At least once a week we speak to a taxpayer still sitting on the fence about filing missing FBARs. Why? There is no rational explanation. Psychologically, we all procrastinate, especially when the decisions facing cost us money or involve the IRS. Many delay in filing FBARs thinking they may not get caught.
Sound familiar? Keep reading…
The German Bundesministerium der Finanzen (Federal Ministry of Finance) and prosecutors are hot on the heals of Germans with unreported Swiss accounts. Specifically, accounts at a Swiss branch of an Israeli bank, Bank Leumi.
While that is hardly newsworthy these days, how the Germans obtained their information is troubling and should cause grave concern to everyone with an unreported foreign account. The Germans bought a CD of account holders allegedly taken by a whistleblower. Swiss authorities are enraged and have accused the Germans of economic espionage and criminal violations of Switzerland’s bank secrecy laws.
For their part, the Germans appear nonplussed.
Should Americans with unreported accounts at Bank Leumi worry? Absolutely! The Germans and Americans routinely share tax information and leads. While here in the U.S., Americans worry about data theft at Target committed by criminal identity thieves, the Germans are essentially paying hackers and whistleblowers for the same type of information. The only difference? Germany isn’t using the information to steal (although you might have a problem convincing some taxpayers of that.)
We have said it before yet stories like this require a reminder. Bank secrecy is dead. There are no places in the world truly safe to hide your money from tax authorities.
According to published reports, the Germans have already discovered one taxpayer with a “hidden” Swiss account containing $110 million USD. If that person was a US taxpayer, the IRS would be demanding a staggering $55 million penalty.
That’ right. The penalties for an unfiled FBAR are up to the greater of $100,000 or 50% of the highest historical account balance.
The IRS is presently offering an amnesty program called the Offshore Voluntary Disclosure Program (OVDP). That program helps taxpayers avoid an audit and possible criminal prosecution but still involves a 27.5% penalty. Luckily, for some taxpayers that can prove their failure to report was not “willfull”, its possible to pay much lower penalties.
The point of this post? The IRS will find you. It’s just a matter of when. If you come into compliance first, the chances of a better deal are vastly improved. Why? The IRS says it won’t negotiate if they find your name first. With whistleblowers and bank employees now selling account data to government agencies, there is no telling when you might get caught. (Remember FATCA is just around the corner too.)
What should you do? If you have an unreported foreign account, contact an experienced FBAR lawyer immediately. If you recently opened or inherited account, a good CPA can probably help too. Why is an FBAR lawyer necessary? Willful failure to file an FBAR is a felony. Unless you are going immediately into the amnesty program, we recommend a tax lawyer if you plan on negotiating directly with the IRS in the hopes of getting a lower penalty.
We welcome questions about FATCA, FBAR and foreign reporting issues and will gladly explain your responsibilities and explore your options. Our IRS tax attorneys have helped many taxpayers with a wide variety of offshore reporting problems. We handle IRS matters worldwide and most services can be handled for a reasonable flat fee.
For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. The author may also be contacted at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence.
Need more information? Our Due Diligence blog has hundreds of text searchable articles on FBARs.