The Internal Revenue Service memo is written in the terse, dry voice of the bureaucrat, but its meaning becomes clear as a reader plows through it. The bottom line of the memo about FBAR (Report of Foreign Bank and Financial Accounts) enforcement is that the IRS wants to improve its compliance efforts. It wants to make sure that those who have in the past failed to report assets in overseas accounts do so now, and that they pay taxes, interest and any penalties owed.
The IRS acknowledges in the memo that it carries the burden of proving that an FBAR violation took place, and when it alleges that the violation was willful, it carries the additional burden of proving that the act was indeed willful. It also describes the processes it will now go through in each open FBAR case to determine what penalties it shall impose and in which instances it will consider criminal referrals.
It should be noted that the potential penalties in an FBAR case are essentially up to the examiners and group managers, who are to "continue to use their best judgment when proposing FBAR penalties," the memo states.
The examiner determines a recommended penalty and then gets approval of the penalty from the group manager. While many readers might assume that it is at this point when the hammer drops on the taxpayer, there is a potential alternative.
The taxpayer can dispute the penalty through various means. The best practice is to convince the agent and his supervisor to impose no penalty or minimal penalty now available under the new IRS memorandum.
We will have more on the FBAR memo and what it can mean for people who are in violation, and how The Law Offices of Horwitz & Citro, P.A., P.A., can help you. Please see our FATCA, FBAR And IRS Amnesty page for more information about our Orlando, Florida, law firm.