The IRS believes that there are millions of Americans who have failed to file FBARs; short for Report of Foreign Bank and Financial Accounts. Taxpayers with offshore holdings of $10,000 or more are required to report those holdings to the IRS. The duty to report includes people merely having signature authority over a foreign account.
IRS outreach efforts have been quite poor. Many dual nationals, ex pats who are living overseas and foreign born Americans simply don’t understand the FBAR filing requirements. Beginning in 2009, the IRS offered a variety of amnesty programs to help people come into compliance. The current program, called the Offshore Voluntary Disclosure Program (“OVDP”) allows participants to avoid audit and criminal prosecution and pay a one time 27.5% penalty based on the highest balance of the accounts. (Better deals may be available, however.)
Since 1999, 30,000 taxpayers took advantage of amnesty. As a result, the IRS collected an additional 5.5 billion in taxes and penalties. Amnesty isn’t the only way to come into compliance, however. Some taxpayers elected a traditional or “voluntary” disclosure. That involves sitting down with the IRS and explaining why FBARs were not timely filed. Although there are no guarantees with a traditional disclosure, those taxpayers that can prove their actions weren’t “willful” may get a much better deal.
A third method of coming into compliance involves making a “quiet disclosure.” That is a fancy way of just amending returns and filing any missing FBARs. The IRS makes it quite clear on its website that quiet disclosures can result in massive penalties. Despite these warnings, however, the government’s General Accounting Office says 10,000 taxpayers have made quiet disclosures.
Why? Good question.
The IRS is notoriously slow. Currently it is taking the Service upwards of 500 days to clear some amnesty filings. That means the quiet disclosures are being pushed to the back burner. Some taxpayers probably hope that the IRS will simply forget or be unable to chase down all the quiet disclosure filers. Others may simply want to buy time and worry about penalties at some future date.
If you failed to file FBARs, have unreported foreign bank or hedge fund accounts or have questions about the current IRS offshore amnesty programs, give us a call. We can explain all your options and help you decide which option is best for you. Our tax lawyers are the exclusive legal services provider to the CPAmerica organization for foreign reporting issues meaning we are the lawyers that other professionals turn to with questions.
For more information about FBARs and unreported offshore accounts, contact attorney Bethany Kroes at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Whether you hire or us or not, we will gladly discuss your options at no cost and without obligation.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.
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Written by Brian Mahany, Esq.