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Plea in offshore account case as IRS ends amnesty program

In 2010, a L.A. taxpayer failed to report more than one million dollars sitting in his Israeli Bank Leumi account on a FBAR (now FinCEN Form 114). He also requested that the bank refrain from mailing statements to the United States and tapped the funds through a loan scheme.

At the end of August, the man pleaded guilty to felony federal tax charges for failing to file. The potential for five years in prison exists in addition to stiff civil monetary penalties. This illustrates that offshore enforcement is still a priority for the IRS even as it concludes its Offshore Voluntary Disclosure Program (OVDP) at the end of the month.

What offshore compliance programs still exist?

The IRS will formally close the current OVDP on September 28, 2018. This was as 2017 filings dropped to 600 from a yearly high of 18,000 back in 2011. Of course, as our lead in to this blog illustrates, the IRS is not backing off on offshore account enforcement. It is also getting more information than ever before following implementation of the Foreign Account Compliance Act (FATCA) and intergovernmental agreements.

Several narrowly tailored programs continue to be options for certain taxpayers with undisclosed offshore accounts, including:

  • Streamlined (foreign and domestic) filing compliance procedures can provide help when noncompliance was not willful. Taxpayers need to generally go back and amend tax returns for the previous three years or FBARs going back six years. For resident taxpayers a five percent penalty applies, nonresidents generally do not pay a penalty.
  • Delinquent FBARs procedures allow tax compliant taxpayers to file past required FBARS without any penalty.
  • Delinquent international information return procedures are another solution if there was a reasonable cause for failing to file required International Information Returns.

The remaining programs do not protect against criminal prosecution if there is some evidence that the failure to file was willful (i.e. asking a foreign bank not to send statements to a U.S. address). As OVDP ends, it is more important to seek experienced counsel on how to return to compliance when a offshore-related problem arises.

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