May 2009 Archives

Foreign Bank Account Reports (FBAR) and Voluntary Disclosure

May 27, 2009,

I have been and will be speaking to several CPA firms as well as various California CPA Society groups regarding the tax problems that have been generated by the failure to file Foreign Bank Account Reports (FBARs), TD 90-22.1, and a possible solution through the Internal Revenue Service’s voluntary disclosure program. I have prepared an outline that I have distributed, entitled “FBARs and Voluntary Disclosure”, which is now available on my website. In addition to some of the topics that I have discussed in my blog, the outline references the issues that CPAs, and other non-tax attorneys face when their clients disclose the existence of offshore bank accounts because the information their clients provide is not privileged, and the non-tax lawyer can be forced to disclose these client confidences to the IRS.

If your clients have undisclosed offshore accounts, and you wish to discuss their tax problems call the tax controversy attorneys at Brager Tax Law Group, A P.C.

Offer-In-Compromise Down Payment Requirement Could be Repealed

May 19, 2009,

Last week, two Congressmen introduced The Tax Compromise Improvement Act of 2009, new legislation intended to encourage taxpayers to settle their tax debts by submitting Offers In Compromise (OIC) to the IRS.

Current law mandates a nonrefundable 20% down payment be submitted with each OIC application. A mandatory non-refundable fee, combined with a very low chance of acceptance (the IRS rejects more than 75% of all OIC applications), makes the OIC program much less alluring to taxpayers who are searching for ways to settle unpaid tax debts. In fact, the number of OICs received by the IRS fell by 21% from 2006 to 2007 when this down payment requirement took effect.

Should Congress pass this pending legislation , the nonrefundable down payment requirement would be repealed. Without this requirement,the OIC would be a much more attractive option to the countless taxpayers who are struggling to settle their tax debts with the IRS.

As our testimonials and success stories demonstrate, our tax attorneys have filed many successful OICs. If you have a tax problem and need a tax lawyer, call the tax attorneys, at Brager Tax Law Group, A P.C.

Internal Revenue Service Issues FAQs on Offshore FBAR Voluntary Disclosure Program

May 8, 2009,

The Internal Revenue Service (IRS) has issued FAQs related to its offshore tax amnesty. As I have previously documented on March 23rd, the IRS announced a “tax amnesty” for owners of Swiss and other offshore accounts who failed to file TDF 90-22.1 (Report of Foreign Bank and Financial Account) a/k/a an FBAR. Under the offshore voluntary disclosure program a taxpayer who makes a voluntary disclosure in a timely manner can limit his penalties to 20 per cent of the highest balance in his offshore accounts during the 6 year lookback period, and avoid criminal tax penalties, along with the 75 per cent civil tax fraud penalty. In addition he must pay the income tax due for the last 6 years, plus a 20 per cent accuracy penalty under IRC Section 6662, along with interest.

The terms of the offshore voluntary compliance program as announced left many questions unanswered. Although the FAQs fills in some holes in the offshore tax amnesty program it still leaves gaps. For me the FAQ answers several key questions:

1. How is the 6 year lookback period calculated?

Under the tax amnesty taxpayers are responsible for the 2003 to 2008 tax years.

2. Are “quiet disclosures” acceptable?

No. Taxpayers must make a “noisy disclosure” by contacting the IRS Criminal Investigation Division. Filing amended income tax returns and FBARs is not sufficient.

I will try and post additional information over the next few days.

I would point out, however, that the FBAR FAQs still leaves unanswered the question of whether, under appropriate circumstances, the IRS will negotiate lower FBAR penalties under previously issued FBAR guidelines.

If you have a UBS bank account, or any offshore bank account, and would like further information about the IRS voluntary disclosure program, contact the tax problem attorneys at Brager Tax Law Group, A P.C.