bank Secrecy Act.”

What Tax Crimes Can I be Convicted of?

As provided by the IRS, Possible criminal charges related to tax matters include tax evasion (IRC § 7201), filing a false return (IRC § 7206(1)) and failure to file an income tax return (IRC § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.  Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. § 286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).

– A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000.

– A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.  

– A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000.  

– A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.

What are the Options to Reduce or Avoid FBAR Penalties?

In order to avoid severe FBAR penalties, the US government has created a program entitled IRS offshore voluntary disclosure.

Offshore Voluntary Disclosure Tax law is very complex. There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.

Ready to Hire an Offshore Disclosure Attorney?

Once you are ready to hire an Offshore Disclosure Attorney, it is very important to separate fact from fiction. Here is a recent article involving the different pitfalls, scams and sales pitches you need to watch out for: Attorney Fees for OVDP – Separating Fact From Fiction.

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