There is no specific designation as an “FBAR attorney”, but many taxpayers with undisclosed foreign financial accounts need to talk to someone with FBAR experience about their potential liability and what actions they can take to mitigate risks. A good FBAR attorney is really just a tax attorney who has experience with Foreign Bank Account Reports (FBARs), and is familiar with tax litigation, criminal tax defense, and the various voluntary disclosure options that can be used to come into FBAR compliance.
You have an FBAR problem if you are a U.S. person who failed to file an FBAR and/or report income from foreign financial accounts on your tax return. You are required to file an FBAR if you meet the following two requirements:
- You had a financial interest or signature authority over a foreign financial account, and
- the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
If you meet those requirements and did not file an FBAR, you can be assessed a penalty of $12,459 per violation for non-willful violations, and for willful violations, the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each violation.
Whether or not your conduct was willful will depend on your particular facts and circumstances, and an experienced FBAR attorney will be able to help you make that determination.
The willful/non-willful distinction is important in choosing the right disclosure option. The Offshore Voluntary Disclosure Program (OVDP) comes with relatively high penalties, but allows taxpayers who committed willful violations to greatly mitigate the risk of going to jail or facing even higher fines. The Streamlined Filing Compliance Procedures come with lower penalties, but is only available for non-willful violations, and doesn’t come with any assurances that you won’t be criminally prosecuted.
Your FBAR attorney will need to analyze your situation, explain the risks and benefits of each approach, and help you choose the best option.
Criminal Tax Experience
If the civil penalties associated with offshore bank account problems were not enough, then the possibility of criminal prosecution should convince you to take action to come into FBAR compliance. Criminal FBAR penalties can be as high as $250,000 for the willful failure to file an FBAR, and you could face up to five years in jail.
It is critical that you consult with a tax attorney to discuss criminal tax matters, and not a CPA firm. There is no applicable accountant-client privilege, and statements you make to a CPA can and will be used by the IRS as evidence against you at trial.
A criminal tax attorney may be able to negotiate reduced penalties and jail time, or argue that your FBAR violations were non-willful. Whether or not you have been contacted by the IRS regarding your failure to file FBARs, any taxpayer with undisclosed foreign financial accounts should consult with a tax attorney with FBAR experience.
For more information, read our free special report, Nine Questions You Should Be Asking About the IRS Streamlined Filing Compliance Procedure for Unreported Foreign Accounts, which you can download here.