Do You Know the Risks with Changing FBAR Rules & Guidelines?
On behalf of Mark L. Horwitz
Earlier this year, the IRS issued a memorandum regarding new guidelines for the determination of penalty amounts for FBAR violations. As you know, anyone who has offshore bank accounts must file a Report of Foreign Bank and Financial Accounts (FBAR) by June 30th of each year - if the accounts total over $10,000.00.
New FBAR penalty guidelines
Based on the recommendations outlined in the May 2015 memo, an examiner for the IRS must prove that the failure to file the FBAR was, in fact, willful. Additionally, the memo attempts to create a process for "fair and consistent" application of penalties.
Previously, willful failure to file the FBAR could result in a penalty of 50% of the account every year. This would be far greater than the value of the account. Per the new guidelines, the IRS will no longer seek the maximum amount of penalties for willful violations, but will generally apply a cap of 50 percent of the highest value of all accounts each year. Additionally, the penalties for non-willful violations are limited to $10,000 for each year of non-compliance.
New IRS guidelines add an element of uncertainty
Although the new guidelines appear to be good news for U.S. citizens with offshore accounts, there remains a high level of subjectivity. Despite the efforts to apply the rules more consistently across the board, the IRS examiner and his or her superior decide whether the failure to file was willful or non-willful. Ultimately, a claim against you will depend upon which agent is assigned to your case. Your results are highly unpredictable unless you have quality legal help.
Defending yourself from alleged FBAR violations
The facts relating to each of your offshore accounts are very important. Because of this, it is vital to your defense to hire a lawyer with a high level of experience in criminal tax defense. An experienced attorney will:
- Evaluate your unique situation
- Evaluate the IRS' probable reactions to the specific facts of your case
- Analyze how the IRS will consider willful versus non-willful factors
- Assess your potential risk of criminal charges
- Decide whether you can benefit from the OVDP or the Streamlined Domestic Offshore Procedures
You have too much to lose by failing to consult an attorney at the first sign of trouble. Do not contact the IRS if you have questions regarding your offshore assets; seek the help of a tax crime lawyer.