FOR IMMEDIATE RELEASE:
Please contact: Dennis Brager, Esq.
Brager Tax Law Group, A P.C. Telephone: (310) 208-6200 www.bragertaxlaw.com
FORMER IRS TAX ATTORNEY DENNIS BRAGER SAYS NEW IRS FBAR TAX AMNESTY PROGRAM OFFERS PLUSES AND MINUSES FOR OFFSHORE BANK ACCOUNT OWNERS
Los Angeles, CA (February 11, 2011) — On February 8th, the IRS announced a new program directed at those with undisclosed income in offshore bank accounts. IRS Tax Commissioner Doug Shulman announced the 2011 Offshore Voluntary Disclosure Initiative (OVDI) which gives tax scofflaws until August 31, 2011 to make voluntary disclosure of their offshore income in order to receive less onerous tax penalties. Responding to that announcement, L.A. Tax Litigation Attorney Dennis Brager noted that the new initiative has both pluses and minuses.
“On the positive side, this tax amnesty initiative gives certainty to those individuals who previously violated the law. On the downside, the price of certainty is a high one. Nonetheless, with offshore banks becoming subject to new reporting requirements effective January 1, 2013, this may be the last chance for foreign bank account owners to make a voluntary disclosure to avoid potentially ruinous penalties. Those who wait could incur penalties that actually exceed the amount in their offshore accounts. While it would be foolish to ignore the IRS offer, I would recommend careful evaluation as each situation is different and one size does not fit all.”
Presently, every US citizen or resident is required to file an annual foreign bank account report known as an FBAR if they have accounts in foreign countries totaling more than $10,000. This includes securities accounts, pension accounts, bank accounts, foreign life insurance policies, or any other kind of financial account. Those who do not file are subject to jail time and civil penalties which can exceed 50% of the highest balance in the account for every year the FBAR has not been filed.
The new IRS tax amnesty program requires those with a foreign source of income to file amended tax returns for the past eight years reporting all their foreign income and paying the taxes due with interest. Additionally, they must pay a one-time penalty equal to 25% of the highest balance in their offshore bank account for that time period. On top of the 25% penalty, another penalty of 20% of the taxes due will be applied. A reduced penalty of 12.5% is available for accounts that did not exceed $75,000 at any time during the prior eight years and a 5% penalty is possible in limited cases, generally those involving inherited accounts.
Brager notes that by design, the new amnesty program is not as favorable as the previous program the IRS offered in March 2009.
“Under the previous IRS tax amnesty,” says Brager, “offshore account holders were eligible for a one-time, reduced penalty of 20% of the highest balance in their foreign account over the six previous years. They were also required to pay any unpaid income taxes for the previous six years plus an additional penalty of 20% of the tax with interest.
Mr. Brager is a California State Bar Certified Tax Specialist and a former Senior Tax Attorney for the IRS’s Office of Chief Counsel. In addition to representing the IRS in court, he advised the Service on complex civil and criminal tax issues. His firm’s practice is limited to representing clients with tax disputes with the IRS and the State of California. He has advised over one hundred clients with respect to the IRS’ previous offshore voluntary disclosure program. For more information, please visit http://www.taxproblemattorneyblog.com/offshore-bank-account-problems.