New York, New York (PRWEB) July 30, 2012
Federal law requires taxpayers to report annually to the Internal Revenue Service (“IRS”) any financial interests they have in any bank, securities, or other financial accounts in a foreign country. 31 U.S.C. § 5314(a). The report is made by filing a completed form TD F 90-22.1 (“FBAR”) with the Department of the Treasury. 1 See id. § 5314; 31 C.F.R. § 1010.350. The FBAR must be filed on or before June 30 of each calendar year with respect to foreign financial accounts maintained during the previous calendar year, 31 C.F.R. § 1010.306(c), and the Secretary of the Treasury may impose a civil money penalty on any person who fails to timely file the report, 31 U.S.C. § 5321(a)(5)(A). Moreover, in cases where a person “willfully” fails to file the FBAR, the Secretary may impose an increased maximum penalty, up to $100,000 or fifty percent of the balance in the account at the time of the violation. Id. § 5321(a)(5)(C). The authority to enforce such assessments has been delegated to the IRS. 31 C.F.R. § 1010.810(g).
Some taxpayers who are dual citizens of the U.S. and a foreign country or who are merely U.S. citizens living and working abroad, may have failed to timely file their FBAR reports.
The good news is that there is a reasonable case exception under the FBAR Statute that that may eliminate the potential FBAR penalty. The authority for the "reasonable cause" exception is found in the IRS Manual IRM 18.104.22.168.3.1 (07-01-2008). This IRM approves of the "reasonable cause" guidance provided under 26 C.F.R. § 1.6664, Reasonable Cause and Good Faith Exception to the § 6662 penalties. IR-2012-65, June 26, 2012 offers a "new procedure" to go into effect September 1, 2012, that embraces the "reasonable cause" exception to the FBAR penalty, as articulated in IRS Fact Sheet FS-2011-13, December 2011.
Whether a failure to file or failure to pay is due to "reasonable cause" is based on a consideration of the facts and circumstances. Reasonable cause relief is generally granted by the IRS when you demonstrate that you exercised ordinary business care and prudence in meeting your tax obligations but nevertheless failed to meet them. In determining whether you exercised ordinary business care and prudence, the IRS will consider all available information, including:
Alvin Brown & Associates, LLC (ABA) is a tax law firm specializing in IRS controversies. ABA has tax clients throughout the U.S. and abroad dealing with all IRS tax issues, including, for example: civil and criminal examinations, offers in compromise, installment agreements, penalty abatement, IRS collection issues, payroll tax issues, F-Bar issues and many other tax issues.
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