FBAR Enforcement is on the Rise

FBAR Enforcement is on the Rise

FBAR Enforcement is on the Rise: Over the past few years, the Internal Revenue Service and U.S. Government as a whole have significantly increased FBAR enforcement. Technically, the FBAR is a Foreign Bank (and Financial) Account Reporting form developed by FinCEN. FinCEN is the Financial Crimes Enforcement Network — although it is still pretty rare for an FBAR violation to lead to criminal enforcement, absent some other types of crimes being committed such as structuring and smurfing.

Here are five (5) reasons why FBAR enforcement is on the rise:

FBAR Penalties can be Brutal

The FBAR penalty regime is brutal, and the spectrum for FBAR Penalties is long and winding.

On the one hand, you may qualify for a penalty waiver.

On the other hand, you may be issued penalties reaching upwards of 50% per year on the maximum value of the unreported balances, up to a 100% penalty (previously 300% to coincide with the 6-year statute).

Recent FBAR cases have tried to limit the enforcement of non-willful penalties, but most of these rulings are at the lower court (District Court).

Lower Standard of Willfulness for FBAR enforcement

In FBAR jargon, willful does not mean intentional.

It can mean reckless disregard (no intent) and willful blindness (no actual knowledge).

Preponderance of the Evidence Standard

Back in 2009, an IRS memoranda circulated, which surmised that the U.S Government should have to prove FBAR penalties by clear and convincing evidence (~75%) 

In practice — and since the overall sentiment is that civil FBAR penalties are just monetary penalties — the U.S. Government has only been required to show a Preponderance of the Evidence (aka more likely than not), which is thought of as +50%.

Courts Agree with the IRS FBAR enforcement

There have been many recent FBAR court cases affirming the IRS position on FBAR enforcement.

Fighting Already Issued FBAR Penalties is Difficult

The FBAR is not a Tax Form.

Rather, it is a “reporting form” in accordance with Title 31 and the Anti-Money Laundering regimes.

Therefore, you cannot fight the penalties in Tax Court, and to fight the FBAR, you must get your dukes up early (before the penalties are affirmed) and go toe-to-toe with the IRS.

Otherwise, if you wait until formal enforcement,  you essentially have to play sitting duck and wait until the IRS comes after you, so you can defend yourself in court — or you have to pay the IRS penalties, and then sue for refund in Federal Court.

FBAR Amnesty can Limit Enforcement

FBAR Amnesty is an approved method for safely getting into compliance.

Many taxpayers can reduce or even avoid penalties altogether.

Please beware of any tax professional that recommends a quiet disclosure — those are illegal and may result in an IRS Special Agent Investigation (read: not good).

We Specialize in FBAR & FATCA Offshore Voluntary Compliance

Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure. 

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.

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• We represented a client in an 8-figure disclosure that spanned 7 countries.
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Generally, experienced attorneys in this field will have the following credentials/experience:

• 20-years experience as a practicing attorney
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