Title 26 Miscellaneous Offshore Penalty Calculation
Title 26 Miscellaneous Offshore Penalty: The Title 26 Miscellaneous Offshore Penalty of 5% is a reduced penalty offered to applicants of the IRS Streamlined Domestic Offshore Procedures (SDOP).
The Title 26 Miscellaneous Offshore Penalty is significantly lower than the FBAR and other offshore penalties a foreign account holder would otherwise suffer if they were audited. The goal is to leverage a smaller penalty (now) against a potentially more devastating penalty(s) later.
For U.S. resident taxpayers considering entering SDOP, it is important to pre-analyze what the penalty will be so that the client has a good understanding of how much they will be out-of-pocket.
Sample Title 26 Miscellaneous Offshore Penalty Calculation
|Form 14654 Penalty Example||How to Calculate||Practice Pointer|
|Step 1: Evaluate your Accounts & Assets||There are many different accounts and assets that may be included in the computation. Two of the most common are assets and accounts involving FATCA (Foreign Account Tax Compliance Act) and FBAR (Report of Foreign Bank and Financial Account Form) *Some assets and accounts may be excluded from the penalty-base.||Be sure your foreign assets and accounts are not excluded from the penalty base|
|Step 2: Compile 12/31 Year-End Balances||Compile the 12/31 balances on your Foreign Accounts, Insurance Policies and other 8938/FBAR qualified accounts for each year within the compliance period.||The use of the December 31st helps avoid double-counting|
|Step 3: Select an annual exchange rate||Determine the proper exchange rate for each year. There are various exchange rates you can use, such as the IRS exchange rates and Department of Treasury exchange rates.||Practice Pointer: Stay consistent with the source of exchange rates you used.|
|Step 4: Aggregate the 12/31 balances||Total the 12/31 balances on your previously unreported Foreign Accounts, Insurance Policies and other 8938/FBAR qualified accounts (Value of Real Estate is not included for the Streamlined Program).||Be sure to only include accounts and assets that comprise the penalty base.|
|Step 5: Select the highest 12/31 aggregate balance||Pick the one-year that has the highest 12/31 balance (not highest max year balance, which is the standard for Traditional Voluntary Disclosure).||The 5% Penalty is not on every year -- just the highest year.|
|Step 6: Multiply the aggregate balance by 5%||Example: Michael's highest year 12/31 aggregate balance in the six (6) year compliance period is 2017. In 2017 his 12/31 balances totaled $2,600,000. His penalty would be $130,000.||Multiple by .05 -- not .50|
Can I Negotiate the Title 26 Miscellaneous Offshore Penalty?
No, unfortunately when a person enters the streamlined domestic offshore procedures, they are subject to a 5% penalty. The IRS agents are not authorized to negotiate the penalty, but is important to note that there are various assets which may be excluded from the computation.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
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:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
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.