BAR: Government’s Intent on Raising Funds

Recently our office has been swamped with telephone calls asking for help clarifying and dealing with a new development in the United States Federal laws having to do with disclosure of foreign bank accounts.

The Government has introduced its Voluntary Disclosure Program beginning April through September 22, 2009. The purpose of this Program is to identify holders of foreign bank accounts (offshore) and substantially increase the Government’s tax revenue. It seems that the IRS is gearing towards making certain that those under its jurisdiction comply with the requirement of disclosure of any interest (financial interest, or signature, or other authority… 31 CFR § 103.24) over a bank, security or any other financial account in a foreign country

FBAR stands for Report of Foreign Bank and Financial Accounts. You can file the disclosure either by checking off the Box on your Schedule B of your 1040 or Filing the FBAR form (Treasury Department Form 90.22.1). The FBAR Form must be filed by July 1 of the following year.

Unfortunately, as the Government runs out of money, it seems inevitable that certain penalties will make their way to the public. In this case, the penalties for non-compliance are egregious. It seems that these penalties are designed to fill the Government’s need for increase in revenue due to the recent economic downturn.

Should the IRS feel that your failure to comply is “non-willful”, then the penalties imposed can be as high as $10,000 per violation. However, a “non-willful” violation will only be determined when a person marked the appropriate box on Schedule B, reported any income from foreign accounts, did not have any prior FBAR filing violations and cooperated with the IRS.

Civil penalties for “ willful” violations can go up to the greater of $100,000 or 50% of the amount in the foreign account at the time of violation. Moreover, the IRS can impose these penalties up to 6 years from the time of each violation.

In addition to the aforementioned civil penalties, criminal penalties for violating the FBAR disclosure requirements can be from $250,000 to $500,000 in fines and/or 5 to 10 years imprisonment.

The FBAR is a proposition that does not have any positive aspects for taxpayers. Failure to comply with the FBAR disclosure requirements carries with it severe penalties (50% of the account balance for each of the previous 6 years). On the other hand, voluntary disclosure carriers with it a small yet significant penalty (20% on the last year’s balance on the foreign account, plus back taxes and penalties for the same).

It is our opinion that the Government is aggressively going after those with foreign bank accounts. The IRS will consider the FBAR as a new tool at increasing the Government’s revenues. Treading though these waters will require complex analysis on a case by case basis. Call us or an attorney you trust for a consultation.

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Los Angeles criminal defense attorneys at Gurovich, Berk & Associates have been providing criminal defense services to individuals charged in criminal cases due to alleged crimes committed in Los Angeles, CA for numerous years. Criminal defense lawyers at this law firm have several offices throughout the greater Los Angeles area. This Los Angeles criminal defense law firm is proud to announce that the Gurovich, Berk & Associates have opened an office in the Downtown Los Angeles areas located at 355 South Grand Ave, #2450, Los Angeles, California 90071. Their Los Angeles criminal defense office is centrally located in the financial district in the heart of Downtown Los Angeles specifically to those clients who reside or work near the Downtown area.

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