What to expect in an FBAR Audit

The IRS has invested millions of dollars and has hired thousands of special auditors to conduct FBAR audits on US taxpayers that it suspects of not filing FBAR forms or filing incorrect FBAR forms. For taxpayers who haven’t filed FBARs or who have filed incorrect FBARs, the situation is daunting.

Not only are FBAR penalties not based on income but rather, calculated on the highest account balances. Additionally, the IRS and Department of Justice is seeking to make an example of those who haven’t filed FBAR correctly.

The good news, that if handled correctly, the risks of an FBAR audit can be diminished, allowing the IRS to move on to other targets.

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“I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.”

Ecclesiastes 9:11 King James Bible (Cambridge Ed.)

FBAR Amnesty for those who did nothing wrong

I thought of my good friend Ecclesiastes today, while reading a New York Times article, “Many Americans Abroad Surprised by Tax Code’s Nasty Bite.” I recalled my feeling that the above passage was incomplete. If my years in tax and criminal law have taught me anything, I would add just one more exclusionary caution: “nor punishment to the guiltiest.”

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Watch our FBAR Penalty & OVDI Webinar

Sign up for our FBAR Webinar here

Transcript of Video:

Are missing IRS FBAR forms freaking you out? Is the threat of massive FBAR penalties for you or your clients giving you anxiety? Are you unsure of what you need to do in order to avoid the wrath of the IRS? Then we have just the thing. Hi this is tax attorney Anthony Parent, managing partner of Parent & Parent LLP, the IRS Medic. Join me and the head of our firm’s offshore tax compliance department, attorney Amy Holbrook for our webinar – everything you never wanted to know about the IRS FBAR but must, simply by signing up in the box on the left. During this webinar you’ll find out how to reduce FBAR penalties, the history of the FBAR, you’ll know more about the FBAR form than 99% of IRS employees, the other kinds of FBARs to watch out for, how to know if you have to enter into one of the offshore voluntary disclosure programs or if there is a simpler way to handle the FBAR problem. The latest with FBAR litigation, if you are a tax payer the type of FBAR advice never to take and if you are an attorney or CPA the FBAR advice never to give.

Just give us your name and email and the webinar date and time you’d like to attend and I promise your information is kept confidential and is protected by the attorney-client privilege and I also promise never to slam your inbox with emails you don’t want.

We will open the floor to questions so this is your chance to ask your really tough FBAR questions anonymously. Our webinars are really popular and fill up quick so sign up right now and we hope to see you.

What sense does it make to have US expatriates living abroad to file an FBAR form? They aren’t attempting to shield income by hiding it overseas. But rather, overseas is where they live and make their money. The truth is most expatriates are in compliance with their local tax authorities. But the IRS demands more than just that for compliance. 

But this compliance comes with a cost. Or so says University of Connecticut Law School candidate and a firm summer intern, Ryan Downing.

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Click here to learn why 2013 could be the best time to disclose foreign bank accounts to the IRS

ALIENATING U.S. TAXPAYERS ABROAD: The Implications of FBAR and FATCA

By Ryan Downing, UConn Law ’14, Summer Intern, Parent & Parent LLP

INTRODUCTION

Taxpayers with foreign bank accounts must report the existence of those accounts using Form TD F 90-22.1 by June 30^th of the following year.¹ The name of this law is the Report of Foreign Bank and Financial Accounts, or FBAR for short.² FBAR underwent substantial change since its inception, and my note will deal with how FBAR must undergo further changes before it can hope to adequately tackle the issues which spurred its legislation. In relation to these issues, it is also important to understand the legislation of FATCA and its potential impact on U.S. residents with foreign bank accounts.

This note will cover the relevant background and mechanics of both FBAR and FATCA, discuss several recent cases illustrative of current problems with these disclosure requirements, and suggest ways in which the IRS should improve FBAR and FATCA. These issues will be covered with the goal of highlighting how the IRS is alienating American residents living abroad.³

Department of Justice continues to hammer those with unreported foreign bank accounts

California pair gets the IRS FBAR hammer

The FBAR penalty the IRS seeks to assess on taxpayers failing to report their foreign accounts is wildly out of proportion with the crime committed. We’ve discussed previous instances of horrifically massive FBAR penalties the IRS has squeezed non-compliant taxpayers into accepting.

With a recent case from Los Angeles, the trend continues. Those with unreported accounts and unreported income who do not utilize the  Offshore Voluntary Disclosure Program (OVDP/OVDI) are treated more harshly than outright thieves, as a pair recent Israeli/Luxembourg FBAR cases from California demonstrates.

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How to get an OVDI or FBAR penalty payment plan you can live with

For many US taxpayers considering whether or not to enter in to the IRS Offshore Voluntary Disclosure Initiative/Program (OVDI/OVDP), one of the biggest concerns is — what if I am forced to accept a 27.5% FBAR-equivalent offshore penalty? What if I am stuck with a bill that I can’t afford to pay?

We’ve written extensively about why the 27.5% offshore penalty is unlikely for the majority of OVDI participants, but for the purposes of putting the potentially millions of ex pats, dual citizens and visa holders who need to use some form of the IRS Voluntary Disclosure (standard 2012 rules, streamlined OVDI, or just late FBAR filing) at ease, this article is for you.

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Do you have to file an FBAR for a bitcoin account?

COMMENTARY & ANALYSIS BY ANTHONY E. PARENT, ESQ

Bitcoin is a virtually currency that is either:

1. a totally laughable pipe-dream concocted by computer geeks too nerdy for Star Trek conventions, or,
2.  a highly valuable currency that will bring economic freedom to those suffering from government induced inflation* and centralized control. 

With the bitcoin exchange value skyrocketing after the government seizure of bank accounts in Cyprus, and  recent guidance from the Financial Crimes Enforcement Network (FinCEN),  it appears bitcoin isn’t going to merely be in the realm of Amiga buffs, but rather more mainstream.

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FinCEN is considering allowing the use of IRS Form 2848  for FBAR form questions.

The first step in our representation of clients before the IRS is to get an IRS form 2848, which allows us to speak to the IRS on a client’s behalf.  This works for almost everything, including OVDI representation.  But did you know that when it comes to FBAR penalties, the office in question won’t accept form 2848?  FinCEN (Financial Crimes Enforcement Network) does not recognize the validity of the standard IRS power of attorney form when dealing specifically with FBARs. This article will discuss the reasons why, and potential charge to the law which will streamline the FBAR representation for third parties, to the relief of taxpayers everywhere. 

What does this beautiful building have to do with the IRS FBAR form? Oh you will just have to read on. Photo credit: History.com

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Yet another UBS-related FBAR conviction

The US Department of Justice (DOJ) scored yet another victory in its crusade against Offshore tax evasion. Christopher B. Berg of Portola Valley, Calif. plead guilty in U.S. District Court in San Jose, California of one count of willful failure to file, in 2005, the required report of foreign bank account (FBAR) for a bank account he opened with UBS in Switzerland.

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Did an IRS employee give you advice? Should you take it?

Below are two statements, neither one offensive and hardly shocking:

• IRS employees represent the government. They do not represent taxpayers.
• IRS auditors and revenue officers should not give legal advice to people they don’t represent. Taxpayers have a fundamental right to hire a tax professional to represent them.

Still, many times we are told by our clients about things IRS employees tell them — things in our opinion that should not have been said. Like:

• “Don’t hire a tax attorney, because they can’t do anything for you.”
• “You owe what you owe. All you can do is get an installment agreement.”
• “You can’t file bankruptcy to discharge a tax debt.”

And then there is what sparked this article –  a pattern of statements we are told by our Offshore tax clients about what IRS employees (before they hired us) have told them in particular, some very big mistakes our clients could have made if they believed what an IRS employee was telling them. 

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