IRS Penalty Abatement (2019) – Relief from Tax & Reporting Penalties
In recent years, and due to the increased enforcement of FATCA (Foreign Account Tax Compliance Act) along with renewed interest in FBAR (Report of Foreign Bank and Financial Accounts) reporting, the IRS has been issuing significantly higher fines and penalties against individuals with unreported, undisclosed, or undeclared foreign accounts, assets, investments, and income.
Common issues and concerns, include:
- Why is the IRS requesting a penalty?
- How do I request an IRS penalty abatement?
- Can I get relief from penalties?
- Why is Offshore & Foreign Money an IRS enforcement priority?
IRS Penalty Abatement – Foreign & Offshore Money
It is not so much that the IRS is predisposed to want to go after individuals with foreign accounts and assets, but it is just typically easier for them to do so, since the IRS makes the automatic presumption that if you have money overseas, it must be for illegal purposes.
Oftentimes, when individuals want to hide assets offshore, they do not go through the same stringent planning that they do with domestic laundering, invasion and fraud criminal planning.
For example, when a person wants to launder or hide money in the United States, they typically have to enter into the black market/underworld. When it comes to offshore and foreign related issues, sometimes it is a simple as an offshore investments that the IRS deems so absurd — that it must be illegal.
The IRS Reduces the Penalty Threshold
In years past, the IRS would have to show intent. In other words, the IRS would have to show that a person has willfully or intentionally failed to report or disclose offshore money, in order to hit them with willful penalties (which can reach 100% value of the account in multiple year tax audit scenario)
Fast-forward to today, and not only can the IRS show intent by showing a person acting with reckless disregard (a much lower standard), but the IRS tries to put the burden back on the individual to show that he or she was not willful.
In other words, the IRS strategy is to require an individual to prove they were non-willful in order to avoid willful penalties. In reality, it is the IRS that has the burden to show a person committed fraud, invasion or another specific intent type of crime.
The IRS Pounces
Aside from increasing enforcement, the IRS has increased the penalties it levies against individuals and businesses. Back in the day, it was easier to negotiate out of an FBAR Penalty and/or receive a waiver. These days, the IRS is pushing towards the maximum penalty, even in non-willful situations – which can easily reach six or seven figures in penalties — depending on the number of accounts, the amount of money and the facts and circumstances of the case.
You Can Still Safely Disclose…
Currently, the IRS has not eliminated the traditional OVDP (Offshore Voluntary Disclosure Program) or the Streamlined Program. In fact, with the Streamlined Domestic Program (SDOP), the IRS has not even increased the penalties since its inception back in July 2014 (modified Streamlined).
And, if you happen to qualify as non-willful and as a foreign resident, you may also qualify for a penalty waiver under the streamlined foreign offshore procedures.
…But for How Long
Here is where the problem starts: In recent months, higher ranking members of the IRS have put out feelers letting individuals in the tax compliance industry know that there are rumblings about getting rid or modifying the IRS Offshore Voluntary Disclosure programs…you can thank FATCA for that.
Under FATCA, more than 110 countries and 300,000 foreign financial institutions have agreed to voluntarily turned over information regarding US account holders in their country. Thus, in many situations, the IRS already has the information and may be pushing for a civil or criminal investigation.
The IRS Has Power to Collect Worldwide
Moreover, the IRS has the right to Lien, Levy, or criminally investigate you if there are sufficient facts. If you happen to travel extensively overseas, you’ll be happy to know that the IRS can also revoke or deny your passport. Moreover, the IRS has been working with many foreign countries, in which the foreign country tax authority is enforcing the debt on behalf of the IRS.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
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 Law Specialist credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients