1. Things May Get Better
According to a report from the Taxpayer Advocate, as of September 29, 2012 the average FBAR (Foreign Bank Account Report) penalty imposed in the 2009 Offshore Voluntary Disclosure Program (OVDP) opt-out cases is $15,737. That figure may be misleading because not all of the 2009 opt-out cases have been closed and it seems likely that it is the larger, more difficult ones that are still open. Those opt-outs have a potential to skew the averages higher. Still the Taxpayer Advocate reported that there have been NO criminal tax prosecutions of taxpayers who have opted out.
2. Things May Get Worse
The same report from the Taxpayer Advocate stated that a small number of the opt-out cases accounted for the bulk of the FBAR penalties that were imposed. Moreover, the IRS’ FAQs warn that taxpayers who opt-out may face a “full scope tax audit” of the tax returns will be initiated. It also warns that if issues are found which were not disclosed previously, those issues may be the subject of review by Criminal Investigation.
3. The Right to Appeal
There is no right to appeal within the OVDP. In fact, favorable decisions of revenue agents and their managers are often reversed by so-called technical advisors. These technical advisors do not interface directly with taxpayers or their tax attorneys and so it is impossible to negotiate with them. Read More
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