The Internal Revenue Service (IRS) has issued guidelines for resolving the civil tax penalties related to offshore bank accounts for individuals who make voluntary disclosures. Generally it will require:
• Payment of all taxes and interest for the previous six years.
• Assessment of an accuracy penalty under Internal Revenue Code Section 6662 or a delinquency penalty for all years • An FBAR penalty of 20% of the highest account balance during the six year period.
In the case of inherited accounts, or other accounts that the taxpayer did not cause to be opened the penalty may be reduced to 5% if other qualifications are met.
Under the settlement initiative taxpayers will not be assessed tax fraud penalties under IRC Section 6651(f) or IRC Section 6663. These tax fraud penalties are 75% of the unpaid tax. In addition the taxpayer would not be liable for the full amount of the FBAR penalties which can equal to 50% of the account balance per year!
This offer is only open to taxpayers who make voluntary disclosures by September 23, 2009. Taxpayers must fully cooperate with the IRS in any civil or criminal investigation in order to take advantage of these terms. Taxpayers can expect detailed questions from the IRS regarding how they came to open their offshore bank accounts, and will be required to name names. We expect that the IRS will use this information to open tax audits of taxpayers who do not come forward.
One area that will need to be evaluated is whether or the IRS will offer the favorable settlement terms to taxpayers who unbeknownst to the taxpayer have already been outed. Normally if the IRS is already aware that a taxpayer has a foreign bank account any subsequent disclosure will not be considered a voluntary disclosure, and could still leave the taxpayer open to both civil and criminal tax penalties.
We are working with our clients to initiate and perfect voluntary disclosures to the IRS where appropriate. If you have an offshore bank account, or any other tax problem contact the California tax lawyers at Brager Tax Law Group, A P.C.