by Brian Mahany
The 2011 IRS Offshore Voluntary Disclosure Initiative (OVDI) is over. Between the 2009 and 2011 tax amnesty programs, roughly 30,000 taxpayers have come forward and reported their offshore accounts. Most have paid severe penalties of 20 to 25% of the value of their offshore holdings. That means someone with $1 million in a Swiss bank probably paid at least $200,000 in penalties. Many of these taxpayers should not have faced those penalties; they were stuck because their accountants failed to properly report their offshore accounts.
Foreign bank accounts are completely legal. Uncle Sam says that for most of us, we must report the account on Schedule B of the tax return and file a Report of Foreign Bank and Financial Accounts, more commonly known as an FBAR. That’s it. Of course, any income from those accounts must also be reported.
Unfortunately, many CPA’s utilize tax software to prepare returns. Think Turbo Tax on steroids. Often, the accounting software utilized by many accountants fails to ask if any of the interest or dividends reported came from a foreign source.
The taxpayer relies on the accountant to properly prepare his or her returns and the accountant unfortunately relies on bad software and is often too lazy or busy to manually match the taxpayers records to the return. We have become so dependent on computers that many accountants failed to actually look at the records given to them.
I have seen several returns in which foreign interest is listed on the return but no FBAR filed and the account not disclosed. Whose fault? It’s usually the tax preparer.
Luckily, most people who have foreign accounts utilize professional CPA firms. The “tax guy” who does returns in his kitchen part time probably doesn’t have insurance. CPAs do. That means if your CPA failed to file the appropriate returns you may be able to recover from their insurance.
Tens of thousands have come forward in the last 3 years and filed late FBARs and amended their returns to report the offshore income and accounts. If you recently paid significant penalties to the IRS for a voluntary disclosure of a foreign account, an offshore audit finding or for participation in one of the two IRS amnesty programs, you may have a claim against your accountant.
The question in all these cases is whether the accountant knew or should have known of the foreign bank or foreign brokerage account. If your shoebox of receipts included an interest statement from a foreign bank, he should know. Similarly, if your annual tax organizer given to you by your accountant asks you to list accounts and you did, he or she is deemed to know.
Many people have used the same accountant for years. That person is often more than a tax preparer, he or she is a trusted financial advisor and sometimes a friend. Unfortunately, many professionals – doctors, lawyers and accountants – make mistakes. That’s why most professionals are insured against malpractice and professional negligence claims. Friend or not, you shouldn’t suffer for their mistakes.
If you paid penalties to the IRS for an unreported foreign account and believe your accountant is to blame, contact us. All calls are strictly confidential. Our accounting malpractice and asset recovery lawyers have helped many people get back their hard earned money.
For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl – America’s Tax and Fraud Lawyers. Offices throughout the U.S. (Milwaukee, Portland, Detroit and San Francisco). Services available in most locations.