tag:blogger.com,1999:blog-1519969502186924526.post6400153255344329714..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: New IRS FBAR Penalty Guidance (5/29/15; 6/1/15; 6/10/16)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger25125tag:blogger.com,1999:blog-1519969502186924526.post-54919612679958825672015-06-03T06:29:58.966-05:002015-06-03T06:29:58.966-05:00``The IRS's position looks quite reasonable an...``The IRS's position looks quite reasonable and is to be commended. It appears <br />to reflect sensitivities over the argument in the Eighth Amendment <br />against excessive fines and penalties and may make it more likely that <br />non-offshore voluntary disclosure program penalty cases will settle <br />before the court action necessary for the government to collect the <br />Title 31 penalty.<br /><br />Scott<br /> D. Michel of Caplin & DrysdaleUStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-9184424886176292702015-06-03T02:59:41.266-05:002015-06-03T02:59:41.266-05:00I would like to thank
you for the efforts you have...I would like to thank<br />you for the efforts you have made in writing this post.<br /><br /><br />Really a helping blog on the FBAR.<br /><br /><a href="http://www.helpfortax.com/irsamnesty.php" rel="nofollow">FBAR Amnesty</a>Avinash Dwivedinoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-36901810856810713242015-06-02T19:32:00.272-05:002015-06-02T19:32:00.272-05:00The recent guidance provides in part as follows: ...The recent guidance provides in part as follows: "In most cases, the total penalty amount for all years under examination will be limited to 50 percent of the highest aggregate balance of all unreported foreign financial accounts during the years under examination." Since the guidance expressly refers to the highest aggregate balance "during" the years under examination, I am at a bit of a loss to understand how you would read this to say something else. I did not see one reference to the highest aggregate balance on the date of the violation or any other indication that the language means anything other than what it says. <br /><br /><br />Also, as you may or may not be aware, the Internal Revenue Manual has for some time set forth certain FBAR penalty guidelines based on the maximum value of an account during the year (and not the value on the date of the violation), so it seems to be entirely plausible that the recent guidance would similarly be keyed to some percentage of maximum account value during the year.<br /><br /><br />With respect to your point about the "normal' 50% cap possibly achieving worse results than the statutory penalty, keep in mind that the 50% cap figure under the recent guidance applies to the total penalty for multiple years, whereas the 50% statutory penalty applies to a single year (and the statutory maximum penalty also has a floor of $100,000 per violation). It is possible to construct a fact pattern where the 50% cap under the recent guidance for multiple years would exceed the statutory penalties for those years, but it would be an unusual case. And, in any event, the possibility of the cap exceeding the statutory penalty would not seem to have any significance. If the cap is higher then the statutory penalty, it is simply irrelevant. <br /> <br /> <br /><br /> "Michael J. Millernoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-86862591754470721632015-06-02T02:27:19.825-05:002015-06-02T02:27:19.825-05:00While all of this leaves a fair amount of discreti...While all of this leaves a fair amount of discretion with the IRS examiner, it does suggest that there are "norms" for FBAR penalties. I would still strongly suggest that TP do a cost/benefit analysis before hiring a tax lawyer. Their argument of course will be given that the actual amount of the penalties will be determined based upon "facts and circumstances"there remains a good deal of leeway for effective advocacy to keep the FBAR penalties as low as possible, and to keep them from reaching the maximum guideline amounts.UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-55452961741266344752015-06-02T02:16:22.492-05:002015-06-02T02:16:22.492-05:00The guidance provides that it is the examiner who ...The guidance provides that it is the examiner who makes a recommendation as to amount, and type of FBAR penalty that is appropriate, and the group manager who makes the final determination, after consultation with an Operating Division FBAR Coordinator. The guidance makes clear (despite what I have heard in the past) that it is not the FBAR Coordinator who makes the decision. In addition, except in cases where the recommendation is to assert a willfulness penalty, IRS Counsel review is not required.UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-36297698205255661912015-06-02T02:12:50.562-05:002015-06-02T02:12:50.562-05:00If the examiner determines that the conduct was no...If the examiner determines that the conduct was non-willful then in most cases the penalty will be limited to $10,000 for each year regardless of the number of unreported financial accounts. Previously the IRS position was that it would assert a penalty of $10,000 per year, per account. The guidance does provide that in some cases the "...facts and circumstances (considering the conduct of the person required to file, and the aggregate balance of the unreported foreign financial accounts) may indicate that asserting nonwillful penalties for each year is not warranted." Examiners may in those cases assert a single penalty not to exceed $10,000 for one year only. The starting point for all nonwillful calculations, however will be the "mitigation guidelines" set forth in IRM 4.26.16.4.6 et. seq.UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-45741140312135226452015-06-02T02:08:57.449-05:002015-06-02T02:08:57.449-05:00.......but in no circumstances will the penalty e..........but in no circumstances will the penalty exceed 100% of the highest aggregate balance (6/30) ........ Since there have been instances where the IRS has threatened penalties of 150% or more this finally places a limit on the maximum civil penalties. Presumably this was done, in part, to undercut any argument by taxpayers that the penalty violated the Constitutional prohibition against "excessive fines" that was raised in the Zwerner case in Florida.UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-73121936302752126022015-06-01T11:51:26.308-05:002015-06-01T11:51:26.308-05:00That is, if you are able to open one or more forei...That is, if you are able to open one or more foreign accounts aggregating to under $10K. (No bank I know of will rent out a safe deposit box without an account from which they can debit the fee.) Therein lies the problem.RCDnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-34822501814380258432015-06-01T11:49:34.051-05:002015-06-01T11:49:34.051-05:00The guidance is vague as to where the line is draw...The guidance is vague as to where the line is drawn between willfulness and lack thereof, and to what level of willfulness would be egregious enough as to justify more than 50%. So I'm not sure how much is really "new."<br /><br />On the other hand, many people were scared into settling for 20, 25 or 27.5% percent because of lack of such guidance. Even many of those who successfully transitioned to streamline have paid a 5% penalty that is more than $10K for each open year.<br /><br />It would seem appropriate to allow those who have signed closing agreements to have the agreement reviewed and receive a refund for overpayment if the penalty would have been lower under the guidelines in the memo. Sadly, I wouldn't hold my breath waiting for this to happen.RCDnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-74410570840543732152015-06-01T01:59:12.237-05:002015-06-01T01:59:12.237-05:00I disagree. As I read the guidance the 50% cap is ...I disagree. As I read the guidance the 50% cap is based on the highest aggregate balance but as of 6/30 and not high/max balanceanonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-85986544698470475052015-05-31T10:34:51.389-05:002015-05-31T10:34:51.389-05:00I disagree. While the 50% statutory maximum penal...I disagree. While the 50% statutory maximum penalty (ignoring the $100,000 floor) is based on the value of the account on the date of the violation, and thus is specifically based on the 6/30 balance, this is something different. As I read the guidance, the "normal" cap of 50% is very clearly based on maximum values during the year.Michael J. Millernoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-8267211753871303002015-05-31T09:45:51.129-05:002015-05-31T09:45:51.129-05:00Don't forget, in these low-interest times, the...Don't forget, in these low-interest times, the possibility of opening safe deposit boxes and storing cash or gold until the statute of limitations runs out. If a burglar breaks into one box, you still have the others.SomebodySmartnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-1852716216938397892015-05-31T09:44:15.096-05:002015-05-31T09:44:15.096-05:00Always remember that I.R.S. no right to one thin C...Always remember that I.R.S. no right to one thin Canadian dime. If you're a Canadian citizen under Canadian laws what difference does it make that some foreign laws classify you as a citizen of that foreign country? The boundary of the U.S.A. is the boundary of the U.S.A. Just say NO and stay in Canada. Why should you visit a foreign country's diplomatic mission and pay a fee to renounce a citizenship that foreign country unilaterally inflicted upon you?<br /><br />Just say NO. Open your accounts with a driver licence and other ID that does not show birth place. Transfer the money from your old account in cash so the old bank cannot be pressed to disclose where the money was transferred to as some Swiss banks have been.SomebodySmartnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-70095357354309411942015-05-31T09:27:33.335-05:002015-05-31T09:27:33.335-05:00No change here either . FinCEN doesn’t really want...No change here either . FinCEN doesn’t really want to administer the FBAR. Sure while you file your FBAR on June 30th with FinCEN, the agency who enforces FBAR penalties is…. the IRS.<br />Why?<br />Because reasons.<br />I have listed my potential reasons:<br /><br />No other agency wanted to do it<br /><br />No other agency had the vast administrative resources, and possibly,<br /><br />The IRS’s has little prestige to lose (a 27% approval rate by the public; and not even all that well-liked by its employees); slapping onerous fines on regular Americans won’t do anything to diminish their esteem. It’s hard to tarnish a tarnished brand.anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-89938365463439430572015-05-31T09:24:43.332-05:002015-05-31T09:24:43.332-05:00It all goes back to the fact that FBARs penalties ...It all goes back to the fact that FBARs penalties have nothing to do with<br /> income taxes. FBAR penalties exists — allegedly — to give law <br />enforcement ways to financially cripple the real mean and nasty <br />terrorist cells, criminal syndicates, and organized crimes (of course, <br />the intent of FBAR penalties isn’t quite lining up with the results; but<br /> let’s not dwell on that too much, ok?). Title 26 of the US Code is the <br />IRS’s bread and butter: the “Internal Revenue Code.” FBARs, however, <br />come from Title 31 (and the Bank Secrecy Act of 1970).anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-16969620428595759962015-05-31T06:00:08.280-05:002015-05-31T06:00:08.280-05:00--------In no
event will the total amount of the ...--------In no <br />event will the total amount of the penalties for nonwillful violations <br />exceed 50% of the highest aggregate balance of all unreported <br />foreign financial accounts for the years under examination.----------<br />This really feels like a turkish bazar when I take into consideration the $10K max. penalty per year and account and holder vs. the NW mitigation guidelines.anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-64670961601616407892015-05-31T05:08:53.497-05:002015-05-31T05:08:53.497-05:00Since 100% of europe goes by a community property ...Since 100% of europe goes by a community property law one way or another, this means very good news for ``H`` because his FBAR penalty will only be based on 50% of the account value. There are inconsistencies here.<br />Why should it be based on the highest account balance ?<br />Again the date of the filing violation is 6/30 of the year following the calendar year for which the account is being reported. Ianonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-70712233806007341522015-05-31T01:11:46.348-05:002015-05-31T01:11:46.348-05:00I see. Yeah that's definetely a difference the...I see. Yeah that's definetely a difference then. Thank you for pointing that out. How generous of the IRS to do this :)popponoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-91327712869964081772015-05-30T12:53:45.620-05:002015-05-30T12:53:45.620-05:00I think who earns may not be the same as who owns ...I think who earns may not be the same as who owns in your example. Assume, for example, the H (US citizen) and W (nonUS citizen) reside in country X with a community property law that says 50% of earnings for personal services belong 1/2 to each, then if W earns everything in the account, it is still owned 1/2 by each. So, if W has no FBAR filing obligation, H's penalty would be based on the 50% he owned. At least that is how I interpret the concept.<br /><br />If W has an FBAR filing requirement, then 100% of the account is the penalty base, but split 50-50 to each of them.<br /><br />Of course, in applying the offshore penalty in OVDP, the IRS has always only applied it to the owned portion of the account for the U.S. taxpayer.<br /><br />Jack Townsend.Jack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-23634186136032405232015-05-30T12:37:42.491-05:002015-05-30T12:37:42.491-05:00---------In no event will the total penalty amount...---------In no event will the total penalty amount exceed 100 % of the highest aggregate balance<br /> of all unreported foreign financial accounts during the years under examination-------------<br /><br />Example :<br />2010 : $250.000 aggregate balances as of 6/30 and not high/max. balance<br />2011 : $250.000 aggregate balances as of 6/30 and not high/max. balance<br />2012 : $250.000 aggregate balances as of 6/30 and not high/max. balance<br /><br /><br />Before for willful penalties was $100k or 50% whatever is greater. Which was $375K (3x125K)<br />Now 100% of $250K = $250K which is a reduction of $125K from earlier guidance.anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-71226595388850739802015-05-30T12:16:28.088-05:002015-05-30T12:16:28.088-05:00Jack I am confused I thought the date of the filin...Jack I am confused I thought the date of the filing violation is 6/30 of the year following the calendar year for which the account is being reported. <br /><br />----------In most cases, the total penalty amount for all years under <br />examination will be limited to 50 % of the highest aggregate <br />balance of all unreported foreign financial accounts during the years <br />under examination.-------------------<br /><br /><br />I assume by aggregate balance we are talking about the amount as of 6/30 for each year under examination.anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-47260066576259783652015-05-30T12:06:20.133-05:002015-05-30T12:06:20.133-05:00Jack
what does that mean : ``For each co-owner ag...Jack <br />what does that mean : ``For each co-owner against whom a penalty is determined, the penalty will<br /> be based on the co-owner's percentage ownership of the highest balance <br />of the foreign financial account.``<br />Example :<br />Joint account Husband (american) and Wife (american).<br />Husband works and earns 100% of the income.<br />Do I interpret this guidance correctly in saying that the FBAR penalty will be based on 100% ownership from husband and 0% from the wife of the highest balance of the foreign financial account.anonnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-72639413246699849892015-05-29T17:05:27.725-05:002015-05-29T17:05:27.725-05:00I don't really see any changes here with regar...I don't really see any changes here with regards to guidance. 50% penalty for willfull conduct per year is still a possibility, and the $10,000 per/account/year is still a possibility. Incredible really. What was the guidance before? Or are we just reading between the lines and as Jack mentions, the fact that the IRS is posting this guidance indicates that they might not be so "punitive"?popponoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-88353287597622455592015-05-29T16:02:17.796-05:002015-05-29T16:02:17.796-05:00Thanks, Guest Esq. I have just posted the link ab...Thanks, Guest Esq. I have just posted the link above.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-22999055259807406042015-05-29T14:50:31.081-05:002015-05-29T14:50:31.081-05:00Jack, the guidance can be found here: http://www.i...Jack, the guidance can be found here: http://www.irs.gov/pub/foia/ig/spder/SBSE-04-0515-0025%5B1%5D.pdfGuest Esqnoreply@blogger.com