Foreign Bank Account Related Statute of Limitations

June 13, 2011
By Dennis N. Brager on June 13, 2011 9:50 AM | | Comments (0)

Many taxpayers who have FBAR (Foreign Bank Account Report) tax problems may be wondering about the statute of limitations or how long the IRS has to come after them. The FBAR civil penalty statute of limitations is six years from the date of the violation, generally June 30th. The criminal FBAR statute of limitations is only 5 years. The FBAR statute continues to run whether or not the FBAR was filed. According to the IRS the FBAR statute may be extended by consent, although there is no explicit statutory authority for this view.

For income tax the general statute of limitations is three years. The IRS has published a guide to its revenue agents about exceptions to the three year statute of limitations that may be applicable. These exceptions are as follows:

1. IRC § 6501 (c)(4) allows the period for assessment OF TAXES to be extended for any period of time agreed upon in writing by the taxpayer and the IRS (generally by submitting Form 872).
2. IRC §§ 6501 (c)(1) and (c)(2) permits assessment at any time if a tax return is false or fraudulent or there is a willful attempt to evade tax.
3. IRC § 6501 (c)(8) permits an assessment within three years after the date certain offshore information returns are filed, including Forms 3520, 3520-A, 5471, and 5472.
4. IRC § 6501 (e)(1 )(A)(i) permits assessment within six years after the later of the due date or date filed if the taxpayer omits from gross income an amount properly includible and that amount is more than 25% of the amount of gross income stated in the return.
5. IRC § 6501 (e)(1 )(A)(ii) allows assessment within six years after the later of the due date or date filed if the taxpayer omits from gross income an amount properly includible therein and such amount exceeds $5,000 and is attributable to one or more foreign financial assets described in IRC § 60380. This exception was added to the law in 2010 and applies to (1) returns filed after March 18, 2010, and (2) returns filed on or before March 18, 2010, if the statute of limitations has not otherwise expired as of March 18, 2010.

This is just a general summary of the statute of limitations which govern income tax and FBAR cases. If you would like more information about income tax problems or FBAR problems call Brager Tax Law Group, A P.C. at 800-380-TAX-LITIGATOR for a consultation.

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