Free Consultation: 858.450.1040 Payment | Client Login

MENUMENU
  • EDD
  • IRS
    • IRS Notices – What They Mean
  • About Us
    • MEET THE TEAM
    • PRACTICE AREAS
    • CONTACT US
  • TAX LAW & EDD RESOURCES
    • SMALL BUSINESS OWNERS TAX LAW GUIDE
    • EDD & IRS AUDITS
    • CRIMINAL TAX
    • SAN DIEGO TAX ATTORNEY
    • Orange County Tax Attorney Services
    • TAX BALANCE
    • INNOCENT SPOUSE RELIEF
    • OTHER TAX LAW MATTERS
    • SALES TAX AUDITS
    • UNFILED TAX RETURNS
    • OFFERS IN COMPROMISE
    • CALIFORNIA INCOME TAXES
    • INTERNATIONAL TAX
    • TAX COLLECTIONS
    • CORPORATE | BUSINESS TAX
    • PAYROLL TAX AUDITS
    • TAX LEIN
    • FAQs
  • SBA Loan Resources
    • PPP FORGIVENESS DENIAL APPEAL
    • SBA Criminal Defense
    • FAQs
  • RESOURCES
    • Blog
    • VIDEO LIBRARY
Home > Blog > IRS Assesses Penalty 40% Greater than the Account Balance

IRS Assesses Penalty 40% Greater than the Account Balance

June 17, 2014

An 87 year old man who has a secret Swiss bank account with $1.5M faces penalties of $2.2M for failure to disclose his bank account to the IRS. This is the first case made public where an individual’s penalties associated with failing to report a foreign bank account exceeded the balance in the account.

When the Patriot Act was enacted in 2003, it allowed the IRS to assess penalties of up to 50% of the highest balance in an offshore account for each year the individual “willfully” failed to report the account to the IRS.

The test for willfulness is whether there was a “voluntary, intentional violation of a known legal duty.” A finding of “willfulness” must be supported by evidence of willfulness and the IRS has the burden of proof.

However, if you can prove the violation was due to “reasonable cause”, the willfulness penalty may not be asserted.

In this case, the individual failed to report the account to the IRS and other evidence suggested the individual took some steps to hide the identity of the account.

Each year, all “U.S. persons” must report the existence of their foreign bank accounts on Schedule A of their individual 1040 income tax return. If the aggregate balance in all their foreign bank accounts is $10,000 or more, they then must also report their accounts on FinCEN Form 14 (formerly the FBAR form).

A “U.S. Person” includes; U.S. citizens; U.S. residents; entities, including corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

The accounts required to be reported are generally accounts that a person has a “signature authority” over or “financial interest” in the financial account located outside of the United States.

If you have a foreign bank account or financial investment, and have not reported your account to the IRS, you have until June 30 of each year to report your account. With new U.S. laws and regulations, many foreign countries have signed agreements with the U.S. government requiring the banks in those countries to report accounts that have a connection to a U.S. person.

For more information about your obligations to report foreign bank accounts, contact our office at and speak with an experienced San Diego tax attorney.

Filed Under: Blog, News

Archives

Search

Categories

Questions About
Tax Audit/Controversies?

A representative will be in contact within 1 business day
PRIVACY POLICY

Get Monthly Updates on Important Tax Law Matters



Milikowsky Tax Law is located at: 4250 Executive Square, Ste. 650, La Jolla, CA 92037
o. (858) 450-1040 | m. (858) 212-0542 |
Privacy Policy

DISCLAIMER:
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

Milikowsky Tax Law © All Rights Reserved. Clear1099.com | Cal1099.com | California1099.com © All Rights Reserved.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT