No FBAR Penalties – Q&A 17 of the OVDP

There are some taxpayers who should not be using the official IRS Offshore Voluntary Disclosure Program (OVDP) now closed. The IRS expressly singled out one category of such taxpayers in its Q&A 17 of the OVDP Rules.

Q&A 17 only applies to the taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs. The key to the application of Q&A 17 is that there should be no underreported tax liabilities by the taxpayer and the taxpayer was not previously contacted regarding an income tax examination or a request for delinquent returns. In such a situation, the IRS is not likely to impose a penalty for the failure to file the delinquent FBARs.

Whether your situation falls within the scope of Q&A 17 should be determined by a tax attorney experienced in the area of voluntary disclosures. If your attorney determines that Q&A 17 applies to your case, you do not need to use the OVDP. Rather, your attorney should file the delinquent FBAR reports according to the FBAR instructions and attach a statement explaining why the reports are filed late.

While Q&A 17 appears to have a clear application, there are plenty of gray-area cases that almost reach the scope of this OVDP provision but still fall short of meeting all of the requirements. In such case, it will be up to the taxpayer’s attorney to determine the proper course of his client’s voluntary disclosure.

Contact Sherayzen Law Office for Voluntary Disclosure Help with Undisclosed Offshore Accounts

If you have unreported offshore accounts, contact Sherayzen Law Office for help with your voluntary disclosure options. Our experienced international tax firm will thoroughly review your case, assess your FBAR liability, identify the available voluntary disclosure options and implement the agreed-upon strategy (including preparation of all legal and tax documents).