Internal Revenue Service Issues FAQs on Offshore FBAR Voluntary Disclosure Program

The Internal Revenue Service (IRS) has issued FAQs related to its offshore tax amnesty. As I have previously documented on March 23rd, the IRS announced a “tax amnesty” for owners of Swiss and other offshore accounts who failed to file TDF 90-22.1 (Report of Foreign Bank and Financial Account) a/k/a an FBAR. Under the offshore voluntary disclosure program a taxpayer who makes a voluntary disclosure in a timely manner can limit his penalties to 20 per cent of the highest balance in his offshore accounts during the 6 year lookback period, and avoid criminal tax penalties, along with the 75 per cent civil tax fraud penalty. In addition he must pay the income tax due for the last 6 years, plus a 20 per cent accuracy penalty under IRC Section 6662, along with interest.

The terms of the offshore voluntary compliance program as announced left many questions unanswered. Although the FAQs fills in some holes in the offshore tax amnesty program it still leaves gaps. For me the FAQ answers several key questions:

1. How is the 6 year lookback period calculated?

Under the tax amnesty taxpayers are responsible for the 2003 to 2008 tax years.

2. Are “quiet disclosures” acceptable?

No. Taxpayers must make a “noisy disclosure” by contacting the IRS Criminal Investigation Division. Filing amended income tax returns and FBARs is not sufficient.

I will try and post additional information over the next few days.

I would point out, however, that the FBAR FAQs still leaves unanswered the question of whether, under appropriate circumstances, the IRS will negotiate lower FBAR penalties under previously issued FBAR guidelines.

If you have a UBS bank account, or any offshore bank account, and would like further information about the IRS voluntary disclosure program, contact the tax problem attorneys at Brager Tax Law Group, A P.C.