Chief of IRS Criminal Investigation Divisions Comes After Those No Disclosing Foreign Accounts and Assets

 On October 18th, the chief of the IRS’ Criminal Investigation Division, Richard Weber, stated that his 4000 special agents will continue to focus on unreported foreign bank accounts.

You do not want to see one
of these in person

The requirement to file FBARs (Report of Foreign Bank and Financial Accounts) dates back to the Bank Secrecy Act in the 1970′s. No attempts were made to enforce this until until the last 4 to 5 years.  Failure to report a foreign account is a felony punishable by up to 5 years in prison. Civil penalties can include the greater of $100,000 or 50% of the high account balance for each year an account is unreported. Even “innocent” violations can result in penalties of up to $10,000 per year.

The  IRS has been looking at banks outside of Switzerland (where they originally began their enforcement efforts). Those banks includes several Israeli banks as well as financial institutions in the Bahamas, India, China, Australia,  Hong Kong, Liechtenstein and others not yet announced.

Speaking before a New York CPA group, Weber said that the IRS and Department of Justice would soon be announcing a new round of indictments involving unreported accounts. These prosecutions will involve banks outside of Switzerland.   The IRS has posted CID special agents around the world.  One indication is that they now have a field office in Panama which was a popular place for US taxpayers to hide their money and income.

There is presently an amnesty program to help taxpayers with unreported accounts. This includes those with foreign hedge funds, investments, bank accounts, CD’s and the like. The program, called the 2012 Offshore Voluntary Disclosure Program offers greatly reduced penalties and a promise of no criminal prosecution.  This program may not work for everyone. Some taxpayers may achieve lower or no penalties by negotiating directly with the IRS outside of the Disclosure program.  The important part is not to wait until the IRS discovers you first because it will then be too late to avoid higher penalties and criminal prosecution.

The procedures and rules for entering the program or surfacing with the IRS outside of the program are complicated.  You should speak with  a tax lawyer right away if you are one of the millions with unreported accounts (and other foreign assets that require reporting on your tax return such as foreign corporations, foreign partnerships and LLCS, passive foreign investment companies, etc.)

Don D. Nelson, Attorney, CPA with over 20 years of expatriate and international tax experience has represented or advises hundreds of clients with a wide variety of offshore reporting issues. His  clients include dual nationals, US permanent residents, taxpayers with offshore accounts, and expatriates who have businesses abroad or who have retired in other countries.

For more information, contact him at ddnelson@gmail.com.  All inquiries are protected by the attorney – client privilege and kept in strict confidence.

Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers (Expatriates)

On June 26, 2012, the IRS announced new streamlined filing compliance procedures for non-resident U.S. taxpayers to go into effect on September 1, 2012. These procedures are being implemented in recognition that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1, but have recently become aware of their filing obligations and now seek to come into compliance with the law. These new procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns.

Description of the New Streamlined Procedure

This streamlined procedure is designed for taxpayers that present a low compliance risk. All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of theOffshore Voluntary Disclosure Program.

Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns. For a summary of information about federal income tax return and FBAR filing requirements and potential penalties, see IRS Fact Sheet FS-2011-13. (December 2011).

Read the rest of the details of the program HERE

Download IRS Submission Questionnaire Used to Enter Program HERE

For Details of the 2012 Voluntary Offshore Disclosure Initiative click HERE.  This program is for those who wish to avoid criminal prosecution and have more complex returns and owe more than 1,500 for any of the past unfiled tax years.