tag:blogger.com,1999:blog-1519969502186924526.post1841236707778987515..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: OVDI 2011 - Mitigating the Penalty by Lowering the Penalty Base (6/27/11)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger106125tag:blogger.com,1999:blog-1519969502186924526.post-81883808889836300442014-08-26T18:03:37.251-05:002014-08-26T18:03:37.251-05:00That is my understanding as well.That is my understanding as well.Jack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-70878977135490392362014-08-26T16:30:03.526-05:002014-08-26T16:30:03.526-05:00My understanding is that the FBAR extension form c...My understanding is that the FBAR extension form constitutes a waiver of an affirmative defense (Title 31) and thereby awakens the dead, where the Form 872 must (under Title 26) be executed prior to expiration to carry force and effect.just sayingnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-27026585449351764652014-06-03T13:35:39.748-05:002014-06-03T13:35:39.748-05:00In the current OVDI program, does the penalty base...In the current OVDI program, does the penalty base include accounts that did not produce any income (regular checking account, or securities accounts with no dividends and no capital gain) or are these account excluded from the computation of penalties because these accounts were tax-compliant) in a situation with multiple accounts, some being non-income producing, some producing income (non reported), and no FBARs were filed?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-45139364853734142242014-02-24T04:43:10.861-06:002014-02-24T04:43:10.861-06:00Thank you for sharing valuable information. Nice p...Thank you for sharing valuable information. Nice post. I enjoyed reading this post. The whole blog is very nice found some good stuff and good information here Thanks..Also visit my page <a href="http://www.rentalaccountants.co.nz/" rel="nofollow">Rental Property Accountants</a>.Santosh seonoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-39878883381050729552014-01-15T19:21:37.895-06:002014-01-15T19:21:37.895-06:00I have the same question, but I found this article...I have the same question, but I found this article that suggests that U.S. greencard holders can still qualify for the 5% penalty. <br /><br />Please see: <br /><br /> <br /><br />Jerusalem Post – Don Shrensky and Leon Harris <br /><br />Dated 06/15/2011<br /><br /> <br /><br />New 5% offshore penalty <br /><br />Under pressure from tax professionals, the IRS<br />is now recognizing that the US citizen or green-card holder living in a foreign<br />country should be classified differently than the US person residing in the<br />United States. There is a new reduced 5% offshore penalty for US persons<br />(citizens, green-card holders) living outside the US. The conditions under<br />which it can be claimed are as follows: <br /><br />1. Taxpayer is a foreign resident.<br /><br />2. Meets all three of the following conditions<br />for all of the years of his voluntary disclosure: a) taxpayer resides in a<br />foreign country; b) taxpayer has made a good-faith showing that he or she has<br />timely complied with all tax-reporting and -paying requirements in the country<br />of residency; and c) taxpayer has $10,000 or less of US source income each<br />year.<br /><br />The IRS also declared that for “these taxpayers<br />only, the offshore penalty will not apply to nonfinancial assets, such as real<br />property, business interests, or artworks, purchased with funds for which the<br />taxpayer can establish that all applicable taxes have been paid, either in the<br />US or in the country of residence.”<br /><br />Therefore, if you are resident of Israel and<br />have been paying Israeli tax on all your foreign-source income (e.g., Israeli<br />salary, rental income from Israeli real estate, pensions, etc.) and have<br />$10,000 or less of US source income in each year, you should meet the<br />conditions for the 5% penalty.<br /><br />The fact that many Israeli residents are not<br />required to file income-tax returns should not disqualify you, providing you<br />have been paying the taxes through withholding at source or payment vouchers<br />(e.g., 10% tax on residential rental income).<br /><br />Taxpayers, who participated in the 2009 OVDI are<br />entitled to have the new reduced 5% offshore penalty applied if they qualify.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-16601867241528493472013-11-05T09:16:48.611-06:002013-11-05T09:16:48.611-06:00thank you Jack - "there is plenty of penalty...thank you Jack - "there is plenty of penalty to apply in open years"<br />Are you refering to FBAR penalties ?UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-48646313635282962032013-11-05T08:57:37.816-06:002013-11-05T08:57:37.816-06:00Again, there is no prohibition in the statute for ...Again, there is no prohibition in the statute for FBAR consents to have open years when filed. If you sign a consent for otherwise closed FBAR years, the IRS's position is that they are effective for those otherwise closed years. And, outside the OVDI/P, the IRS may not ask for consents for the otherwise closed FBAR years. But, keep in mind that, except in unusual cases, if they were to ask or even if they did not ask, there is plenty of penalty to apply in open years.<br /><br /><br />If the taxpayer is not in OVDI/P and has not signed any FBAR consents for otherwise closed years and does not sign any FBAR consents for otherwise closed years, those otherwise closed years should stay closed.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-91876529826192247282013-11-05T08:08:27.537-06:002013-11-05T08:08:27.537-06:00Jack but I was talking outside of OVDI/P and for t...Jack but I was talking outside of OVDI/P and for tax year 2006 the civil FBAR SOL has run out @ 6/30/2013 which should mean that the IRS cannot ask for an extension after the <br />fact.UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-56778127290446367342013-11-05T08:02:13.112-06:002013-11-05T08:02:13.112-06:00Mr. Smith,
First, keep in mind that FAQ 53 looks...Mr. Smith,<br /><br /><br />First, keep in mind that FAQ 53 looks to aggregate noncompliant accounts. Certainly Account #1 is noncompliant. It appears that, for some years, Account #2 was noncompliant at least in terms of reporting the income. Technically, that is noncompliance. I have heard that some agents will not require inclusion where there is de minimis noncompliance but my understanding is that the persons in charge of the program discourage and even prohibit that.<br /><br /><br />Still, I think you ought to run it up the flagpole, so to speak. Someone, somewhere may have some reasonable discretion so that the program does not turn upon trifles.<br /><br /><br />Good luck.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-53355517233167224902013-11-05T07:55:52.174-06:002013-11-05T07:55:52.174-06:00The IRS requires the taxpayer in OVDI/P to sign a ...The IRS requires the taxpayer in OVDI/P to sign a consent to extend the FBAR statute of limitations for the years involved. The FBAR consent is not like the income tax consent. The income tax consent can only cover years that are still open under the SOL when the consent is filed. The FBAR consent can cover any years covered by the consent regardless of whether the SOL is otherwise open. At least that is the IRS's position. I don't think that position has been tested in court. But I do know that the income tax rule requiring that the SOL be open when the consent is signed is based on the language of 6501 permitting consents. That language is not in the FBAR positions, so the IRS says that the consent is like any other waiver of the SOL in Anglo-American jurisprudence -- i.e., it can cover periods otherwise closed when the waiver / consent is given.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-71691589405481495482013-11-05T04:27:57.885-06:002013-11-05T04:27:57.885-06:00Jack, do I understand this correctly that for 1) 2...Jack, do I understand this correctly that for 1) 2006 the civil FBAR SOL has run out @ 6/30/2013 which should mean outside of OVDI/P that the IRS cannot ask for an extension after the fact or can they send the taxpayer form 872 anyway ? 2) if the SOL has run out, the IRS cannot assess civil FBAR penalties . Now if the taxpayers FBAR non compliance has been found to be willful (willful blindness etc.) does this change anything with regards to SOL ?UStaxnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-51875808614112664832013-11-04T14:44:51.308-06:002013-11-04T14:44:51.308-06:00Thank you for your response - and indeed for maint...Thank you for your response - and indeed for maintaining such an interesting and informative blog site.<br />Apologies that the facts were confusing; in an effort to be succinct, not too many details were created. Hopefully your analysis still holds with this additional detail.<br /><br /><br />Account #1: the highest balance is $70K, and therefore eligible under FAQ53 for 12.5% penalty.<br />The question is: if there is any arguable area regarding being "fully tax compliant" with Account #2. I assume the expectation is to have been fully tax compliant not just for the usual SOL, but for the entire period of the disclosure.<br />Account#2: the interest has been reported for the 5 years 2008-2012. In prior years, it was less than $10 (for which, if it were a US domestic account a 1099 would not be generated), and although the existence of the account was acknowledged on Schedule B, this small amount of interest was not reported.<br />If this omission of approximately $7 interest for each of these 3 years, renders this account not " fully compliant", the ramification of having to include it in the VD makes the difference between the penalty base of 27.5% on the combined high balances instead of 12.5% of the $70K.sadim smithnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-78724471344531769202013-11-04T11:25:03.920-06:002013-11-04T11:25:03.920-06:00Sadim, by "reported on all Schedule B" d...Sadim, by "reported on all Schedule B" do you mean that you checked the 'yes' box? Are both accounts in the UK? If so, then the yes response would cover both accounts and this would be a good fact if you opt out.<br /><br />Of course the big issue is the FBAR. If the balance of "around 70K" NEVER EVER exceeded $75K for the years that the FBAR was not filed, then it seems you would be eligible for the penalty of 12.5% of highest balance of that account. That's $9K on a 72K high balance. If the account exceeded $75K during that period (which it may have due to GBP/USD currency fluctuation) then we're talking 20/25/27.5% penalty. <br /><br />In either case it might make sense for you to opt out depending on all your facts.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-22274464248319342972013-11-01T12:49:51.170-05:002013-11-01T12:49:51.170-05:00I am not sure that I really understand your facts....I am not sure that I really understand your facts. But, as I understand the facts, you did report any interest on the second account and did reported the country of the account on Schedule B. As to that account (principally because you included the income in reporting your tax), it is U.S. income tax compliant. It is not included in the penalty base in OVDI/P to which the penalty rate (consecutively 20%, 25% and 27.5%) applies.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-37289670597894317032013-10-31T22:21:51.282-05:002013-10-31T22:21:51.282-05:00Let us suppose there are 2 accounts; both jointly ...Let us suppose there are 2 accounts; both jointly owned prior to becoming American citizens.<br />1) offshore. balance around $70K, dormant, no account activity since inception in 1987, and has never been reported since owner understood it to be legitimately "tax free" and "non reportable" unless re-domiciled to the UK.<br />2) domestic UK account, balance usually less than $5K for use in visiting UK. This account has been acknowledged in all 1040 Schedule B as ownership of foreign account; but since less than $10K balance, no FBAR was filed. In addition, the (negligible) amount of interest has been reported for the past 4 years and included as taxable income.<br /><br />For an OVDP submission, does this constitute tax compliance with respect to the second account such that it's highest balance need not be included ?<br /><br />If not, then the aggregate high balance would render the penalty base above the $75,000 bar.sadim smithnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-40810119981986586172013-10-28T16:33:23.219-05:002013-10-28T16:33:23.219-05:00If the FBAR is received after the June 30 deadline...If the FBAR is received after the June 30 deadline it's late, period. Doesn't matter whether it was before or after October 15.<br /><br /><br />However it is my understanding that tax compliant accounts are excluded from the penalty base whether they are tax compliant because 1) the income was properly reported in the original return or 2) they did not generate income (such as a non-interest bearing account.)<br /><br /><br />But if you're in OVDI it is likely that you also did not file FBARs for prior years.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-58886468064643036882013-10-25T19:14:17.466-05:002013-10-25T19:14:17.466-05:00
Can the late filing of the 2009 FBAR (filed befor...<br />Can the late filing of the 2009 FBAR (filed before Oct 15, 2010 and before participation in the 2011 OVDI) alone be reason for the IRS to include all foreign accounts and rental property in 2009 in the penalty base for 2009?<br /><br />Thanks in advance.ist2012njnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-85066467069166857542012-07-22T15:38:56.472-05:002012-07-22T15:38:56.472-05:00According to the IRS’s “Comparison of Form 8938 an...According to the IRS’s “Comparison of Form 8938 and FBAR Requirements”<br />of 3/26/2012, a foreign-issued life insurance w/ cash value has to be reported<br />on both forms, though according to Asher Rubinstein’s comment of 6/30/2011<br />03:39 PM the situation was “far from clear” in previous years. Following Asher’s<br />line of argumentation: Assuming the insurance is recognized as life insurance<br />by US standards, can it be excluded from the OVDP penalty base if (a) it was purchased<br />before the beginning of the look-back period (in which case it would not even<br />matter if the funds to purchase it included unreported income, as far as I<br />understand FAQ #34), and (b) surrendering the policy on maturity (the taxable event)<br />takes place after the look-back period, or gains have been tax-compliant when<br />the policy was cashed in?<br /><br />Jack, thanks for your prompt response to my<br />previous comment, Henry.Henrynoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-72391393647898462942012-07-22T12:42:26.856-05:002012-07-22T12:42:26.856-05:00I haven't faced that direct question and have ...I haven't faced that direct question and have not tracked back through the FAQs to determine whether they directly or by inference answer the question. I would think, however, that your argument is that the account in question is U.S. tax compliant and thus should not be included in the penalty base.<br /><br />Jack TownsendJackTownsendnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-88341276707170760482012-07-22T08:53:46.173-05:002012-07-22T08:53:46.173-05:00Jack, as you point out in this posting of 6/27/11,...Jack, as you point out in this posting of 6/27/11, the OVDP penalty base can be reduced according to FAQ #37 (counting funds transferred between accounts only once) and FAQ #38 (excluding accounts over which the taxpayer only has signature authority). Do I understand it correctly that another possibility arises from FAQs #35 and #36: If an account doesn't generate income during the disclosure period (e.g. an interest-free account which had a constant balance throughout the look-back period), then the offshore penalty doesn't apply to this account because there was no income for this account, hence no reportable income, hence the account was U.S. tax compliant? But if the account, at any time during the disclosure period, received funds transferred from another account which wasn't tax-compliant, then the account would still be considered "related to tax non-compliance" and would be included in the penalty base?<br />Thanks, Henry.Henrynoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-74258672165913130052012-04-12T16:03:50.349-05:002012-04-12T16:03:50.349-05:00My mother opened up an account in India in 2006 an...My mother opened up an account in India in 2006 and I was a co-signature; she paid Indian taxes on all income. I never disclosed having the account as I did not expect to benefit from it. She passed away last year and now the account (that ranged from 50-70K over the 6 years) is mine. Do I have to go back and submit FBAR on all the previous years and have I broken a law where one would think that I have to submit OVDI? I never received a penny from that account in all these years; do I really have to pay taxes on the interest income for the past 6 years?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-41437969211820037412011-10-21T20:18:54.844-05:002011-10-21T20:18:54.844-05:00I am an accountant trying to help a client. He did...I am an accountant trying to help a client. He did not file a FBAR to report life insurance policies with a cah surrender value. However, there was no income from inception and the policy was sold at a loss during the OVDI period. This is one of many assets, some subject to the penalty, owned directly by the client. Can it be excluded from the penalty calculation separately or is it an all or nothing proposition? You can call me Confused in SOCALAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-3973633778347730182011-09-05T04:31:26.202-05:002011-09-05T04:31:26.202-05:00Could someone - Jack? - comment on FAQ 51.3 for th...Could someone - Jack? - comment on FAQ 51.3 for the OVDI? <br /><br />Would permanent residents (green card holders) who live and work abroad, have very little US income, file foreign and 1040 US taxes, and only visit the US for a few weeks in the year qualify as "foreign residents" and thus only have to pay a 5% penalty?<br /><br />It's not very clear what the IRS considers "foreign residents". The examples only mention expat citizens.<br /><br />Quote from the FAQ 51.3 below:<br />---------------------------------------<br /><br /><br />Taxpayers who are foreign residents and who meet all three of the following conditions for all of the years of their voluntary disclosure: (a) taxpayer resides in a foreign country; (b) taxpayer has made a good faith showing that he or she has timely complied with all tax reporting and payment requirements in the country of residency; and (c) taxpayer has $10,000 or less of U.S. source income each year.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-1920771892634651512011-09-03T20:56:32.869-05:002011-09-03T20:56:32.869-05:00I have a question which is very important for dete...I have a question which is very important for determination of my penalty. I am hoping Jack or other "experts" here can weigh in on this.<br /><br />If I bought property from funds in a non-tax compliant account (i.e. an account that was not reported and some amount in it was not taxed), I understand that both the account and the FMV of the property are part of the OVDI penalty base. But my question is that in determining my penalty, can I deduct the buying amount from the property FMV as it is already part of the account penalty base. Isn't the same amount being penalized twice?<br /><br />Does IRS have a clear guideline on this? <br /><br />Thanks in advance for your response.<br /><br />Anon987Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-27099635099215719582011-09-03T14:06:44.185-05:002011-09-03T14:06:44.185-05:00I am wondering if any further information has come...I am wondering if any further information has come to light concerning whether 2010 is included in the penalty base if 2010 FBAR and 1040 timely filed and tax paid?<br /><br />Thank you...Anonymousnoreply@blogger.com