FBAR Amnesty & The Offshore Voluntary Disclosure Initiative (OVDI)
By Michael Rozbruch, Founder & CEO Tax Resolution Services Co.
It is not uncommon for Americans to hold foreign bank accounts, especially if they conduct business internationally. Unfortunately, many U.S. taxpayers have used these foreign bank accounts to hide undisclosed assets from the IRS resulting in billions in tax revenue that owed to the U.S. government.
The headlines in the past few years have reflected the increased scrutiny of such accounts by the IRS and the U.S. Department of Justice and to hold foreign bank account holders accountable. Many of these cases have resulted in criminal prosecution and prison time.
If you (or know someone) who is a foreign bank account holder it is very important to understand everything you are required to do by law. Here are some frequently asked questions we get to help you get started.
1. What is FBAR? FBAR stands for Report of Foreign Bank and Financial Accountsalso referred to as Form TD F 90-22.1 by the IRS.
2. What happens if I fail to file FBAR in a timely manner? Failure to comply with IRS regulations regarding FBAR will result in severe tax penalties that could debilitate your financial well being for life. In many cases, account holders will face criminal penalties and can even serve prison time.
3. What are volunteer disclosure programs? In recent years, the IRS has offered two volunteer disclosure programs: 2009 Voluntary Disclosure Program and the 2011 Offshore Voluntary Disclosure Initiative. These programs proved quite popular as they allowed taxpayers to come into compliance while avoiding criminal prosecution for their undisclosed accounts.
4. How long do I have to take care of this? The deadline for 2011 Offshore Voluntary Disclosure Initiative is August 31, 2011. If you have money abroad it’s important to act now – getting tax help can help you avoid huge penalties and even criminal prosecution for failing to file the appropriate FBAR reports for foreign accounts.
5. What are the penalties I could face if I fail to disclose offshore bank accounts? FBAR penalties can exceed 100% of the value of the asset, plus tax penalties and interest; the criminal sanctions can be as much as up to 5 years in prison.
6. Who needs to file FBAR? Again, anyone with an offshore bank account. If you have questions, I advise contacting a Certified Tax Resolution Specialist or Tax Attorney. Here are the Guidelines from the IRS.gov to help clarify: “United States persons are required to file an FBAR if:
- The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
- United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States”
The takeaway: The U.S. government in a high stakes battle in its war on tax evasion and has no intention of backing off. What was once considered a safe haven, offshore accounts are subject to closer scruntiny and full disclosure. Case in point: the once elusive and secret Swiss bank UBS has now provided an unprecedented amount of information on account holders to the U.S. Government.
Additional FBAR Resources:
- FBAR and Offshore Account Disclosure
- Tax Resolution Univeristy Blog Category: Offshore Tax Settlements
- How to Get Tax Help with Your Offshore Bank Account if You Missed the FBAR Amnesty Deadline for IRS Voluntary Disclosure
- Reporting Offshore Bank Accounts – the time is NOW.
For more information about offshore bank account opening and offshore company formation please visit Dema Partners site: www.worldwideoffshore.com