“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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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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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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Does the IRS “Offshore Penalty” always make sense?

Analysis & Commentary by Amy L. Holbrook, Esq.

The current 2012 Offshore Voluntary Disclosure Program,present taxpayers faced with potentially high penalties (up to 50% of foreign account value per year, for unfiled FBARs) the chance to disclose their foreign assets voluntarily and accept an “Offshore Penalty”  of 27.5%, intended to be a better option than facing the FBAR penalties themselves, as well as providing a degree of certainty as to the cost of compliance.  The penalty is reduced to 12.5% in the cases of total assets under $75,000, and 5% in certain special cases.

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

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Why the dual passport trick isn’t a safe way to hide from the IRS

Since the 2012 Offshore Voluntary Disclosure rules were passed, my office has spoken to hundreds of US persons who have undisclosed offshore accounts. Many have decided to use our services, some have decided to hire our OVDI attorney peers, and many have decided to roll the dice, because of a belief based upon a faulty premise, that goes something like this: 

“I have two passports: a US passport and an Iranian passport. I opened a bank account in Dubai with my Iranian passport. Therefore, I am safe from detection, as the United Arab Emirates bank will not disclosed any of my information to the IRS because the bank will have no way of knowing that I am in fact, a US person subject to the universal tax jurisdiction of the IRS.”

This article will explain why such a plan is incredibly naive and can lead to the largest loss of a person’s freedom and wealth.

Don’t expect a foreign passport to shield you from IRS detection

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South Florida Woman hit with 3200% penalty courtesy of the FBAR.

News the other day, shocked most other attorneys and CPAs I spoke with. They found it unbelievable that a 1200% tax evasion penalty can be assessed. This was a case out of New Jersey, and yet, news from Florida  is even more shocking:  the Department of Justice strong-armed an elderly widow into accepting a plea deal that included an FBAR penalty equal to 3200% of the total tax evaded.

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HSBC customer feels sting of IRS investigation with draconian FBAR penalties

Let assume that someone engages in the crime of tax evasion. And let’s say that as a result of the tax evasion, the US government lost out on somewhere between $80,000 to $200,000 of tax revenue.

What do you think the the appropriate penalty be?

A. 10% penalty based on the high loss. $20,000.00

B. Half of the high loss. $100,000.00

C. Double the high loss, $400,000.00

D. $2,370,000.00

If you suspect the correct answer is D, your paranoia has served you well. Because that is exactly what happened in this one recent case from the Garden State.

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US Expats: Unfiled tax returns happen

For many US expats, the IRS is out-of-sight and out of mind. And now, as either their overseas employment is about to end or they learned about the offshore crackdown by the IRS they are beginning to worry about what is going to happen to this. In this article, tax Attorney Amy Holbrook discusses the action an expat with unfiled US taxes should take.

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What is the appeals process for Offshore Voluntary Disclosures?

My colleague and terrific tax lawyer from Sacramento, California, Steven J. Mopsick, was kind enough to blog about his knowledge and experience for those taxpayers  opting out of the OVDI program and what appeals has been like. His experience thus far has been exactly like ours, and he gives a likely framework to the Appeals process available for the OVDI program.

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What tax professionals need to know about the IRS Offshore Voluntary Disclosure Program  (OVDP)

I was very fortunate to be able to contribute to the good people over at the Tax Insider, an article entitled “What tax professionals need to know about the IRS voluntary disclosure program.” Here’s an except:

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