The Offshore Voluntary Disclosure Program (“OVDP”) is officially closed on September 28, 2018
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How to Deal With the IRS if You Have Undisclosed Foreign Bank Accounts

Request A Case Evaluation Or Tax Resolution Development Plan

Get a Tax Resolution Development Plan from us first before you attempt to deal with the IRS. You would meet with Board Certified Tax Attorney Jeffrey B. Kahn at the office location most convenient to you. Jeff will review your situation and go over your options and best strategy to resolve your tax problems. This is more than a mere consultation. You will get the strategy or plan to move forward to resolve your tax problems! Jeff’s office can set up a date and time that is convenient for you and take your credit card information to charge the $600.00 session fee which secures your appointment. By the end of your Tax Resolution Development Plan Session, if you desire to hire us to implement the strategy or plan, Jeff would quote you our fees and apply in full the $600.00 charge for the Tax Resolution Development Plan Session.

FBAR Compliance Services

Foreign Bank Account Report “FBAR” – FinCEN 114

The Bank Secrecy Act requires that a Form FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR), be filed if the aggregate balances of such foreign accounts exceed $10,000 at any time during the year. This form is used as part of the IRS’s enforcement initiative against abusive offshore transactions and attempts by U.S. persons to avoid taxes by hiding money offshore.

The FBAR covers a calendar year and must be filed no later than the deadline (including extension) of your Federal Individual Income Tax Return of the following year and includes any interest a U.S. person has in:

Beware: Timely filing your currently due FBAR does not cure failure to file prior-year FBAR’s!

The penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. The penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report.

We can assist with IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

The IRS has established a Special Unit to disseminate bank information received from foreign banks and compare it to the forms and information reported by U.S. taxpayers on their tax returns. In addition, this Unit is able to review previously filed FBAR’s to determine whether all income was reported on each income tax return. Starting in 2011, taxpayers who have foreign assets will be required to disclose those assets with the filing of their Federal Individual Income Tax Return. This reporting which is made on Form 8938, Statement of Specified Foreign Financial Assets, will serve as an additional tool for this Unit.

In advance of the expected large wave of enforcement to be commenced by IRS, the IRS had established programs for taxpayers to voluntarily come forward and disclose unreported foreign income and foreign accounts.

Options Available For U.S. Taxpayers with Undisclosed Foreign Financial Assets As Modified By The IRS On June 18, 2014

The four options are:

  1. Offshore Voluntary Disclosure Program;
  2. Streamlined Filing Compliance Procedures;
  3. Delinquent FBAR submission procedures; and
  4. Delinquent international information return submission procedures.

Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets. OVDP is designed to provide to taxpayers with such exposure (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations.

OVDP requires that taxpayers:

  • File 8 years of back tax returns reflecting unreported foreign source income;
  • File 8 years of back FBAR’s reporting the foreign financial accounts;
  • Calculate interest each year on unpaid tax;
  • Apply a 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651; and
  • Apply up to a 27.5% penalty based upon the highest balance of the account in the past eight years.Beginning August 4, 2014, this
    rate increases to 50% for U.S.
    accountholders of certain foreign

In return for entering the offshore voluntary disclosure program, the IRS has agreed not to pursue:

  • Charges of criminal tax evasion which would have resulted in jail time or a felony on your record; and
  • Other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance).

On March 13, 2018 the IRS announced that OVDP will be officially closed on September 28, 2018.

Streamlined Filing Compliance Procedures

The streamlined filing compliance procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.

Taxpayers will be required to certify that the failure to report all income, pay all tax, and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct.

If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the OVDP or its predecessor programs) may still use the streamlined procedures.

The Streamlined Procedures are classified between U.S. Taxpayers Residing Outside the United States and U.S. Taxpayers Residing in the United States.

U.S. Taxpayers Residing Outside the United States

Requires that taxpayers:

  • Meet the applicable non-residency requirement described below (for joint return filers, both spouses must meet the applicable non-residency requirement);
  • Certify that the failure to report the income from a foreign financial asset and pay tax as required by U.S. law, and failure to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, resulted from non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
  • File 3 years of back tax returns reflecting unreported foreign source income;
  • File 6 years of back FBAR’s reporting the foreign financial accounts; and
  • Calculate interest each year on unpaid tax.

In return for entering the streamlined offshore voluntary disclosure program, the IRS has agreed:

  • Waiver of charges of criminal tax evasion which would have resulted in jail time or a felony on your record; and
  • Waiver of other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance).
  • Waiver of the 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651; and
  • Waiver of any OVDI penalty.

Non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents (i.e., “green card holders”): Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days. Under IRC section 911 and its regulations, which apply for purposes of these procedures, neither temporary presence of the individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that the individual’s abode is in the United States.

Non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents: Individuals who are not U.S. citizens or lawful permanent residents, or estates of individuals who were not U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the last three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not meet the substantial presence test of IRC section 7701(b)(3).

U.S. Taxpayers Residing in the United States

Requires that taxpayers:

  • Certify that the failure to report the income from a foreign financial asset and pay tax as required by U.S. law, and failure to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, resulted from non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
  • File 3 years of back tax returns reflecting unreported foreign source income;
  • File 6 years of back FBAR’s reporting the foreign financial accounts;
  • Calculate interest each year on unpaid tax; and
  • Apply a 5% penalty based upon the highest balance of the account in the past six years.

In return for entering the streamlined offshore voluntary disclosure program, the IRS has agreed:

  • Waiver of charges of criminal tax evasion which would have resulted in jail time or a felony on your record; and
  • Waiver of other fraud and filing penalties including IRC Sec. 6663 fraud penalties (75% of the unpaid tax) and failure to file a TD F 90-22.1, Report of Foreign Bank and Financial Accounts Report, (FBAR) (the greater of $100,000 or 50% of the foreign account balance).
  • Waiver of the 20% accuracy-related penalty under Code Sec. 6662 or a 25% delinquency penalty under Code Sec. 6651; and

Delinquent FBAR Submission Procedures

Taxpayers who do not need to use either OVDP or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who (1) have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114, previously Form TD F 90-22.1), (2) are not under a civil examination or a criminal investigation by the IRS, and (3) have not already been contacted by the IRS about the delinquent FBARs can file the delinquent FBARs with a statement explaining why the FBARs are filed late. Be aware that the IRS has discretion whether to abate penalties for the failure to file the delinquent FBARs. To qualify for this relief you must have properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.

Delinquent International Information Return Submission Procedures

Taxpayers who do not need to use either OVDP or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who (1) have not filed one or more required international information returns, (2) have reasonable cause for not timely filing the information returns, (3) are not under a civil examination or a criminal investigation by the IRS, and (4) have not already been contacted by the IRS about the delinquent information returns can file the delinquent information returns with a statement of all facts establishing reasonable cause for the failure to file. As part of the reasonable cause statement, taxpayers must also certify that any entity for which the information returns are being filed was not engaged in tax evasion. If a reasonable cause statement is not attached to each delinquent information return filed, penalties may be assessed in accordance with existing procedures.

Other Things To Consider

Recent closure and liquidation of foreign accounts will not remove your exposure for non-disclosure as the IRS will be securing bank information for the last eight years. Additionally, as a result of the account closure and distribution of funds being reported in normal banking channels, this will elevate your chances of being selected for investigation by the IRS. For those taxpayers who have submitted delinquent FBAR’s and amended tax returns without applying for amnesty (referred to as a “quiet disclosure”), the IRS has blocked the processing of these returns and flagged these taxpayers for further investigation. You should also expect that the IRS will use such conduct to show willfulness by the taxpayer to justify the maximum punishment.

Additionally, starting with the 2011 Tax Return Filing Season: U.S. taxpayers who have an interest in foreign assets with an aggregate value exceeding $50,000 must include new Form 8938 (Statement of Specified Foreign Financial Assets) with their Federal income tax return. This reporting will serve as an additional tool for the IRS to determine prior noncompliance of taxpayers who have undisclosed foreign accounts or unreported foreign income. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts). Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40% penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.

If the IRS has already selected you for an audit or you are being investigated, these programs are not available to you. To find out how you must now protect yourself, click here.

Click here for FAQ’s on applying for amnesty.

For those taxpayers who have filed for amnesty and are having difficulty with their case or do not have the confidence in their representative to secure the best possible result, we offer a service whereby we would evaluate your case and discuss your options. We have found that the Revenue Agents working these cases have made errors that favor the IRS. Let our experience work for you to avail you of the benefits of this amnesty program with the lowest liability possible. Contact an IRS lawyer today.

Given the wealth of foreign account information released to the IRS and the IRS’ expansion of resources to enforce compliance, this may be the last opportunity for taxpayers to resolve unreported foreign income issues without criminal prosecution. Once the IRS has commenced an investigation, a taxpayer cannot enter into a Voluntary Disclosure Program. We recommend that taxpayers in this situation act immediately and seek assistance from an IRS attorney with expertise in the Voluntary Disclosure Program for undisclosed foreign accounts.

For prompt evaluation of your case, we encourage you to contact us using our toll-free number at 866.494.6829.



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Taxpayers with undisclosed foreign assets are urged to come forward before the Offshore Voluntary Disclosure Program (“OVDP”) closes September 28, 2018. The IRS announced on March 13, 2018 that it will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (“OVDP”) and close the program on September 28, 2018. In a statement made by […]