IRS Gives Big Break to Non-Willful Foreign Bank Account Holders
On June 18th, 2014, the IRS announced that it had put in place new procedures for foreign bank account holders that effectively reduce the delinquency penalties from 27.5% of the highest unreported aggregate balance of foreign bank account holdings to 5%.
Although thousands of taxpayers have signed up for this new program, we are surprised that the participation levels are not greater. Here is what you get if you qualify for the new Streamlined Procedures Program:
- Exemption from criminal prosecution (it is a crime not to disclose your foreign bank account holdings);
- Reduced penalties for failure to report foreign passive income;
- Reduced penalties for failure to report foreign bank accounts ¹
Anyone with a foreign bank account should speak with an experienced tax attorney to determine whether he or she qualifies for the new streamlined program and whether or not it is the best option for them.
Call one of our attorneys today at 407-915-3470 or 813-708-5530 for a free consultation and evaluation of your case.
Footnotes:
¹ For taxpayers who fail to take advantage of the Streamlined or regular Amnesty (OVDI) programs, the civil penalty for willful failure to disclose foreign bank accounts (via form TD 90.22-1) is 50% of the highest aggregate balance of foreign bank accounts for each of the last eight (8) years. Example: Al Capone, III has kept $1,000,000 in undisclosed foreign bank accounts over the last eight years. His foreign banks have disclosed to the federal government the existence of and balances in these accountants. The IRS audits Capone and assesses penalties against him for failure to disclose as follows:
| Year | Highest Aggregate Balance | Penalty Rate | Penalty |
| 2007 | 1,000,000 | 50% | $500,000 |
| 2008 | 1,000,000 | 50% | $500,000 |
| 2009 | 1,000,000 | 50% | $500,000 |
| 2010 | 1,000,000 | 50% | $500,000 |
| 2011 | 1,000,000 | 50% | $500,000 |
| 2012 | 1,000,000 | 50% | $500,000 |
| 2013 | 1,000,000 | 50% | $500,000 |
| 2014 | 1,000,000 | 50% | $500,000 |
| Total | $4,000,000 |
The above table illustrates that the taxpayer who does not participate in the Streamlined or OVDI amnesty programs not only exposes himself to criminal prosecution, but runs the very real risk of having the IRS assess penalties against him that are several times greater than the amount of money and assets he is holding in foreign offshore bank accounts.