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January 9, 2013

Bad Marks given by the IRS Taxpayer Advocate on Voluntary Offshore Disclosure Program in Its report to Congress

The IRS National Taxpayer Advocate reported the following to Congress:

The IRS’s Offshore Voluntary Disclosure programs and their failure to distinguish adequately between “bad actors” and “benign actors.” The IRS has sought to increase enforcement of Foreign Bank and Financial Accounts (FBAR) reporting requirements in recent years and has offered a series of voluntary disclosure programs designed to settle with taxpayers who had failed to file required FBAR forms. However, the report says, the programs generally applied a “one-size-fits-all” approach that required the payment of significant penalties and did not distinguish between “bad actors” and “benign actors.” By generally requiring taxpayers who make voluntary disclosures to “opt out” of the disclosure program and submit to comprehensive audits in order to avoid draconian penalties, the report argues that the program has caused excessive burden and fear for taxpayers who had reasonable cause for not filing FBAR forms or whose failure to file was inadvertent.

This confirms the IRS has not created a fair and just  program to allow those middle class US Citizens living abroad who were unaware of their US filing and foreign assets reporting obligation to come forward and correct the problem without the risk of unfair civil and criminal penalties. Hopefully this report will encourage Congress and the IRS to soften the procedures and to take into account these citizens or green card holders were never effectively informed of their obligations by the IRS or the US Government.

We can help you catch up now and represent you before the IRS under the current offshore disclosure program. We have advised or represented over a hundred clients so far surface with the IRS with great success.

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