Voluntary Disclosures and Proof of Source of Funds


One of the key questions in the IRS Offshore Voluntary Disclosure letter is “source of funds”. For many taxpayers with funds offshore who did not file Foreign Bank Account Reports (FBAR’s) this question presents multiple problems. The problems are discussed below.

First, taxpayers who used an Informal Value Transfer System (sometimes referred to as a Hawala network) cannot easily provide proof of the source of funds other than where the funds currently are deposited. Often these funds have their origination in the taxpayer’s or the taxpayer’s family’s country of origin and were sent to an foreign financial institution through the informal network in order to avoid currency control or disguise the transfer of funds for other reasons. Reasons for not filing FBAR’s for these accounts often vary, but range from simple claims of ignorance of the law to other more complex reasons. But, the failure to file FBAR’s is where the U.S. compliance problem begins for not filing FBAR’s may result in both serious civil and criminal penalties. Civil and criminal tax penalties may also apply if ownership of the foreign accounts was not disclosed on the taxpayer’s income tax returns and if earnings on the accounts were not reported.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sanford Millar, Law Offices of Sanford I. Millar | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.