In “Scent of a Woman” Al Pacino’s character stated “I’m just getting started here!”, well the same can be said for the IRS efforts to gather offshore financial information from U.S. taxpayers. Many taxpayers and tax advisors are now aware of the obligation to file a Report of Foreign Bank Account (FBAR) if they have $10,000 or more in aggregate foreign financial accounts at anytime in the year. An FBAR is required under the Bank Secrecy Act (BSA). Disclosure of the existence offshore accounts was also required under the Internal Revenue Code (IRC) on Schedule B of Form 1040. The Form 1040 disclosure until now required that the taxpayer simply answer Yes or No to the questions on Schedule B. The administrative and enforcement remedies between the BSA and the IRC are substantive . Under the BSA a non-criminal FBAR penalty is enforced by a civil lawsuit filed by the Department of Justice in the US District Court.
Under the IRC non-criminal income tax liabilities, penalties and interest are enforced under the lien and levy rules of the IRC. In the two recent voluntary disclosure programs offered by the IRS, 2009 and 2011, the IRS created a “miscellaneous civil penalty”, in lieu of FBAR penalties, to allow it to administer the voluntary disclosures under the IRC. The natural evolution of the process that created the “miscellaneous civil penalty” is the enhanced reporting requirements under the HIRE Act Section 6038D, which created the “Super FBAR”.
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