Friday, June 22, 2012

Updated IRM on FBAR Penalties (6/22/12)

A reader just alerted me to  updated 4.26.7  Bank Secrecy Act Penalties, here.   I have not had the opportunity to go through the updates yet, but will as I have time.  The reader did call my attention to the definition of willfulness so I provide the first installment below.


1.  Definition of willfulness:
4.26.7.4.2  (06-20-2012)
Civil Willfulness 
Civil willfulness is established by evidence showing a voluntary intentional violation of a known legal duty. 
If a person does not know of that legal duty but it can be shown that the person made conscious efforts to avoid learning of the duty, willfulness may be imputed under the concept of "willful blindness" or "reckless disregard" .
This concept is elsewhere in the IRM.  See 4.26.16.4.5.3  (07-01-2008) FBAR Willfulness Penalty - Willfulness at par. 6), here:

Under the concept of "willful blindness" , willfulness may be attributed to a person who has made a conscious effort to avoid learning about the FBAR reporting and recordkeeping requirements. An example that might involve willful blindness would be a person who admits knowledge of and fails to answer a question concerning signature authority at foreign banks on Schedule B of his income tax return. This section of the return refers taxpayers to the instructions for Schedule B that provide further guidance on their responsibilities for reporting foreign bank accounts and discusses the duty to file Form 90-22.1. These resources indicate that the person could have learned of the filing and recordkeeping requirements quite easily. It is reasonable to assume that a person who has foreign bank accounts should read the information specified by the government in tax forms. The failure to follow-up on this knowledge and learn of the further reporting requirement as suggested on Schedule B may provide some evidence of willful blindness on the part of the person. For example, the failure to learn of the filing requirements coupled with other factors, such as the efforts taken to conceal the existence of the accounts and the amounts involved may lead to a conclusion that the violation was due to willful blindness. The mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, by itself, to establish that the FBAR violation was attributable to willful blindness. 
The new IRM dealing with BSA penalties generally (of which FBAR is only one) omits this elaboration, but I suspect that it is subsumed in the new more succinct statement.

44 comments:

  1. Jack

    I posted the original comment. One correction. The section on FBAR procedures (4.26.16) in the IRM has not changed (at least it has the same date) and it still has the text you quote, but the section on general BSA penalties (4.26.7) has changed. I am fairly sure that 'reckless disregard' was not present in the older 4.26.7 (although I haven't checked with the wayback machine). This holds for all BSA examinations, not just FBARs. I speculate that this *may* be related to the news reports that the government is trying to get Israeli or other banks to provide information on depositors. Presumably, the government might find it hard to assess willful penalties against banks that are not as obviously culpable as the Swiss banks, but could sustain penalties showing 'reckless disregard' of laws. [ Like I say, this is speculation, it could just be that the service has taken up this new position to more easily assess FBAR penalties against individuals in FBAR audits.]

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  2. Thanks, anonymous, I have made a slight correction to note that the concept is in another IRM provision that was of earlier vintage.

    Now as to the relationship to the Israeli banks, I am not sure I get your point. Which of the other BSA provisions would apply to those banks?

    But for the larger point, I think that where the statute in question requires willfulness which is interpreted as in Cheek to be intentional violation of a known legal duty then the conscious avoidance / willful blindness concept meet that willfulness standard at least in a civil penalty context and probably in a criminal context as well. See Global Tech Appliances, Inc. v. SEB, ___ U.S. ___, 2011 U.S. LEXIS 4022 (2011)..

    Jack Townsend

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  3. Further to the point, I think that, since the Supreme Court says that willfulness blindness or reckless disregard is equivalent to willfulness in other civil penalty contexts and, by dicta, in criminal contexts, I think that would be the standard whether the IRM said that or not. In other words, the IRS is not stepping out on this issue, but simply recognizing that, for the BSA civil penalties (including FBAR), the interpretation of willfulness includes willful blindness or reckless disregard (or related concepts such as conscious avoidance).

    Jack Townsend

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  4. "An example that might involve willful blindness would be a person who admits knowledge of and fails to answer a question concerning signature authority at foreign banks on Schedule B of his income tax return".But later on, it says "the mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, by itself, to establish that the FBAR violation was attributable to willful blindness. "But later on, it says "the mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, by itself, to establish that the FBAR violation was attributable to willful blindness. "They seem to say one thing and its contrary. What is the nuance here? Jack, would you mind clarifying?

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  5. The first example's key fact is an admission of knowledge of and failure to answer the question. Not many taxpayers admit that they even knew of the question and the requirement that it be answered. But, again all the facts are in play on that decision, so even with those facts, the Government might not be able to prove willfulness.

    Jack Townsend

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  6.  Jack

    I was thinking of some of the civil penalties the government was trying to apply against 'enabler' banks. For instance, seizing Wegelin's assets. I think that was under forfeiture laws, not FBAR laws, but I also remember DoJ has touted possibly using civil FBAR penalties against banks since the statute seems to allow penalties against anyone who 'causes a violation' of the reporting requirements, and foreign enabler banks may fall into that category. This is pure speculation on my part.

    Thanks for your reference on the Supreme Court case. I did look at the opinion, and while I am not a lawyer, I think that it says that willful blindness can be said to be equivalent to willfulness (although it seems to set the standard for willful blindness pretty high). But it also goes out of its way to say that


    First, the defendant must subjectively believe that there is a high probability that a fact exists.  Second, the defendant must take deliberate actions to avoid learning of that fact.  These requirements give willful blindness an appropriately limited scope that surpasses recklessness and negligence.


    So I don't think the IRM follows the decision if the IRM implies that recklessness  is the same as willfulness (I am unsure if there is a distinction between 'reckless disregard' and just 'recklessness').


     

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  7. Does the knowledge of known legal duty have to be established when the return was due? what happens in the case where the person was liable to file fbar but did not know about it until after the deadline passed. Does he have to file the delinquent fbars, or can he do nothing stating that he was not aware at the time when the forms were due.

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  8. The intentional violation of the known legal duty has to occur at the time of the violation -- i.e., June 30 in the case of failure to file an FBAR or the date of filing in the case of the filing of a false FBAR.

    I don't think there is any specific authority one way or the other if the person not have the required intent at the time of violation (as indicated above) later learns of the duty. By analogy to similar obligations (e.g., tax filing obligations), the person does not commit a crime later by learning of the duty when he or she did not know of the duty at the time of the violation.

    So the answer is that, based on this analysis, the person does not have to file delinquent or amended FBARs upon later learning that he should have filed or that the earlier filing was incorrect.

    As in the tax area, persons may find it prudent for some reasons to file delinquent or amended FBARs, but the person is not be convicted of a crime or subject to a penalty for failing to do so.

    Jack Townsend

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  9. Hi,
    I am filing FBAR for first time this year. I have information of account/deposit/interest for last 2 years so I can file accurate information. My accounts were fixed deposit/CD or savings with total of $175K over past 10 years. However I dont have details of account/amount/interest for prior years. Looks like it will take many weeks to get that information. Question: I file FBAR for current year now to meet June30 deadline but prior years later on in the year. Will that be ok OR should I file every thing next year once I get all the information ?

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  10. I am just about to file my FBAR and have one doubt. If I've transferred money from Account A in one bank to Account B in another bank, then this money should be counted in Account A or Account B for high bal purpose. The CPA says we don't count money twice in case of account transfers. Example: Account A has high balance of 15K. Account B has high balance of 12K. Now from Account A (after the day of high balance), 5K was transferred to Account B making Account B balance to 17K. As per CPA, Account A should report 15K and Account B should report 12K instead of 17K as this 5K is already counted in Account A.

    Sir Jack, now lets say we do what is our knowledge and later in audit, IRS says your calculation is incorrect etc...would that mean we will be subjected to false filing as accounts high val was not as what IRS would have calculated. We relied on CPA counsel. What else can we do. How can i be sure that what is calculated is 100% accurate or not.

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  11. 1. My understanding is that high balances in each account are reported regardless of transfers in or out, including transfers to other accounts reported on the FBAR.

    2. Would the IRS treat elimination of duplicate amounts from transfers as false reporting? I don't control the IRS, but I doubt that the IRS would penalize it materially unless the IRS could show that the taxpayer knew better and eliminated the duplication anyway.

    3. I think the IRS might seriously consider penalizing this type of elimination: For 2011, Swiss Account A has high balance of $100,000 which was reached on June 30, 2011. On July 1, 2011, Swiss Account A is closed and all the money ($100,000) is moved to UK account A, which on the date the transfer (July 1, 2011) is received reaches its high balance of $200,000. Now, if the taxpayer reported only UK Account A and did not report at all Swiss Account A on the claim that the UK Account duplicates it, I think the IRS would be peaved and at least feign offense. A significant penalty might be imposed.

    4. Moreover, I think the IRS might also be peaved but less aggrieved by reporting Swiss Account A at a zero balance.

    5. Many variations in between. For example, if the transfer to the UK Bank in the above example were only $50,000 so that the FBAR reported $50,000 on the Swiss account and $150,000 on the UK account.

    6. Better part of wisdom is to report the high balances in each account, I think. Or alternatively, include an attachment stating what you are doing and what the high balance would be if no eliminated.

    Jack Townsend

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  12. If you are set on filing delinquent FBARs (that may or may not be a good decision, but assuming you are set on that choice), the risk you take is that the IRS could start an audit which would preclude you from joining OVDP 2012. If you already know you are not joining, then I suppose that risk is not material.

    Jack Townsend

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  13. 1. File FBAR for current year now, and not file delinquent FBARs now but later with OVDP
    2. File FBAR for current year now, and not file delinquent FBARs now but later with QD
    3. File FBAR and delinquent FBAR together now. (Looks like not a good idea)
    So looks like 1 or 2 are better options than 3 or any better method
    3.

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  14. In Form 8938, do we eliminate double counting while calculating high balance in each account (I mean would account transfers be elimiated if this account tranfer is made after the high bal date).In other words, the 50K limit for form 8938 is for your aggregate high bal (which would be without double counting) or just blunt high bal of each account with double counting.
     

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  15. There are two issues.

    First, the threshold question is whether you must file a Form 8938. That is keyed to the high aggregate value on two key dates -- the end of the year and any time during the year if higher than the end of the year. (I suppose that could be shortened to mean just the high value of all reportable assets anytime during the year rather than stating the threshold test in the higher of the disjunctive dates.) That threshold determination seems to a snapshot on the given date and would seem to effectively eliminate duplications because you are taking a shapshot of the aggregate value.

    Second, if you are required to report, like with the FBAR, you report the high value during the year. I read this to be without eliminating duplications for transfers between accounts.

    Keep in mind that the Form 8938, like the FBAR, is just an information form. Hence, whether you eliminate the duplication is not material to any tax cost you may incur. It is just information. Hence there is no cost even if you do not eliminate duplications caused by transfers from one asst to another.

    Finally, of course, the principal purpose of the Form 8938 is to encourage taxpayer's to properly report income from reportable assets and, indeed, all foreign assets whether reportable specifica foreign financial assets or not. So be sure, however you interpret Form 8938, to properly report all of your worldwide income, including income from assets of the type reportable on the Form 8938.

    Best,

    Jack Townsend

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  16. Thanks Jack. I'm fine from the last day reporting threshold and don't have to submit this form for sure. But anytime during the year clause was confusing. I wasn't sure if I should count my FBAR total and rely on that total to determine my threshold for Form 8938. If Account A is highest on Day 1, Account B is highest on Day 10. Then I will add Day 1 balance of Account A and Account B. If this is below threshold, I will add Day 10 balance of Account A and Account B. If this too is below threshold, then no Form 8938. If either of Day 1 or Day 10 aggregate execceds threshoold, then do Form 8938. Is this right understanding? 

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  17. I was tripped by the wording "... more than $x at any time during the tax year" and assumed sum of yearly max values. How safe is it assume that this means "Sum of asset vlaues on any particular day". Is this the IRS intention or a possible interpretation...
    This interpretation would not require me to file a 8938 eventhough its just informational.

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  18. Do I've sufficient time to mail the FBAR now so that it will reach by Friday. Can FBAr be submitted electronically? My CPA should finish my FBAR by tomorrow so if there are ways to get it sent by Friday, please let me know. I think i can use the express mail option.

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  19.  FBAR is different from 8938. FBAR only asks for highest balance. 8938 specifically asks for the maximum amount held abroad. You do not add maximum balances. For the end of the year, you take  balance on that day. For anytime during the year, you take, as Jack says, a 'snapshot' and then take the maximum snapshot. 

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  20. You can use BSA E-filing system to file the FBAR electronically. You can find a link on IRS page under FBAR guidance

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  21. What currency conversion rates should we use... Particular days or Treasury End of year published rates. For some that might make a material difference in the reaching the thresholds.

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  22.  To SolomonAd,
    The deadline for the current FBAR is the most important, since late filing will be delinquent.

    You are allowed to amend FBARs, and somewhere on the form there are words to the effect of filing the form with a "reasonable approximation."  So (as a non-lawyer) I would assume that calculations do not have to be to the penny (actually impossible because of different exchange rates) and that if you reported an account as 100k, and then amended to the precise amount of $99,567.89 you would not be penalized. 

    Therefore if you are set on filing the delinquent ones, perhaps filing them with the best data you have would be good, followed by amended FBARs with precise figures.  But that, together with the OVDI2 or QD or forward compliance decision is something you need to discuss with your lawyer.

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  23. IRM says that
    "the mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, by itself, to establish that the FBAR violation was attributable to willful blindness." If a taxpayer checked " no " box inadvertently in 2 tax years, but has the following other facts.

    1) Never created any layers of entities, trust. OR sham co.2) All the money from W 2 taxed money.3) All the foreign accounts are in individual name CDs , with USA addresses from the beginning.4) No money was withdrawn from CDs.5) Never moved money from one country to another.6) All the CDs are in the home country, which is not a tax-heaven country.7) Never got any FBAR warning.8) Tax payer inadvertently forgot to claim Schedule M credit for 2 consecutive years.
    In all the facts above, will the inadvertent checking box " no " , make the taxpayer willful ? OR he can be non-wilful.

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  24. I don't think anyone can give you a definite answer but you seem to have generally good facts. Some are more important than others, for example:

    #1 entities are very often used to conceal, it's great that you didn't have any.

    #4 I don't think that having withdrawn some money would necessarily be bad, it could be if you had found some way to withdraw it involving some subterfuge, for example a credit/ATM card used to bring funds to the US.

    #7: I don't think any of us ever got an FBAR warning, so this doesn't make you any different than others, but anyone who has had an FBAR warning would find it extremely hard to make a case that they didn't know.

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  25. Jack,
    What would be your comments to this particular tax payer.

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  26. No, there was no credit card, debit/ATM card. Money was meant for personal retirement fund & that's why they were not withdrawn. What do you think about other points.

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  27. The question is whether the facts establish willfulness. On the bare facts recounted, willfulness is probably not present. The problem is that, if the IRS wants to assert willfulness, the factual tapestry will be a lot richer than these sparse facts. That is the problem with looking for something definitive in this format. I recommend that the person seek professional assistance for the type of interaction needed if he is looking for advice to rely upon.

    Jack Townsend

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  28. If I want to see you, what documents would you like to see from me on the above subject.

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  29. if you want to contact Jack regarding your own case, it is better to send him email or make a call directly him.

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  30. I am in 2011 ovdi. Tax loss to IRS is under $ 11,000.00 in 7 years. In 2005 & 2006 I checked wrong box on sch. B. In other years I Did not check any box. Other facts are similar to above. Like 1) never created any layers of trust/sham co. 2) all the accounts are CD in my individual name with USA address from the beginning. 3) all these CDs are in my home country & not in any tax heaven country.4) I did not move the funds or attempt to move funds to conceal from IRS. I did not remember how I checked wrong box in 2 years. But I think in those years I mechanically compared manually prepared return to on-line tax preeparation software return. In those online tax preparation software wrong box was checked by default. Will this render me willw

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  31. A person has checked wrong box of " no " in 2005 , 2006 years & did not check any box in other 5 years. If this person is in ovdi, will he be considered willful ?
    His other facts are as follows:
    A) never created or attempted to create any layers of entities/trust/co.s
    B) source of the funding was W2taxed money.
    C) all the accounts are CDs & in the individual name.
    D) all the accounts have USA address & no other address was used.
    E ) all the cd accounts are in home country , not in an obvious tax heaven country.
    I don't know why checked wrong box in 2 years. All the returns were prepared manually. but this was possibly due to mechanically comparing with on line tax preparation software return where the wrong box was checked by default & then copied that entry on the manually prepared tax return. Will it be considered willful ?

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  32. Willfulness is a far more complex subject that you summary facts present. You have good facts; you have bad facts. Which way the facts ultimately tilt will turn upon a host of other, perhaps more subtle facts and the IRS's exercise of discretion. I suggest you seek counsel. I have a list of attorneys in the upper right hand column of this blog. Find one close to you and seek more nuanced advice that can really serve you best.

    Jack Townsend

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  33. I just posted this reply to another comment you made which is basically the same comment. So, I cut and paste the reply:

    Willfulness is a far more complex subject that you summary facts present. You have good facts; you have bad facts. Which way the facts ultimately tilt will turn upon a host of other, perhaps more subtle facts and the IRS's exercise of discretion. I suggest you seek counsel. I have a list of attorneys in the upper right hand column of this blog. Find one close to you and seek more nuanced advice that can really serve you best.

    Jack Townsend

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  34. For his case, it is not so much on willfulness, but his story on reasonable cause. Non-willful FBAR penalty is still a killing. Without a true reasonable cause (or at least what IRS believe it is), it will be a wild range of penalty under IRS discretion.


    A good tax lawyers should have enough data (experience) to help going through the process (if or not go opt-out).


    I did not take a legal counsel because I did not have a lot to lose

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  35. Mr Townsend, I wonder if I could ask you a clarifying question re your above answer... I do recognise your advice to report the high balances in each account. In the following situation though, I am wondering what might be considered the 'high balance' as this issue has come up a few times for me and I am not sure whether the periodic statement is a 'fair reflection' of the account balance here:

    1. Transfer 100k from account A to account B, while account C is being created. The funds are then on-transferred to Account C with that transaction backdated to a virtually simultaneous time that they were first transferred to account B. The periodic statement gives 'line item balances' (as opposed to close of business day balances), so it shows a highest balance in account B as 100k, even though that deposit was effectively immediately reversed, as evidenced in the very next line item balance.

    2. Alternatively, the original deposit to account B might be made overnight (eg: 20th January at 11:59pm, after close of business), and the transfer on to account C might be made the next morning (eg: 21st January at 9:30am), due to the way banks handle the timing of internet transfers. Again, the 100k is not in the account for any 'close of business day balance', though the 'reversing transaction' is not quite as simultaneous as in example 1. The periodic statement again shows the highest balance in account B as 100k, based on line item balances, even though the $100k had both come and gone before the close of business (showing in the statement as consecutive transactions), so it would not reflect on a close of business day balance.

    These circumstances happen a lot with term deposits, where the principal is moved briefly to a main account on maturity until the funds are rolled over into a new term deposit account. I wonder what your opinion might be re this: Leaving aside the double counting issue (the money would be reported in the term deposit, and the IRS have confirmed that rolled over term deposits only need to be counted once per year even if the account number changes), does the 100k have to be included in account B (i.e. the main, non-term deposit account) in these situations, even when, in 'non lawyer terms' at least, the periodic statement may not be showing a 'fair reflection' of the true value of that account, since those funds were put in and taken out virtually immediately, and in less than a business day at worst? Account B would still be disclosed in the FBAR but at a lower 'end of business day' balance. I know you can't speak for the IRS, but would this be something they would perhaps 'let go' or are they more likely to consider this an under-disclosure and penalise accordingly? There is no under-reporting of income, so what might a penalty here look like per year?

    I have not been able to get any clarity on this issue thus far, so I would greatly appreciate your input. Thank you!

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  36. Bill,


    1. You don't advise of the context for the question. Is the question whether the amount in account B needs to be reported on the FBAR for the year. The answer to that is yes. Keep in mind that the FBAR is just an information report and it requires you to state the highest amount in the account, no matter how fleeting that spike was. Now, if you are asking about the penalty inside or outside OVDI/OVDP that is another matter. As I understand it, the IRS would avoid double counting for a penalty based on a percentage of the high balance in the account. To use a more specific example based on the one you gave. Say the on March 1 of the year, account A has $200,000. The next day, $100,000 is transferred to account B. The following day, that $100,000 is transferred to account C. The high balances in accounts A, B and C respectively will be $200,000, $100,000 and $100,000 but, because double counting is avoided, the high balance among these amounts is $200,000. However, keep in mind that the nonwillful penalty is not based on high balance but is a penalty of up to $10,000 per account per year. So, in this case, there are three accounts and thus the penalty for the year could be $10,000. It might well be that, if the IRS could be convinced that account B were just a transitory account (the money transitioning to account C), you could talk the IRS on audit into treating the accounts as just 2 account.


    2. I think in this example, at least in theory, is not materially different than the first. Again, if you are concerned about a penalty based on a percentage of the high balance, as I understand it the IRS aggregates the high balances without duplications and applies the penalty. So, as to that penalty, it would not matter if the $100,000 were transferred through 20 accounts or simply stayed in one account. Of course, the more accounts the worse the problem potentially becomes for the nonwillful penalty. Again, if you can convince the IRS that account B was just a short term transitory account, I think the IRS would be inclined to eliminate it from the penalty.


    Both of these answers assume that the use of account B was not intended to hide the accounts or beneficial owners but really served some legitimate purpose.


    Perhaps I did not understand your particular concern, but I hope this helps.


    Jack Townsend

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  37. Thanks very much for your detailed response... much appreciated. To provide context, as far as I am aware, all FBAR lodgement is uptodate, and all foreign accounts requiring to be disclosed (including account B) have been. All income has been declared and taxes fully paid. There is not at this stage any OVDI/OVDP or audit concern. The only issue is whether the correct value was disclosed on the FBAR for account B only. From your response, it appears that perhaps it has not been and that even if the additional funds were in the account for only a fleeting moment, it should be included as part of maximum value computations. (By extension, it seems you might be saying that the individual could not necessarily rely on the argument that the periodic statement showing the transitory funds was not a 'fair reflection' of the account's value).

    The issue this then leads into, is whether or not amended FBARs should be lodged (not within OVDI/OVDP) showing the higher balance for account B and if they are amended (or even if they are not amended, but the IRS decides at some point on audit that the higher value should have been disclosed), what penalties might be imposed by the IRS on audit. From your response, it seems that if it can be shown that account B truly was only a legitimate transitory account for the additional funds (which it was, based on bank practices of putting the funds briefly into a holding account when certificates of deposit are rolled over, or of making internet transfers post into accounts only overnight), your thoughts are that the IRS would probably be inclined to not impose a penalty re account B. As a worst case scenario, the penalty would appear to be $10k per year that account B was undervalued (I think it has been a couple of years, and may not even be a continued process any more as the individual has restructured the accounts). Am I understanding this correctly?!! This matter is in relation to a current case only, but in researching this issue, it came up a few times more than I would have thought, though n!

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  38. Jack

    For someone who has opted out and agreed on an FBAR penalty (minnow case, small penalty) with the IRS, is there any need to insist on a 'closing agreement' with a form 906 ? I know that is supposed to bring 'finality', so there is some supposed comfort, but it may mean months more of bureaucracy until the form 906 is approved (or so I gather). Realistically, the IRS would be acting in bad faith if it went back and tried to increase FBAR penalties (taxes owed are literally a rounding error, so not concerned about that) later, so it would be pretty unlikely, I presume ?

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  39. And to follow up on my post, are you planning to insist on closing agreements for your opt out cases when the time comes (at least, those that don't receive an FBAR warning letter, but some penalty) ?

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  40. On the opt out, there is a "regular" audit. Audits are not normally resolved by Form 906. I suppose that there might be some reason in some cases to want to get a Form 906, if the IRS will even agree to give one. But in most cases a Form 906 would not be that important. Whether your particular case is one that, from a practical perspective, does not need a 906, I have no idea.

    Best,

    Jack Townsend

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  41. Jack


    Thanks, that was just what I wanted to know --- whether a closing agreement was normally executed after an audit. I know people who did not opt out did sign such an agreement, but the IRS likely had standard boilerplate for such an agreement. I doubt they would have any such for an opt out, and would instead just have regular IRS tax adjustment and either an FBAR warning or penalty letter.

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  42. @disqus_47wuPH1llr:disqus

    Would that be possible to give us a data point of what to expect in opt-out audits:

    Would you mind posting some information about your case, like when Jack make posts about convictions:
    - number of accounts
    - Approximate total amount
    - Unreported income.
    - Amount of your FBAR penalty.
    That would be great. Thanks in advance on behalf of all the minnows reading this blog.

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  43. Minnows often worry that they will face millions of dollars of penalties because they may have dozens of accounts abroad. For opt outs, more effort should be focused on developing reasonable cause arguments than on worrying about the number of accounts. In IRM 4.26.16.4.7(4), it is stated "Given the magnitude of the maximum penalties permitted for each violation,
    the assertion of multiple penalties and the assertion of separate penalties
    for multiple violations with respect to a single FBAR form, should be considered
    only in the most egregious cases." It is unlikely most minnow cases are egregious and one can argue for one penalty per year if the IRS insists on imposing a penalty.

    The question then becomes how much that one penalty per year will be. A reasonable estimate of non-willful penalty amounts would be as is found in IRM 4.26.16.4.6.2 (4) (5) (6). The next question is if examiner discretion and the OVD Opt Out Committee will allow lesser amounts. Is there any anecdotal evidence or opinions on that?

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  44. Hello Shah, My case is very very similar to yours with CD funds in India. I am interested in update on your case since I am just getting started and would find your experience extremely valuable.


    Thanks!
    SSDinDetroit@gmail.com

    ReplyDelete

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