Tag Archive for OVDP

Prudence And Caution: The Antidote To The Hazards of Certifying Nonwillfulness Under The Streamlined Procedures

Back on August 13, 2014, the IRS issued an update of the Internal Revenue Manual that sheds some light on what type of submissions might be ripe for audit under the streamlined procedures. For those unfamiliar with the Internal Revenue Manual, it is the “official source of instructions to IRS personnel relating to the organization, administration, and operation of the IRS.”[i] It contains instructions that IRS employees rely upon to carry out their responsibilities, such as procedures for processing and examining tax returns.

The most critical aspect of the update is an instruction that requires submissions containing five or more foreign information returns to be referred for examination.

9. To complete adjustments on Form 1040X filed under the SDO: Read More

Written by | Posted in FBAR • OVDP

Playing Russian Roulette With The IRS: Zwerner Learns The Cost of Hidden Offshore Accounts

Whether you have chosen to hide your account willingly or failed to file an FBAR by mistake, you may not know the full ramifications of your activities or your best course of action now. If you haven’t heard the horror stories yet, you’re about to have a couple to remember. For those who have kept an offshore account secret, there are three options: quiet disclosure, OVDP, or the streamlined offshore procedures. Some may even feel they have a fourth option: keeping the account a secret. The average person may have a hard time deciding what course of action they should take. It may not seem to matter much, but Charles Rettig gives us two frightening examples in his articles, “Jury Determines 150-Percent FBAR Penalty” and “U.S. Seeks FBAR Related Forfeiture of $12 Million!” These stories teach an important lesson, but first, let’s discuss proper offshore account Read More

Written by | Posted in FBAR • International • IRS • OVDP

Problems With The Streamlined Program

There are some shortcomings of the Streamlined Program:

“Despite the seemingly taxpayer-friendly incentives, the streamlined program has several shortcomings. The devil is in the details! First, participants are not guaranteed immunity from criminal prosecution. Second, with respect to the Streamlined Domestic Offshore Procedures, the five-percent penalty is imposed on a broader base of foreign assets – not just those relating to FBAR reporting.

Finally, to the extent that the IRS undertakes an examination of the taxpayer’s returns and finds that the taxpayer was willful, the taxpayer could be subject to any one of the following parade of horribles. First, and most obvious, the taxpayer will be barred from participating Read More

Written by | Posted in FATCA • FBAR • International • IRS • OVDP

A Recipe For Whipping Up The Streamlined Offshore Penalty In Three Easy Steps

Before reading this blog, I make the following disclaimer. If it is getting close to lunch time and you can hear your stomach growling, you might want to put off reading this until after lunch. Readers who disregard this warning are doing so at their own risk.

Calculating the offshore penalty within the Streamlined Domestic Offshore Procedures can be tricky. It’s not as simple as tying your shoes. Before delving into the tricky part, let’s cover three basic concepts:

(1) The offshore penalty under the streamlined domestic offshore procedures is 5%.

(2) The 5% penalty is calculated based upon the value of foreign financial assets that would have otherwise formed the basis of the civil miscellaneous penalty under the Read More

Written by | Posted in OVDP

Beyond The FBAR

Other Civil Penalties Lying In Wait For The Unwary Taxpayer With Undisclosed Offshore Assets

With all of the focus on FBAR penalties when it comes to foreign asset reporting, it’s easy to overlook the others, some of which can be just as onerous as the FBAR penalty itself. What other pestilent civil penalties are lying in wait for the unwary taxpayer who decides not to participate in one of the IRS’s voluntary disclosure programs and is subsequently audited?

I. Failure to File a Tax Return Penalty

The civil penalty applicable for failure to timely file returns is section 6651(a)(1). This Read More

Written by | Posted in FBAR • International • IRS • OVDP • Tax Fraud/Evasion/Crimes

The Risks of Certifying NonWillfulness

Recently, “Tax Notes Today” published an article by Andrew Velarde entitled, Streamlined Program Non-Willful Certification Can Be Hazardous, 2014 TNT 143-4 (7/25/14). The article summarizes comments made by three tax practitioners on a Bloomberg-sponsored webcast relating to the certification of non-willfulness. The practitioners were Robert F. Katzberg, of Kaplan & Katzberg; Alan Granwell of Sharp Partners; and Bill Sharp of Sharp Partners.

If there was a recurring theme to the article it was that certification of non-willfulness is risky business and not for the “do-it-yourselfer.” Very simply, false certifications can lead to steeper penalties (even greater than the onerous OVDP penalty), not to mention criminal prosecution for perjury. Read More

Written by | Posted in FBAR • OVDP

Does The IRS Have The Authority to Issue Whistleblower Awards For FBAR Penalties?

Does the IRS have the authority to issue Whistleblower awards under Section 7623(b) to an individual who provides information that results in the assertion of FBAR penalties? In Whistleblower 22231-12W v. Commissioner, T.C. Memo. 2014-157, the Tax Court came close to deciding this issue.

The only reason it stopped short was because the jurisdictional pre-requisite for the Court to act – a determination by the Whistleblower Office on whether to accept or reject the petitioner’s claim – had not yet been made. In other words, because the petitioner’s claim was still pending before the Whistleblower Office, the Tax Court did not have jurisdiction to do anything. Read More

Written by | Posted in FBAR

New Filing Compliance Procedures for Non-Resident U.S. Taxpayers

The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing obligations and now seek to come into compliance with the law. The Service is announcing a new procedure for current non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns to file their delinquent returns. This procedure will go into effect on Sept. 1, 2012.

Note: On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Report 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Report 114 supersedes TD F 90-22.1 (the FBAR form that was used in Read More

Written by | Posted in Expatriate • FATCA • FBAR • Federal • International • OVDP • Tax Fraud/Evasion/Crimes

Who Decides Whether To Authorize A Taxpayer’s Certification For Transitional Treatment To The Streamlined Procedures?

Earlier this week, I spoke to an IRS Revenue Agent who shed some light on how the decision regarding transitional treatment is made for those taxpayers seeking to transition to the Streamlined Procedures from OVDP. Under the current procedures, the agent and his or her supervisor make the decision regarding transitional treatment, with involvement as necessary by the technical adviser. Practically speaking, the technical adviser does nothing more than “rubber stamp” the decision made by the examiner and the examiner’s manager.

While the process might seem straight-forward, it is not always seamless. That is where Streamlined Transition FAQ 8 comes into play. It provides some role for a central committee in those cases designated for central committee review. Unfortunately, no Read More

Written by | Posted in OVDP

Disparity In Treatment of Taxpayers Who Qualify For Transitional Relief Is Casting A Shadow On The New Streamlined Procedures

Many tax practitioners have become disenchanted with the IRS’s treatment of those who are transitioning from OVDP to the Streamlined Procedures. What is the source of this disenchantment? Very simply, the IRS is denying the nonwillful certification in a disproportionately high number of cases.

To make matters worse, the process of denial is somewhat of an enigma. In OVDP cases, the IRS has more than just the certification. It also has the Offshore Voluntary Disclosure Letter and the accompanying documents that make up the final submission. According to many tax practitioners, if the certification causes the IRS to doubt the taxpayer’s claim that he was nonwillful, then its default position is to deny transitional relief. Read More

Written by | Posted in FBAR • International • OVDP
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