July 2011 Archives

FBAR Offshore Voluntary Disclosure Initiative (OVDI) Tax Amnesty Countdown

July 21, 2011,

The last day for disclosing unfiled foreign bank account reports (FBARs) under the Offshore Voluntary Disclosure Initiative (OVDI) is August 31, 2011. Here is the countdown:

OVDI FAQ No. 25 provides that the entire OVDI package must be submitted on or before August 31, 2011 to:

Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative

The FAQ doesn't state that the OVDI package must be received by Aug. 31st, simply that it must be "submitted" by that date, so presumably if it is mailed by Aug. 31st that will be sufficient. The countdown is based upon the last Fedex drop off time near the offices of Brager Tax Law Group, A P.C. in Los Angeles, California of 6:45 PM.

The other problem is that FAQ No. 25, presupposes that a taxpayer has received a preliminary clearance pursuant to FAQ No. 24 from the IRS Criminal Investigation Division (CI). According to the IRS OVDI Hotline at (267) 941-0020, however, if an offshore account holder is in a time crunch he should obtain a pre-clearance from CI, and then send the document package to Austin, Texas once the pre-clearance has been received. Our tax attorneys have been receiving pre-clearances in 24 to 48 hours, but your mileage may vary.

Keep in mind that the oral advice from the OVDI Hotline is not binding on the IRS, and it is important to keep updated on a regular basis with the IRS' changing directives, and whims.

Continue reading "FBAR Offshore Voluntary Disclosure Initiative (OVDI) Tax Amnesty Countdown " »

Foreign Bank Account Report (FBAR) OVDI Deadline Extended--Sort of

July 19, 2011,

Some articles, but not any tax attorneys we know, have suggested that the IRS has extended the 2011 Offshore Voluntary Disclosure Initiative (OVDI) for unfiled foreign bank account reports (FBARs) by 90 days. That's not quite the case. The IRS has published FAQ 25.1 which provides that if an offshore bank account holder is unable to submit the complete required package of documents by the August 31st they may REQUEST a 90 day extension of the OVDI deadline. To quote the IRS OVDI FAQ:

A taxpayer may request an extension of the deadline to complete his or her submission if the taxpayer can demonstrate a good faith attempt to fully comply with FAQ 25.1 on or before August 31, 2011.
Note nothing says that the IRS will GRANT the extension for requesting tax amnesty relief. In order to receive an extension the taxpayer must demonstrate that he has made a "good faith attempt" to comply. The conditions for requesting an extension requires that the foreign bank account owner include in his extension request:

1. A statement of those items that are missing,
2. The reasons why they are not included,
3. The steps taken to secure them, and
4. Properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties.

This leaves open the very real possibility that a faulty request for an extension may result in the OVDI deadline not be extended, and the taxpayer exposed to the full set of civil FBAR penalties.

Continue reading "Foreign Bank Account Report (FBAR) OVDI Deadline Extended--Sort of " »

HSBC India Foreign Bank Account Client Indicted on FBAR (Foreign Bank Account) and False Tax Return Charges

July 7, 2011,

The Department of Justice (DOJ) and Internal Revenue Service (IRS) announced last week the indictment of an HSBC India client on four counts of filing false tax returns and four counts of failure to file a Foreign Bank Account Report, form TD F 90-22.1 (FBAR). According to the press release each false tax return charge can result in a penalty of three years in prison and a $250,000 fine, and each failure to file an FBAR can result in 10 years in prison and a $500,000 fine. The press release is further evidence of the hardline positions that the IRS continues to take in FBAR cases. The maximum criminal penalty for willful failure to file an FBAR is "only" $250,000 and a five year jail term, under 31 USC 5322(a). However, under 31 USC 5322(b) if the willful failure to file an FBAR occurs "while violating another law of the United States or as part of a pattern of any illegal activity involving more than $ 100,000 in a 12-month period" that ups the ante to 10 years and $500,0000. By referencing the 10 year jail term the IRS is sending a message that it will seek maximum prison time.

The indictment alleges Dr. Arvind Ahuja, a US citizen living in Wisconsin, transferred and maintained millions of dollars in accounts in India and the Bailiwick of Jersey (Jersey) through HSBC. Jersey is considered to be a tax haven jurisdiction, meaning its laws are intended to conceal financial information from authorities in other countries. The indictment further alleges the balances of Dr. Ahuja's accounts ranged from $5 to $9 million and generated interest income that was unreported on his US tax returns.

The FBAR reporting requirement applies to individuals with a financial interest in or signature authority over foreign bank accounts if the aggregate value of those accounts exceeded $10,000 on any one day. The failure to file an FBAR is a charge independent of the failure to report taxable income. Foreign account holders with past unreported taxable income or undisclosed foreign accounts may make a voluntary disclosure under the IRS's Offshore Voluntary Disclosure Initiative (OVDI) and avoid or decrease penalties. The OVDI is open until August 31, 2011 and certain individuals may be entitled to an extension.

Continue reading "HSBC India Foreign Bank Account Client Indicted on FBAR (Foreign Bank Account) and False Tax Return Charges " »