What are the risks of Opting Out of the IRS Offshore Voluntary Disclosure Programs?


Under the 2009 and 2011 federal voluntary disclosure programs, the penalties for failing to timely file Foreign Bank Account Reports, (FBAR’s) and the penalties for failure to file information returns (such as Controlled Foreign Corporation tax returns) were combined into a single miscellaneous civil penalty. The penalty which varied depending on whether it was under the 2009 program or the 2011 program combined the FBAR penalty which is established under the Bank Secrecy Act (BSA) with penalties assessed under the Internal Revenue Code (Code) and the combined penalty is assessed under the Code. This is combination to be administered under the Code avoids the requirement that the FBAR be brought as a civil case in the United States District Court, rather than under the assessment provision of the Code.

The IRS in its FBAR Frequently Ask Questions (No.51 ) discusses the basis upon which a taxpyaer might “opt out of the offshore voluntary disclosure program. The IRS uses the term “reasonable cause” in defining whether a taxpayer’s conduct is willful or non-willful. Because of the integration of BSA and Code penalties the participants in either the 2009 or 2011 offshore voluntary disclosure programs the tax cases that define reasonable cause may be the basis for determining whether it makes sense for taxpayers to “opt out” of the an offshore voluntary disclosure program when faced with failure to file Information Returns as well as failing to file FBAR’s.

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.