In case Enrolled Agents need any evidence for convincing prospective clients to cease their holdouts on reporting foreign accounts, the story about Mary Estelle Curran is enlightening. The IRS has shown no leniency in its efforts to identify taxpayers with unreported offshore accounts. Furthermore, the Justice Department has escalated its prosecution of these individuals. Before people in Curran’s situation find themselves in court, they should seek advice from a tax expert who holds an EA license.
Wealthy business owners with Swiss bank accounts are no longer the only people targeted by the IRS. Rather, ordinary middle class Americans and dual nationals who send money to family members abroad are potential Enrolled Agent jobs for averting disastrous legal assaults by the government.
The case against Curran illustrates that no taxpayer is sympathetically viewed as innocently unaware of foreign account disclosure requirements. The 79-year-old widow from Palm Beach is confronted by a potential prison sentence. She was ordered to pay the IRS $21,666,929 in penalties based upon uncollected tax for the government of about $667,716.
Interestingly, Curran attempted to enter the Offshore Voluntary Disclosure Program. The OVDP allows taxpayers to apply for amnesty for past failure to disclose foreign accounts. Unfortunately, Curran did not consult an Enrolled Agent tax expert about the rules for participation in the program. Taxpayers are only eligible for the OVDP prior to the IRS obtaining their names as foreign account holders. Individuals are uncertain about whether the IRS has their names of a list. Even court records are inadequate for identification of the accused because judges issue John Doe subpoenas.
The stakes are high for people in Curran’s situation. An amnesty penalty is only 27.5 percent, compared to the nearly 4000 percent penalty for Curran. Felony conviction for willful failure to file a Report of Foreign Bank and Financial Accounts is punishable by six years in prison. That is how Curran arrived in her predicament. She inherited accountants in Switzerland and Liechtenstein when her husband died in 2000. She failed to report them from 2001 through 2007, by which time the account values totaled over $42 million.
Anyone in Curran’s situation should seek immediate assistance with FBAR filing by a tax professional with Enrolled Agent education. Waiting too long eventually lands a person on the IRS list of ineligibility for amnesty. Quietly closing overseas accounts doesn’t solve the disclosure problem. The IRS can evaluate the preceding eight to ten years for unreported foreign accounts.
Non-compliance with FBAR requirements brings serious consequences. Failure to file Form TD F 90 – 22.1 triggers a $500,000 penalty. This form is required for a foreign account that exceeds $10,000 during any part of the tax year. A willful violation, such as Curran’s, results in a penalty comprising 50 percent of the highest account balance or at least $100,000.
Tax experts with EA certification assure that all worldwide income is reported on the federal income tax return of US citizens and resident aliens. In addition, some citizens must report foreign assets – including financial accounts – on IRS Form 8938. An FBAR is due every June 30. Taxpayers with FBAR non-disclosure problems from earlier years probably need referral by their Enrolled Agents to competent legal advisers.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.