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2017 FBAR Deadline | FinCEN Form 114 FBAR Lawyer & Attorney

FinCEN recently confirmed the 2017 FBAR deadline and the automatic extension option.

2017 FBAR Deadline: FBAR Background

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is commonly known as FBAR.  US taxpayers should use this form to report their financial interest in or signatory authority over foreign financial accounts. Failure to timely file the FBAR may result in the imposition of draconian FBAR penalties.

2017 FBAR Deadline: Traditional FBAR Deadline

Prior to 2016 FBAR, the taxpayers had to file their FBARs for each relevant calendar year by June 30 of the following year. No filings extensions were allowed. The last FBAR that followed this deadline was 2015 FBAR (its due date was June 30, 2016).

2017 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR.  Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.

Furthermore, during the transition period, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. The taxpayers do not need to make any specific requests in order for extension to be granted.

In other words, starting 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. Moreover, the new FBAR filing deadline will follow to the letter the federal income tax due date guidance. The federal income tax due date guidance states that, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day.

2017 FBAR Deadline

Based on the new law, the 2017 FBAR deadline will be April 17, 2018 (same as 2017 income tax return due date). If a taxpayer does not file his 2017 FBAR by April 17, 2018, then the IRS will automatically grant an extension until October 15, 2018. Failure to file 2017 FBAR by October 15, 2018, may result in the imposition of FBAR civil and criminal penalties.

IRS Letter 3708: IRS Demand to Pay FBAR Penalty

After the IRS imposes an FBAR penalty on the taxpayer, the IRS will send the taxpayer IRS Letter 3708 to demand the payment of the part of the FBAR Penalty that remains unpaid. In this article, I would like to discuss IRS Letter 3708 in more detail, particularly focusing on the various FBAR Penalty Collection options that the letter lists.

First Part of IRS Letter 3708: Explanation of FBAR Penalty Imposed and Balance Unpaid

IRS Letter 3708 begins with the statement that this letter is a demand for the payment of the FBAR (Report of Foreign Bank and Financial Accounts) penalty that was assessed to the taxpayer under relevant IRC sections (such as §5321(a)(5) and §5321(a)(6)). Then, the IRS Letter 3708 mentions that the taxpayer should have previously received IRS Letter 3709 with the explanation of penalty imposed based on the facts of the taxpayer’s case.

Second Part of IRS Letter 3708: Account Summary and Payment Instructions

The next part of IRS Letter 3708 is devoted to the summary of the taxpayer’s account – i.e. the amounts owed per each relevant year. At total amount due is provided at the end.

The letter continues with the explanation of the precise payment instructions, including what information needs to be written on the check (in order for the payment to be applied correctly). Also, an option for an installment agreement is mentioned if the payment in full is not possible. However, even in the case of an installment agreement, the interest of at least 1% will be charged (interest rates may change); additional debt servicing fee of about 18% of the penalty amount may also be charged.

Third Part of IRS Letter 3708: Interest and Penalties

Failure to pay the amount due within 30 days may lead to the imposition of interest and penalties. The interest is imposed under IRC Section 3717(a)-(d); the current rate is 1% per year, but it may be raised in the near future.

The late payment penalty is imposed under IRC Section 3717(e)(2); currently, the rate if 6% per year. This penalty is imposed on portion of the FBAR penalty that remains unpaid 90 days from the date listed on IRS Letter 3708.

IRS Letter 3708 also mentions that both, interest and penalties, may be abated under 31 C.F.R. 5.5(b).

Fourth Part of IRS Letter 3708: Collection Enforcement and Costs

The fourth part of the IRS Letter 3708 is very important, because it is devoted entirely to how the IRS can collect the amount due. The letter lists seven different collection enforcement mechanisms that are available to the IRS if the debt not paid within 30 days:

• Referral to the Department of Justice to initiate litigation against the taxpayer.
• Referral to the Department of the Treasury’s Financial Management Service. (This referral involves an additional debt-servicing fee that is approximately 18% of the balance due.)
• Referral to private collection agencies. (Referral to a private collection agency increases the additional debt-servicing fee from approximately 18% to 28% of the balance due.)
• Offset of federal payments such as income tax refunds and certain benefit payments such as social security.
• Administrative wage garnishment.
• Revocation or suspension of federal licenses, permits or privileges.
• Ineligibility for federal loans, loan insurance or guarantees

These additional costs may be imposed on noncomplying taxpayer based on 31 U.S.C. §3717(e)(1).

Final Part of IRS Letter 3708: Contesting Penalty Assessment

At the end, IRS Letter 3708 advises the taxpayers of two main options for contesting the penalty assessment. First, the taxpayers can file an administrative appeal with the Appeals Office in Detroit. This option is available if an administrative appeal was not requested based on Letter 3709 or if new situations have occurred since the last administrative review. The appeal must be requested in writing within 30 days from the date listed on IRS Letter 3708.

The second option is to file a refund suit in the United States District Court or the United States Court of Federal Claims. IRS Letter 3708 does not state whether such a suit would be subject to the full-payment rule (such as one that applied in income tax matters).

Contact Sherayzen Law Office if Your Received IRS Letter 3708 or IRS Letter 3709

If you received IRS Letter 3708 or IRS Letter 3709, contact Sherayzen Law Office for legal help as soon as possible. We have helped taxpayers around the world to reduce their FBAR penalties and we can help you!

Call Today to Schedule Your Confidential Consultation!

Swiss Bank Program Penalties Bring More than $1 Billion

On December 23, 2015, as US Department of Justice (DOJ) announced that it reached resolutions with Bank J. Safra Sarasin AG, Coutts & Co Ltd, Gonet & Cie and Banque Cantonal du Valais, it also announced that Swiss Bank Program Penalties reached a landmark – more than $1 Billion. At that time, in addition to Swiss Bank Program Penalties, DOJ also reached agreements with 75 Swiss Banks.

As a reminder to readers, the DOJ Swiss Bank Program was announced by DOJ on August 29, 2013 (per agreement with Swiss government). The Program provides a framework for Swiss Banks to resolve their US tax issues (or “cross-border criminal tax violations”) in exchange for information about the Banks’ US accountholders and, for Category 2 banks, Swiss Bank Program Penalties.

Moreover, according to the terms of the non-prosecution agreements signed by Swiss banks under the Program, Swiss Banks agree to cooperate in any related criminal and civil proceedings, show that the Banks implemented controls to avoid future misconduct with respect to US-held accounts.

While the percentages of Swiss Bank Program Penalties are firmly established, under the terms of the Program, the banks are allowed to mitigate their Swiss Bank Program Penalties if they can show that their US accountholders are either in compliance with their US tax obligations or they entered the IRS Offshore Voluntary Disclosure Program (and, later, Streamlined Procedures).

It should be noted that more Swiss banks reached resolutions with DOJ under the Program since December 23, 2015. This means that the DOJ has already collected even more Swiss Bank Program Penalties.

These resolutions under the Program concern not only Swiss Banks and Swiss Bank Program Penalties, but they also have direct relevance to US owners of undeclared Swiss bank accounts. Two major consequences arise for US taxpayers with undisclosed accounts from their Swiss Bank participation in the Program. First, there is a direct impact of information exchange between the participating Bank and the IRS which may lead to the discovery of the undisclosed accounts by US tax authorities. The subsequent IRS investigation is likely to render any future participation of the taxpayer in the OVDP impossible.

Second, if the participating bank reaches resolution and pays its Swiss Bank Program Penalties to the DOJ before the taxpayer enters OVDP (or, more precisely, files the Preclearance Request), the OVDP penalty on all (not just the taxpayer’s accounts in the participating Bank’s) of the taxpayer’s accounts will jump to 50% (from the normal 27.5%).

Contact Sherayzen Law Office for Help With Your Undisclosed Foreign Accounts

If you have undisclosed foreign accounts or any other foreign assets, you should contact Sherayzen Law Office as soon as possible. Our experienced legal team has helped hundreds of US taxpayers around the world and we can help you!

Contact Us Today to Schedule Your Initial Consultation!