FBAR lawyers New York

New York FBAR Lawyer | Foreign Accounts Tax Attorney

If you are looking for a New York FBAR Lawyer, you should consider retaining the services of Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. While Mr. Sherayzen is not physically located in New York, he has a considerable number of clients in the City of New York and the State of New York.

It is important to understand that the geographical location of a New York FBAR Lawyer does not have any impact on his ability to interpret the federal rules and regulations regarding FBAR precisely for the reason that FBAR is federal law, not state law. Moreover, the development of modern communications technology has basically eliminated virtually the entire advantage of retaining a local New York FBAR Lawyer.

Rather, the most important consideration in retaining a New York FBAR Lawyer should be his experience and knowledge of the subject matter. Here, Sherayzen Law Office, Ltd. holds a considerable advantage due to its profound knowledge in international tax law, particularly FBAR compliance and FBAR voluntary disclosures. In fact, this is one of the leading international tax law firms in the world with experience in all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP.

It is also important to understand that the FBAR issues are often tightly intertwined with other international tax compliance requirements, such as foreign income reporting, Form 8938, Form 8621, foreign business ownership reporting returns (5471, 8865 and 8858), et cetera. This is why your New York FBAR lawyer should be highly knowledgeable in other areas of international tax law in addition to FBARs.

Again, Sherayzen Law Office occupies a leading position in the world on this subject with extensive knowledge and experience concerning all major relevant areas of international tax law including PFIC compliance, Subpart F rules, all types of US international reporting returns, US income tax returns (individual, partnership and corporate) for domestic and foreign persons, et cetera.

Contact Sherayzen Law Office – Your New York FBAR Lawyer

This is why, if you are looking for a New York FBAR lawyer, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

Treasury 2014 FBAR Currency Conversion Rates of December 31, 2014

According to the June 2014 FBAR currency conversion rates instructions published by FinCEN, in order to determine the maximum value of a foreign bank account, the Treasury’s Financial Management Service (still called so even though Financial Management Service was consolidated into the Bureau of the Fiscal Service within the Treasury Department) rates must be used. In particular, the 2014 FBAR currency conversion rates instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

The 2014 FBAR Currency Conversion rates are highly important for any international tax attorney who deals with FBARs.  For your convenience, Sherayzen Law Office provides a table of the official Treasury FBAR currency conversion rates below (keep in mind, you still need to refer to the official website for any updates):

Country – Currency Foreign Currency to $1.00
AFGHANISTAN – AFGHANI 57.9000
ALBANIA – LEK 115.1000
ALGERIA – DINAR 87.8100
ANGOLA – KWANZA 104.0000
ANTIGUA – BARBUDA – E. CARIBBEAN DOLLAR 2.7000
ARGENTINA-PESO 8.3730
ARMENIA – DRAM 470.0000
AUSTRALIA – DOLLAR 1.2190
AUSTRIA – EURO 0.8220
AZERBAIJAN – NEW MANAT 0.8000
BAHAMAS – DOLLAR 1.0000
BAHRAIN – DINAR 0.3770
BANGLADESH – TAKA 79.0000
BARBADOS – DOLLAR 2.0200
BELARUS – RUBLE 13779.0000
BELGIUM-EURO 0.8220
BELIZE – DOLLAR 2.0000
BENIN – CFA FRANC 538.7000
BERMUDA – DOLLAR 1.0000
BOLIVIA – BOLIVIANO 6.8600
BOSNIA-HERCEGOVINA MARKA 1.6080
BOTSWANA – PULA 9.4970
BRAZIL – REAL 2.6570
BRUNEI – DOLLAR 1.2540
BULGARIA – LEV 1.6090
BURKINA FASO – CFA FRANC 538.7000
BURMA – KYAT 1028.0000
BURUNDI – FRANC 1550.0000
CAMBODIA (KHMER) – RIEL 4103.0000
CAMEROON – CFA FRANC 538.8200
CANADA – DOLLAR 1.1580
CAPE VERDE – ESCUDO 87.8710
CAYMAN ISLANDS – DOLLAR 0.8200
CENTRAL AFRICAN REPUBLIC – CFA FRANC 538.8200
CHAD – CFA FRANC 538.8200
CHILE – PESO 607.1600
CHINA – RENMINBI 6.2050
COLOMBIA – PESO 2372.6000
COMOROS – FRANC 361.3500
CONGO – CFA FRANC 538.8200
CONGO, DEM. REP – CONGOLESE FRANC 920.0000
COSTA RICA – COLON 533.2500
COTE D’IVOIRE – CFA FRANC 538.7000
CROATIA – KUNA 6.1500
CUBA-PESO 1.0000
CYPRUS-EURO 0.8220
CZECH – KORUNA 22.3260
DENMARK – KRONE 6.1240
DJIBOUTI – FRANC 177.0000
DOMINICAN REPUBLIC – PESO 44.1300
ECAUDOR-DOLARES 1.0000
EGYPT – POUND 7.1500
EL SALVADOR-DOLARES 1.0000
EQUATORIAL GUINEA – CFA FRANC 538.8200
ERITREA – NAKFA 15.0000
ESTONIA-EURO 0.8220
ETHIOPIA – BIRR 20.0900
EURO ZONE – EURO 0.82200
FIJI – DOLLAR 1.9580
FINLAND-EURO 0.8220
FRANCE-EURO 0.8220
GABON – CFA FRANC 538.8200
GAMBIA – DALASI 45.0000
GEORGIA-LARI 1.8700
GERMANY FRG-EURO 0.8220
GHANA – CEDI 3.2100
GREECE-EURO 0.8220
GRENADA – EAST CARIBBEAN DOLLAR 2.7000
GUATEMALA – QUENTZAL 7.5970
GUINEA – FRANC 7136.0000
GUINEA BISSAU – CFA FRANC 538.7000
GUYANA – DOLLAR 202.0000
HAITI – GOURDE 46.7500
HONDURAS – LEMPIRA 21.2700
HONG KONG – DOLLAR 7.7560
HUNGARY – FORINT 259.4400
ICELAND – KRONA 126.7500
INDIA – RUPEE 63.2000
INDONESIA – RUPIAH 12350.0000
IRAN – RIAL 8229.0000
IRAQ – DINAR 1166.0000
IRELAND-EURO 0.8220
ISRAEL-SHEKEL 3.8810
ITALY-EURO 0.8220
JAMAICA – DOLLAR 113.9000
JAPAN – YEN 119.4500
JERUSALEM-SHEKEL 3.8810
JORDAN – DINAR 0.7080
KAZAKHSTAN – TENGE 182.4000
KENYA – SHILLING 90.6500
KOREA – WON 1086.8700
KUWAIT – DINAR 0.2930
KYRGYZSTAN – SOM 58.7000
LAOS – KIP 8078.0000
LATVIA – LATS 0.8220
LEBANON – POUND 1500.0000
LESOTHO – SOUTH AFRICAN RAND 11.5660
LIBERIA – U.S. DOLLAR 82.0000
LIBYA-DINAR 1.1950
LITHUANIA – LITAS 2.8390
LUXEMBOURG-EURO 0.8220
MACAO – MOP 8.0000
MACEDONIA FYROM – DENAR 49.2000
MADAGASCAR-ARIA 2596.7300
MALAWI – KWACHA 505.0000
MALAYSIA – RINGGIT 3.4950
MALI – CFA FRANC 538.7000
MALTA-EURO 0.8220
MARSHALLS ISLANDS – DOLLAR 1.0000
MARTINIQUE-EURO 0.82200
MAURITANIA – OUGUIYA 305.0000
MAURITIUS – RUPEE 31.7000
MEXICO – NEW PESO 14.7020
MICRONESIA – DOLLAR 1.0000
MOLDOVA – LEU 15.5520
MONGOLIA – TUGRIK 1885.6000
MONTENEGRO-EURO 0.8220
MOROCCO – DIRHAM 9.0240
MOZAMBIQUE – METICAL 33.0500
NAMIBIA-DOLLAR 11.5660
NEPAL – RUPEE 101.4000
NETHERLANDS-EURO 0.8220
NETHERLANDS ANTILLES – GUILDER 1.7800
NEW ZEALAND – DOLLAR 1.2750
NICARAGUA – CORDOBA 26.6000
NIGER – CFA FRANC 538.7000
NIGERIA – NAIRA 182.9000
NORWAY – KRONE 7.3900
OMAN – RIAL 0.3850
PAKISTAN – RUPEE 100.9000
PALAU-DOLLAR 1.0000
PANAMA – BALBOA 1.0000
PAPUA NEW GUINEA – KINA 2.5440
PARAGUAY – GUARANI 4629.3000
PERU – NUEVO SOL 2.9000
PHILIPPINES – PESO 44.77500
POLAND – ZLOTY 3.5130
PORTUGAL-EURO 0.8220
QATAR – RIYAL 3.6420
ROMANIA – LEU 3.6850
RUSSIA – RUBLE 58.6760
RWANDA – FRANC 689.1900
SAO TOME & PRINCIPE – DOBRAS 20087.7110
SAUDI ARABIA – RIYAL 3.7500
SENEGAL – CFA FRANC 538.7000
SERBIA-DINAR 99.4600
SEYCHELLES – RUPEE 12.9800
SIERRA LEONE – LEONE 4990.0000
SINGAPORE – DOLLAR 1.3210
SLOVAK REPUBLIC – EURO 0.8220
SLOVENIA – EURO 0.8220
SOLOMON ISLANDS – DOLLAR 7.3100
SOUTH AFRICA – RAND 11.5660
SOUTH SUDANESE – POUND 3.0000
SPAIN – EURO 0.8220
SRI LANKA – RUPEE 131.1500
ST LUCIA – EC DOLLAR 2.7000
SUDAN – SUDANESE POUND 6.4000
SURINAME – GUILDER 3.3500
SWAZILAND – LILANGENI 11.5660
SWEDEN – KRONA 7.7130
SWITZERLAND – FRANC 0.9890
SYRIA – POUND 179.2000
TAIWAN – DOLLAR 31.6400
TAJIKISTAN – SOMONI 5.3000
TANZANIA – SHILLING 1730.0000
THAILAND – BAHT 32.9200
TIMOR – LESTE DILI 1.0000
TOGO – CFA FRANC 538.7000
TONGA – PA’ANGA 1.8700
TRINIDAD & TOBAGO – DOLLAR 6.3560
TUNISIA – DINAR 1.8590
TURKEY – LIRA 2.3270
TURKMENISTAN – MANAT 2.8400
UGANDA – SHILLING 2770.0000
UKRAINE – HRYVNIA 15.7680
UNITED ARAB EMIRATES – DIRHAM 3.6700
UNITED KINGDOM – POUND STERLING 0.6420
URUGUAY – PESO 23.9600
UZBEKISTAN – SOM 2461.0000
VANUATU – VATU 99.9300
VENEZUELA – BOLIVAR 6.3000
VIETNAM – DONG 21400.0000
WESTERN SAMOA – TALA 2.3530
YEMEN – RIAL 214.5000
ZAMBIA – KWACHA (NEW) 6.3750
ZAMBIA – KWACHA (OLD) 5455.0000
ZIMBABWE – DOLLAR 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – former Yugoslav Republic of Macedonia.
4. Latvia’s Lats converted to the Euro on January 1, 2014. This means that the Euro 2014 FBAR Currency Conversion rate may also need to used for the determination of the highest balance of accounts in Latvia. Contact Sherayzen Law Office for more details.

IRS Loses Two Offshore Tax Cases: Weil & Baravarian

Last month, a federal jury in Fort Lauderdale, Florida acquitted Raoul Weil, a former top UBS Swiss banking executive, of tax evasion charges. Weil was indicted in 2008 under 18 U.S.C. § 371 (“Conspiracy to commit offense or to defraud United States”) and it was alleged that he helped nearly 17,000 wealthy US persons hide $20 Billion in Swiss bank accounts from the IRS. Weil had been extradited to the US to stand trial after being arrested by Interpol while vacationing in Italy in 2013. He would have faced up to five years in prison and a $250,000 fine, if found guilty. Weil did not testify in the case.

From 2002 through 2007, Weil was head of Swiss Bank’s wealth management business, which included US cross-border business and other businesses. In July of 2007, he became the CEO a division that oversaw the United States cross-border business and world-wide private banking. The verdict for the trial (which began on October 14), was quickly reached in less than an hour and a half of deliberation. According to a news report, Weil’s attorney told the jury that Weil was not culpable because, “There’s no evidence in this case that Mr. Weil knew and much less participated in activities by low-level bankers who were violating the bank’s own policies.” In response, a former DOJ tax division assistant attorney general, Nathan Hochman, was quoted after the verdict stating, “The verdict shows you the difficulty of going after senior management who can at times blame the bank’s customers and lower-level employees for the bank’s mistakes.” Prosecutors also failed to show that “a single overall conspiracy” existed under the law.

Weil was the highest-ranking foreign banker to be charged by the US during its lengthy probe of offshore tax evasion cases. The failure by the IRS and DOJ to obtain a conviction in this case represents a significant setback as they have been very successful in prosecuting such cases (and UBS itself had previously paid a $780 million fine in 2009 and admitted to assisting clients evade US taxes in exchange for non-prosecution).

The jury verdict in Weil’s case comes on the heels of another case in which a retired senior vice president at the Los Angeles branch of a bank headquartered in Tel Aviv, Israel Mizrahi Tefahot Bank Ltd., Shokrollah Baravarian, was acquitted in a federal court of charges of conspiring to defraud the U.S. government and of helping clients prepare false tax returns. Baravarian was alleged to have conspired to conceal the existence of undeclared offshore accounts owned and controlled by U.S. customers by opening them under pseudonyms, code names and the names of nominee entities set up in the British Virgin Islands and the island of Nevis. Like Weil, he also would have faced a potential maximum prison term of five years and a maximum fine of $250,000, if convicted.

Contact Sherayzen Law Office for Help with Your Offshore-Related US Tax Compliance Issues

As can be seen from the two acquittals highlighted above, legal challenges to the IRS and DOJ in offshore tax cases can be successful. Certain US persons who reported foreign accounts through the OVDP may also find that they wish to challenge their FBAR determinations in court. If you have any questions regarding OVDP-related litigation or compliance, please contact our experienced tax practice at Sherayzen Law Office, PLLC.

Official Treasury Currency Conversion Rates of December 31, 2013 – 2013 FBAR Conversion Rates

Every year, the U.S. Department of Treasure publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates”); I will refer to the “FBAR Conversion Rates”. Recently, the Treasury Department published the FBAR Conversion rates for December 31, 2013. While there are other good reasons for the existence of these rates, the 2013 FBAR Conversion Rates are especially important for persons who are required to file the FBARs.

The latest (October 2013) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official  2013 FBAR Conversion Rates below (keep in mind, you still need to refer to the official website for any updates).

 

Country – Currency

Foreign Currency to $1.00

AFGHANISTAN – AFGHANI

56.0000

ALBANIA – LEK

101.7000

ALGERIA – DINAR

78.0250

ANGOLA – KWANZA

95.0000

ANTIGUA – BARBUDA – E. CARIBBEAN DOLLAR

2.7000

ARGENTINA – PESO

6.5180

ARMENIA – DRAM

404.0000

AUSTRALIA – DOLLAR

1.1200

AUSTRIA – EURO

0.7260

AZERBAIJAN – NEW MANAT

0.8000

BAHAMAS – DOLLAR

1.0000

BAHRAIN – DINAR

0.3770

BANGLADESH – TAKA

79.0000

BARBADOS – DOLLAR

2.0200

BELARUS – RUBLE

9510.0000

BELGIUM – EURO

0.7260

BELIZE – DOLLAR

2.0000

BENIN – CFA FRANC

475.0000

BERMUDA – DOLLAR

1.0000

BOLIVIA – BOLIVIANO

6.8600

BOSNIA-HERCEGOVINA MARKA

1.4210

BOTSWANA – PULA

8.7490

BRAZIL – REAL

2.3620

BRUNEI – DOLLAR

1.2540

BULGARIA – LEV

1.4210

BURKINA FASO – CFA FRANC

475.0000

BURMA – KYAT

980.0000

BURUNDI – FRANC

1540.0000

CAMBODIA (KHMER) – RIEL

4103.0000

CAMEROON – CFA FRANC

476.5400

CANADA – DOLLAR

1.0640

CAPE VERDE – ESCUDO

80.3030

CAYMAN ISLANDS – DOLLAR

0.8200

CENTRAL AFRICAN REPUBLIC – CFA FRANC

475.0000

CHAD – CFA FRANC

476.5400

CHILE – PESO

525.3200

CHINA – RENMINBI

6.0540

COLOMBIA – PESO

1924.9800

COMOROS – FRANC

361.3500

CONGO – CFA FRANC

475.0000

CONGO, DEM. REP – CONGOLESE FRANC

920.0000

COSTA RICA – COLON

495.2000

COTE D’IVOIRE – CFA FRANC

475.0000

CROATIA – KUNA

5.4600

CUBA-PESO

1.0000

CYPRUS – EURO

0.7260

CZECH – KORUNA

19.4570

DENMARK – KRONE

5.4190

DJIBOUTI – FRANC

177.0000

DOMINICAN REPUBLIC – PESO

42.6500

ECAUDOR – DOLARES

1.0000

EGYPT – POUND

6.9480

EL SALVADOR – DOLARES

1.0000

EQUATORIAL GUINEA – CFA FRANC

476.5400

ERITREA – NAKFA

15.0000

ESTONIA – EURO

0.7260

ETHIOPIA – BIRR

19.0600

EURO ZONE – EURO

0.7260

FIJI – DOLLAR

1.8640

FINLAND-EURO

0.7260

FRANCE-EURO

0.7260

GABON – CFA FRANC

476.5400

GAMBIA – DALASI

39.0000

GEORGIA – LARI

1.7400

GERMANY FRG – EURO

0.7260

GHANA – CEDI

2.3500

GREECE – EURO

0.7260

GRENADA – EAST CARIBBEAN DOLLAR

2.7000

GUATEMALA – QUENTZAL

7.8410

GUINEA – FRANC

7006.0000

GUINEA BISSAU – CFA FRANC

475.0000

GUYANA – DOLLAR

202.0000

HAITI – GOURDE

43.5500

HONDURAS – LEMPIRA

20.4200

HONG KONG – DOLLAR

7.7530

HUNGARY – FORINT

215.7300

ICELAND – KRONA

115.0300

INDIA – RUPEE

61.5000

INDONESIA – RUPIAH

12100.0000

IRAN – RIAL

8229.0000

IRAQ – DINAR

1166.0000

IRELAND-EURO

0.7260

ISRAEL-SHEKEL

3.4690

ITALY-EURO

0.7260

JAMAICA – DOLLAR

104.0000

JAPAN – YEN

105.0100

JERUSALEM-SHEKEL

3.4690

JORDAN – DINAR

0.7080

KAZAKHSTAN – TENGE

153.6000

KENYA – SHILLING

86.4000

KOREA – WON

1055.2500

KUWAIT – DINAR

0.2820

KYRGYZSTAN – SOM

49.4000

LAOS – KIP

8006.0000

LATVIA – LATS

0.5080

LEBANON – POUND

1500.0000

LESOTHO – SOUTH AFRICAN RAND

10.4800

LIBERIA – U.S. DOLLAR

79.0100

LIBYA-DINAR

1.2290

LITHUANIA – LITAS

2.5080

LUXEMBOURG-EURO

0.7260

MACAO – MOP

8.0000

MACEDONIA FYROM – DENAR

>43.4000

MADAGASCAR-ARIA

2236.0100

MALAWI – KWACHA

448.0000

MALAYSIA – RINGGIT

3.2770

MALI – CFA FRANC

475.0000

MALTA-EURO

0.7260

MARSHALLS ISLANDS – DOLLAR

1.0000

MARTINIQUE-EURO

0.7260

MAURITANIA – OUGUIYA

295.0000

MAURITIUS – RUPEE

29.9500

MEXICO – NEW PESO

13.0890

MICRONESIA – DOLLAR

1.0000

MOLDOVA – LEU

12.8950

MONGOLIA – TUGRIK

1654.1000

MONTENEGRO-EURO

0.7260

MOROCCO – DIRHAM

8.1470

MOZAMBIQUE – METICAL

29.8000

NAMIBIA – DOLLAR

10.4800

NEPAL – RUPEE

98.8000

NETHERLANDS – EURO

0.7260

NETHERLANDS ANTILLES – GUILDER

1.7800

NEW ZEALAND – DOLLAR

1.2160

NICARAGUA – CORDOBA

25.3300

NIGER – CFA FRANC

475.0000

NIGERIA – NAIRA

159.7000

NORWAY – KRONE

6.0830

OMAN – RIAL

0.3850

PAKISTAN – RUPEE

105.1600

PALAU-DOLLAR

1.0000

PANAMA – BALBOA

1.0000

PAPUA NEW GUINEA – KINA

2.3530

PARAGUAY – GUARANI

4585.4400

PERU – NUEVO SOL

2.7900

PHILIPPINES – PESO

44.3800

POLAND – ZLOTY

3.0140

PORTUGAL-EURO

0.7260

QATAR – RIYAL

3.6410

ROMANIA – LEU

3.2500

RUSSIA – RUBLE

32.8640

RWANDA – FRANC

665.6900

SAO TOME & PRINCIPE – DOBRAS

17736.4360

SAUDI ARABIA – RIYAL

3.7500

SENEGAL – CFA FRANC

475.0000

SERBIA-DINAR

83.1300

SEYCHELLES – RUPEE

11.9420

SIERRA LEONE – LEONE

4340.0000

SINGAPORE – DOLLAR

1.2630

SLOVAK REPUBLIC – EURO

0.7260

SLOVENIA – EURO

0.7260

SOLOMON ISLANDS – DOLLAR

7.0320

SOUTH AFRICA – RAND

10.4800

SOUTH SUDANESE – POUND

3.0000

SPAIN – EURO

0.7260

SRI LANKA – RUPEE

130.7500

ST LUCIA – EC DOLLAR

2.7000

SUDAN – SUDANESE POUND

6.1000

SURINAME – GUILDER

3.3500

SWAZILAND – LILANGENI

10.4800

SWEDEN – KRONA

6.4140

SWITZERLAND – FRANC

0.8910

SYRIA – POUND

141.3700

TAIWAN – DOLLAR

29.8150

TAJIKISTAN – SOMONI

4.7700

TANZANIA – SHILLING

1585.0000

THAILAND – BAHT

32.7400

TIMOR – LESTE DILI

1.0000

TOGO – CFA FRANC

475.0000

TONGA – PA’ANGA

1.7420

TRINIDAD & TOBAGO – DOLLAR

6.3800

TUNISIA – DINAR

1.6430

TURKEY – LIRA

2.1360

TURKMENISTAN – MANAT

2.8430

UGANDA – SHILLING

2520.0000

UKRAINE – HRYVNIA

8.2300

UNITED ARAB EMIRATES – DIRHAM

3.6730

UNITED KINGDOM – POUND STERLING

0.6050

URUGUAY – PESO

21.1000

UZBEKISTAN – SOM

2237.0000

VANUATU – VATU

95.3600

VENEZUELA – BOLIVAR

6.3000

VIETNAM – DONG

21100.0000

WESTERN SAMOA – TALA

2.2590

YEMEN – RIAL

214.5000

ZAMBIA – NEW KWACHA

5.5000

ZAMBIA – KWACHA

5455.0000

ZIMBABWE – DOLLAR

1.0000

 

FBAR Penalties vs Offshore Voluntary Disclosure Program Penalties

There is a great confusion among international tax attorneys and Offshore Voluntary Disclosure Program (OVDP) applicants with respect to the OVDP Offshore Penalty and how it differs from the FBAR penalties. I already described in another article the OVDP penalties. In this article, I would like to compare and contrast some of the major features of the OVDP Offshore Penalty with the FBAR penalties.

FBAR Penalties

FBAR is one of the most unforgiving forms on the planet. The penalties associated with delinquent FBARs can be terrifying.

At the apex of the penalty structure are the criminal penalties that are imposed in association with a willful violation of the FBAR filing requirements under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. Section 1001. The criminal penalties may be up to 10 years in jail and $500,000 in fines.

Willful (i.e. where a person willfully fails to report an account or account identifying information) civil penalties equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. See 31 U.S.C. section 5321(a)(5). Note, that a penalty in this case applies to each violation which is defined as each undisclosed account per year.

Even where the violation is non-willful, a person may be subject to a civil penalty of $10,000 per violation. Again, note that this is a penalty per violation – i.e. per each unreported account per each year.

For the purposes of this article, it is also important to note that the penalties apply only to “foreign financial accounts”. This term is defined broadly to include various types of accounts which are not normally associated with the word “account” (for example: a precious metals storage or a life insurance policy with a cash-surrender value). Nevertheless, the FBAR penalty would not apply to real estate or a business interest; it would apply only to foreign financial accounts – i.e. the balances on the foreign financial accounts and the number of these accounts constitute the primary penalty base for the calculation of the FBAR penalties.

OVDP Offshore Penalties

In contrast to traditional FBAR penalties, OVDP Offshore Penalty may mean a completely different penalty range and penalty base.

Offshore Penalty Range

Unlike the FBAR penalties, OVDP Offshore Penalty is a limited penalty – i.e. there is a certain penalty that you have to pay by virtue of participating into the program. It is very important to understand that most individual circumstances, willfulness, non-willfulness and reasonable case have virtually no impact on the calculation of the Offshore Penalty.

There are three tiers of the OVDP Offshore Penalty. First, there is a 5% penalty tier. There are various possibilities how one would be entitled to such a favorable treatment; a detailed discussion of the 5% penalty possibilities is described elsewhere on sherayzenlaw.com.

Second, there is a 12.5% penalty tier. An OVDP applicant would be entitled to this penalty tier only if, during each of the years covered by the OVDP, the taxpayer’s penalty base (see below for detailed explanation of what “penalty base” means) is less than $75,000.

Finally, if neither 5% nor 12.5% penalty tiers apply, the default penalty of 27.5% of the penalty base will apply.

Penalty Base

As important as the penalty range, it pales in comparison to the determination of the OVDP Offshore Penalty base, because these calculations can be vastly different from the FBAR penalties.

First, the Offshore Penalty is imposed only once on the highest amount of the penalty base during the Voluntary Disclosure period (i.e. years covered by the OVDP which sometimes can be quite tricky to figure out).

Second, the base for the Offshore Penalty includes a wide variety of assets including foreign bank accounts, the fair market value of assets in undisclosed offshore entities, and the fair market value of any foreign assets that were either acquired with improperly untaxed funds or produced improperly untaxed income. The general rule is that the offshore penalty is intended to apply to all of the taxpayer’s offshore holdings that are related in any way to tax non-compliance, regardless of the form of the taxpayer’s ownership or the character of the asset.

This means that the Offshore Penalty may include such assets as business ownership interests, stocks, artwork, automobiles, patents, trademarks, and (very important) real estate. Even ownership of U.S. businesses acquired with tainted funds may be open to the Offshore Penalty.

In other words, the penalty base of the OVDP Offshore Penalty may include a much greater variety of assets in addition to the assets already covered by the FBAR.

Penalty Differences Between FBARs and OVDP Should Influence Your Voluntary Disclosure Options

Given the tremendous differences in the range of penalties and the calculation of the penalty base, it is highly important (and I cannot stress this point enough) to properly analyze the potential tax liabilities under both methods before making the decision on whether to enter the OVDP or pursue a reasonable cause (so-called “noisy” or “modified”) voluntary disclosure. It is highly important that the client understands the differences in the calculations and the potential risks of pursuing either option.

Contact Sherayzen Law Office for Professional Help With the Disclosure of Your Foreign Financial Accounts

If you have undisclosed foreign financial accounts or other offshore assets, contact Sherayzen Law Office for legal help. Our experienced international tax law firm will thoroughly analyze your case, calculate your potential tax liabilities, present you with a range of options, and implement your voluntary disclosure plan (including preparation of all tax forms and legal documents).