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Tax evasion - Can one expect to be safe to agree to voluntary disclosure of FBAR worth $12000 - not reported for 5 years?

Los Angeles, CA |

Hi,

Re: Tax evasion

If someone has not reported a foreign bank account worth $12000 and if he does it now (and agrees to pay tax + 20% penalty for last 5 years - amounting to $200 or so).

Is this a high risk that IRS will intend to impose more punishment other than the 20% penalty?

Thanks.

Attorney Answers 2

Posted

Hmmm... I have written a book on this issue accessible over the internet having done over 100 offshore voluntary disclosures. Lawyer like answer - it depends!!

You cannot submit your own deal to the government in this scenario. If you enter into a 2012 OVDI you will be bound to the terms of that program.

Read about it here: http://www.klasing-associates.com/2012-offshore-voluntary-disclosure-initiative.html

The actual steps involved can be learned about here: http://www.klasing-associates.com/steps-to-participate-in-the-2012-offshore-voluntary-disclosure-i.html
and here:

http://www.irs.gov/uac/2012-Offshore-Voluntary-Disclosure-Program

If all of the income was reported on the foreign account but only the FBARS (TDF 90-22.1's) did not get filed you should look at Q17 relief which would be without penalties:

Taxpayers who have properly reported all taxable income but recently learned that he/she should have been filing FBARs in prior years to report a personal foreign bank account or to report signature authority over bank accounts owned by an employer.
Taxpayers who reported, and paid tax on, all their taxable income for prior years but did not file FBARs, should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late.

The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.

The FBARS need to now be filed electronically - even for back years. This is an issue that you should seek legal consultation over...

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David Warren Klasing

David Warren Klasing

Posted

At a minimum your looking at a $10,000 penalty per account per year. Additionally - there is no diminimus rule for income tax evasion. This is a really a good 1/2 hour of consultation issue.

Posted

You should read attorney Klasing's advice carefully. In addition to the tax and 20% accuracy penalty, you will pay an OVDP penalty of 27.5% of the highest balance in your account during the past eight years.

This is not intended to be legal advice, and is general in nature.

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David Warren Klasing

David Warren Klasing

Posted

Actually, He may be able to get away with a 5% penalty under the following circumstances. Under what circumstances would a taxpayer making a voluntary disclosure under this initiative qualify for a reduced 5 percent offshore penalty? Unless the taxpayer would owe a lesser amount under FAQ 50, taxpayers making voluntary disclosures who fall into one of the three categories described below will qualify for a 5 percent offshore penalty. Examiners have no authority to negotiate a different offshore penalty percentage. 1.Taxpayers who meet all four of the following conditions: (a) did not open or cause the account to be opened (unless the bank required that a new account be opened, rather than allowing a change in ownership of an existing account, upon the death of the owner of the account); (b) have exercised minimal, infrequent contact with the account, for example, to request the account balance, or update accountholder information such as a change in address, contact person, or email address; (c) have, except for a withdrawal closing the account and transferring the funds to an account in the United States, not withdrawn more than $1,000 from the account in any year for which the taxpayer was non-compliant; and (d) can establish that all applicable U.S. taxes have been paid on funds deposited to the account (only account earnings have escaped U.S. taxation). For funds deposited before January 1, 1991, if no information is available to establish whether such funds were appropriately taxed, it will be presumed that they were http://www.irs.gov/Individuals/International-Taxpayers/Offshore-Voluntary-Disclosure-Program-Frequently-Asked-Questions-and-Answers Or a 12.5% penalty if the high water mark (highest aggregate balances) of his offshore account never exceeded $75,000.

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