Jail time for failure to file TD F 90-22.1 Report of Foreign Bank and Financial Accounts

Lance Wallach

A former UBS, AG ("UBS") client from Miami Beach, Florida was sentenced to four months in federal prison for willfully failing to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts ("FBAR"), for the UBS account the man held with as much as $4,000,0000 in it. This information was released by the U.S. Attorney for the Southern District of Florida on July 25 2012.

The former UBS client paid a civil penalty of $2,000,000 related to the $4,000,000 high account balance stemming from tax year 2006. Additionally, the former UBS client was sentenced to four months in federal prison, three years of supervised release, 250 hours of community service and a $20,000 criminal fine.

The UBS account related to two offshore corporations owned by the man, one in the Virgin Islands and one in the Republic of Panama. These corporations opened accounts at UBS. The man was not named as the direct owner but instead he was deemed only the "beneficial owner." The accounts with UBS were opened from tax years 2005 through 2007.

It is stated that the man was aware of the obligation on the FBAR to report as he had previously filed FBARs for other offshore corporations. An FBAR is required to be filed by both U.S. citizens and residents who have a financial interest in or signatory authority over a non-U.S. financial account with a value of more than $10,000 at any point during the tax year. The $10,000 amount is an aggregation of all non-U.S. financial accounts and not just an analysis on an account-by-account basis.

The information on the former UBS client was turned over after UBS agreed in February 2009 to pay $780,000,000 under a deferred prosecution agreement to settle the claim that UBS conspired to defraud the U.S. by impeding the Internal Revenue Service ("IRS"). UBS also agreed to turn over information to the U.S. Department of Justice on 300 account holders. Google Lance Wallach for more articles on point.

A US citizen or resident that held an account with UBS or any other institution that has not filed the necessary FBARs for the last eight tax years, should immediately reach out to get help to discuss any potential issues they may have and their alternatives. Filing for amnesty and then opting out are two options that our former IRS agents have successfully done for our clients. If not done properly it can be a disaster. We suggest you use a CPA with years of prior experience with the IRS international division.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on FBAR, OVDI, IRS tax amnesty and opting-out abusive tax shelters, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, OVDI,  IRS tax amnesty and opting-out and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or lanwalla@aol.com visit www.taxadvisorexperts.com  or www.Lawyer4Audits.com.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

FBAR & IRS: Painful lessons from the 4th Circuit’s US v Williams reversal

July 26, 2012 | FBAR Penalties, International Taxation, Miscellaneous, News, OVDI Offshore Voluntary Disclosure Initiative, Voluntary Disclosure

The 4th Circuit takes a hard line on FBAR penalties

Nearly two years ago, I commentated on the lone FBAR court decision, US v. Williams (4th Cir. Jul 20 2012). In this case, the IRS lost. But because the facts were so unique, so limited, it really wasn’t much of a loss for the IRS. After all:
“…Williams’ tax professionals did not advise him to the requirement to file an FBAR. He said he didn’t know he had to and no one made it clear to him that he needed to. Unlike a strict liability offense where state of mind in irrelevant, in order to be liable for willful failure to file penalties, ones must possess a willful state of mind. Ignorance is at best, negligent.
Second, and here’s what I think it most important — is that for tax year 2000, the due date to report the TDF 90-22.1 form was on June 30, 2001. But the thing is that the IRS already knew about the account — since November 2000 when the account was originally frozen!
So when Williams was required to disclose the accounts existence to the IRS on June 30, 2001, Williams already knew the IRS knew about the Credit Agricole. There is no possible way Williams failure to file the FBAR could have possibly helped him and he must have known that. The court reasoned that the failure to check the box and failure to file a TDF 90-22.1 form by the June 30th deadline could have only been an innocent mistake. There actually was no strategic reason for Williams to file an FBAR — thus, the court inferred that the failure to file was not willful.”
So after the district court ruled against the IRS in 2010, I figured the Williams matter to be pretty much over. The case wasn’t all that strong for the government, and the taxpayer had absolutely nothing to gain by not filing the FBAR. After all, he already plead guilty to tax evasion on income earned from the very bank accounts that the IRS assessed the FBAR penalties. I figured the IRS would move on to more fertile ground, and not appeal. I was wrong. The IRS appealed. And more surprising, this time, they won.
And these are the lessons…
1. The IRS is insanely aggressive in assessing FBAR penalties. The IRS threw everything that had at this case and there was no mercy even though prudence would probably have called for it. So people thinking about a so-called ‘quiet’ or ‘soft’ disclosure think twice. And any tax professional advising a course of action — understand the IRS will probably come after you if they catch wind that you profited from advising something other than compliance.
2. Reliance on tax professional is no defense to FBAR penalties. Williams hired counsel during this time to assist him in coming clean. Clearly they missed having him file an FBAR. And if I were in their shoes, I would probably do no different. I am not criticizing his counsel. Of course, in retrospect, they should have. But how were they to know? They attempted a voluntary disclosure. Shouldn’t the IRS have said ‘jeez, we want to process this voluntary disclosure, but it seems we are missing some FBARs.”
So if you are outside the OVDI program, and get assessed FBAR penalties, do not expect the leniency available if you get into the OVDI program. They will push this all the way (However, If you are in the OVDI program reliance on a tax professional is a legitimate reason). Think about it: If the IRS can and will assess FBAR penalties in this case, what case will they not?
3. Willful is a low, low threshold. The 4th circuit has now ruled that “willful” is tantamount to “I could not possibly benefit from non-compliance, I relied on professional advice, and honestly my failure is what 80% of taxpayers so similarly situated did.”
This is a pertinent fact missing form the decision: According to the IRS records, in 2002, no more than 20% of taxpayer who were required to file FBARs actually filed FBARs. The FBAR filing requirement has been in place since 1970, but because of massive confusion and the Treasury even admitting that it it not have the resource to process them. It was a requirement that was routinely ignored…by everyone.
4. Do not expect justice/commonsense/fairness if you do not make an OVDI disclosure. It will not happen. If you do not like the IRS, you must get political. (or wait until a member of congress get caught in an FBAR scandal. Then maybe we can expect some reasonableness to trickle down). If you want to be treated somewhat fairly, you must disclose) by filing an OVDI an aggressively seek a lower penalty amount.
Here’s the thing. Not everyone who failed to file and FBAR or did not report income earned overseas should be treated like a criminal. And in fact, the opposite the vast majority of noncompliance is from either ex-pats, dual citizens or VISA holders who were under the mistaken assumption that because they paid taxes on income earned in their home/host country, the did not need additionally be taxes by the IRS. As this is totally a reasonable position. Look at the 16th Amendment. Where does it say worldwide income? It doesn’t. It actually took a US Supreme Court case, US v Tait, to rule that yes, the IRS could tax you globally.

Fbar-REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS

REPORT OF FOREIGN BANK 
AND FINANCIAL ACCOUNTS

Form
http://www.irs.gov/pub/irs-pdf/f90221.pdf

FBAR international tax IRS after you?

IRS Offshore Voluntary Disclosure Program Reopens
Lance Wallach Council Member President, VEBA Plan

0 answers

Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness Jan. 9, 2012 Today, the Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes.  Additionally, the IRS revealed the collection of more than $4.4 billion so far from the two previous international programs. The Offshore Voluntary Disclosure Program (OVDP) was reopened following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will remain open indefinitely until otherwise announced. Lance Wallach and his associates have received thousands of phone calls from concerned clients with questions about the prior programs. Some of Lance’s associates are still very busy helping people with the last program. Not a single person has been audited and most are pleased with the results and are now able to sleep easily without worrying about the IRS.  According to Lance, it requires years of experience to obtain a good result from the program. He suggests using a CPA-certified, ex-IRS agent with lots of international tax experience. While this is not a requirement to file under the program, Lance has heard many horror stories from people who have tried to file by themselves or who have used inexperienced accountants.” Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.” The new program is similar to the 2011 program in many ways, but it has a few key differences. Unlike last year, there is no set deadline for people to apply.  However, the terms of the program could change at any time going forward.  For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.” As we've said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase. “The third offshore effort accompanies another announcement that Shulman made today, that the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program.  That figure reflects closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases. In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures.  Those who come in after the closing of the 2011 program will be able to be treated under the provisions of the new OVDP program.


The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

The new program’s penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or the value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations.  This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax.  

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit http://www.taxadvisorexpert.com.

IRS Offshore Voluntary Disclosure Program Reopens

Offshore International Today                                         Jan 2012

By Lance Wallach, CLU, CHFC

Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness

---

 Jan. 9, 2012 

Today, the Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes.  Additionally, the IRS revealed the collection of more than $4.4 billion so far from the two previous international programs.

The Offshore Voluntary Disclosure Program (OVDP) was reopened following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will remain open indefinitely until otherwise announced.

Lance Wallach and his associates have received thousands of phone calls from concerned clients with questions about the prior programs. Some of Lance’s associates are still very busy helping people with the last program. Not a single person has been audited and most are pleased with the results and are now able to sleep easily without worrying about the IRS.  According to Lance, it requires years of experience to obtain a good result from the program.

He suggests using a CPA-certified, ex-IRS agent with lots of international tax experience. While this is not a requirement to file under the program, Lance has heard many horror stories from people who have tried to file by themselves or who have used inexperienced accountants.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The new program is similar to the 2011 program in many ways, but it has a few key differences. Unlike last year, there is no set deadline for people to apply.  However, the terms of the program could change at any time going forward.  For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

“As we've said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”

The third offshore effort accompanies another announcement that Shulman made today, that the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program.  That figure reflects closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures.  Those who come in after the closing of the 2011 program will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

The new program’s penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or the value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations.  This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. 

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR, and captive insurance plans. He speaks at more than ten conventions annually, writes for over fifty publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Pubic Radio’s All Things Considered, and others. Lance has written numerous books including Protecting Clients from Fraud, Incompetence and Scams published by John Wiley and Sons, Bisk Education’s CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation, as well as the AICPA best-selling books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, wallachinc@gmail.com or visit www.taxadvisorexpert.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

Help with Common IRS Problems: International Tax, Transfer Pricing, FBAR Problems

Help with Common IRS Problems: International Tax, Transfer Pricing, FBAR Problems

The IRS really, REALLY wants your FBAR

Penalties?

• If non-filing is accidental, up to $10,000.
• If non-filing is intentional, up to the greater of $100,000 or 50 percent of account balances. Plus criminal penalties may also apply.

Haven’t filed FBAR in the Past?
The OVDI (Offshore Voluntary Disclosure Incentive) program is still open, albeit with a higher penalty. Lots if Internet chatter about OVDI exists. For more information on various strategies available for OVDI, please click OVDI on the drop down Category list in the right sidebar. Yes, we prepare OVDI applications, including amended returns.
What is FBAR?
Expat CPAs usually say it’s a form used by the IRS to help track foreign banking transactions by US “persons”. Tracking means:

• Looking for taxable income that should have been reported on your Form 1040 or business return.
• Looking for illegal foreign banking transactions. Like money laundering .

A US person includes US residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
You file FBAR separately from your Form 1040. So it’s not like Form 2555 that you file with your Form 1040. For more FBAR information, click FBAR in the Forms drop down list on the right sidebar.
How to get the correct dollar value for FBAR

• Look at your bank statements for the year.
• Find the time period when you had the most assets in those accounts.
• Convert that highest amount to US dollars using the end of the year conversion rate.
• Enter the US dollar amount on FBAR.

Who has to File?

• Did you control a non-US bank account?
• Did the highest total balance in your non-US bank accounts ever exceed $10,000 for the year?
• Are you a US person as defined above?

If you answered yes to all three questions you have to file FBAR.
FBAR vs. Form 8938
They’re similar. Expat CPAs worry about the stiff penalties for not filing Form 8938 because it’s new and folks living outside the US might not be aware of the new reporting requirements. Click on 8938 in the Forms list for more info.
Are there exceptions for filing FBAR?
Yes. Here’s the IRS list:

• Certain foreign financial accounts jointly owned by spouses.
• United States persons included in a consolidated FBAR.
• Correspondent/nostro accounts.
• Foreign financial accounts owned by a govermental entity.
• Foreign financial accounts owned by an international financial institution.
• IRA owners and beneficiaries.
• Participants in and beneficiaries of tax-qualified retirement plans.
• Certain individuals with signature authority over but no financial interest in a foreign financial account.
• Trust beneficiaries.
• Foreign financial accounts maintained on a United States military banking facility.

Our CPA who was a manager in the international division of the IRS suggests filing, and then opting out to try to reduce the tax. Our Tax atty agrees.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

IRS Begins Rejecting OVDI Filings – Important News for Fence Sitters

By Brian M

We have written at least 100 posts about the Offshore Voluntary Disclosure Program (called OVDI or OVDP) and the need to file FBARs (Reports of Foreign Bank and Financial Accounts). In almost every such post we remind readers that time is running out. Many folks learned this week just how true that advice was.

The IRS has kicked out an undisclosed number of taxpayers from the OVDI program this week, even though they had previously received acceptance letters. Why? Because their names had already been disclosed to the IRS from a cooperating bank. The decision to begin enforcing the “first contact policy” has tremendous impacts on the millions of Americans with unreported foreign accounts.

Officially, anyone can participate in the Offshore Voluntary Disclosure Program unless they are under audit or criminal investigation, have received notice from the IRS regarding unreported foreign accounts or the IRS has already received their name from a cooperating bank. The first two exceptions are easy to understand = if you get a notice in the mail or a knock on the door from the IRS it’s too late to seek amnesty protection.

No one knows how or when the IRS will receive information from a cooperating bank. In some instances, the information could literally sit for months somewhere within the giant IRS bureaucracy until contact is made. That is exactly what has happened with last week’s recision letters sent by the IRS.

An undisclosed number of taxpayers who were already accepted into the program received letters from the IRS advising them that they were no longer eligible. Their participation was terminated meaning that they are now subject to audit, possible criminal prosecution and draconian penalties. Some had been in the program for 6 months before receiving the fateful letters.

Obviously, tax records are confidential and the IRS won’t share the names of those folks who have been rejected from the program. From what we can gather from the small community of lawyers that specialize in offshore tax reporting, most of those rejected had accounts at Bank Leumi. Coincidentally, Bank Leumi has been under investigation by the IRS and Justice Department for quite some time. This means that as part of the investigation, at some point Bank Leumi turned over the names of U.S. account holders rendering those people instantly ineligible for the amnesty program.

Is the IRS playing fair? Absolutely not but they are playing within the rules. Rules that they made.

We believe that once accepted into the program, participants should be allowed to complete the program and reap the benefits of compliance. The stated mission of the IRS is to promote voluntary compliance with the tax code. Pulling the rug out from under folks who made a good faith decision to come into compliance isn’t exactly fair. The IRS did reserve the right to reject anyone, however, if their name and identity had already been disclosed.

Because of the bureaucratic inefficiencies inherent within the IRS, that means others may find themselves accepted into the program and later rejected.

The message being sent by the IRS is crystal clear. The longer you wait, the higher the risks. Beginning next year, foreign banks will be required to identify and report account holders with ties to the United States. With hundreds of thousands of reports expected, it could be months – or more – before the IRS gets around to sending notices to anyone with a previously undisclosed account.

Receiving a rejection letter from the IRS isn’t the end of the world for some taxpayers. But it does mean an audit, more legal and accounting expenses and the potential of much higher penalties. (The penalties for unreported foreign accounts are as much as $100,000 per account or 50% of the highest account balance for each year the account was unreported.) If taxpayers can prove the failure to disclose the offshore accounts was due to mere negligence or ignorance, the penalties might actually be lower than those in amnesty.

The decision to reject Bank of Leumi account holders is something we will watch closely. Unfortunately, this probably is the beginning of a trend.

Our message needs to be repeated again. TIME IS RUNNING OUT. For a few it may already be too late. If you have unreported accounts, get off the fence and do something now. Before it’s definitely too late.

Above is an excellent article. I think that someone with this problem would do much better if they filed and the elected to opt out. That way you deal with the appeals division of the IRS and usually get a much better result.

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.