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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15201
Experience:  15years with H & R Block. Divisional leader, Instructor
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Foreign Bank Account Reporting ( FBAR) Under the IRS Offshore

Resolved Question:

Foreign Bank Account Reporting ( FBAR):

Under the IRS Offshore Voluntary disclosure initiative (OVDI) the taxpayer is required to obtain a pre clearance. There is accuracy related penalty of 25%
on the total assets for each year besides late filing penaltiies in the OVDI. Here are my questions:

1. Is there any way to legally avoid pre clearance and accuracy related penalty?

2. If the client has reported ALL the foreign income with the returns but did not file the FBAR form for past few years. Are they subject to accuracy related penalty or any other penalty if they choose to avail the amnesty of filing the FBAR by August 31, 2011.

3. If the client has amended his/her tx returns recently and reported ALL the foreign income with the amended returns but did not file the FBAR form for past few years. Are they subject to accuracy related penalty or any other penalty if they choose to avail the amnesty of filing the FBAR by August 31, 2011.

Thanks.



2.
Submitted: 5 years ago.
Category: Tax
Expert:  Robin D. replied 5 years ago.

Robin D :

Hello and thank you for using Just Answer
In response to your 2nd question:
For taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs, you should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MINNN-NN-NNNN and attach a statement explaining why the reports are filed late. The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and the FBARs are filed by August 31, 2011.

Robin D :

In response to #3:


The IRS is aware that some taxpayers have attempted so-called “quiet” disclosures by filing amended returns and paying any related tax and interest for previously unreported offshore income without otherwise notifying the IRS. Taxpayers who have already made “quiet” disclosures are eligible to take advantage of the penalty framework applicable to this initiative by submitting an application, along with copies of their previously filed returns (original and amended) to the IRS’s Voluntary Disclosure Coordinator (see FAQ 24) by August 31, 2011.


Taxpayers are strongly encouraged to come forward under the 2011 OVDI to make timely, accurate, and complete disclosures. Those taxpayers making “quiet” disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.

Robin D :

For #1, the whole process is to assist taxpayers that have not filed the reporting forms but have filed the income ontheir tax returns. Their intent clearly was not to avoid taxation. Thisis of course the worse thing a taxpayer can do. The penalty structure is in place for those that did not report the income but avoidance of penalties can be had fr those that reported the income and now come forward to file the FBAR(s)

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