LOS ANGELES, Oct. 1, 2013 (GLOBE NEWSWIRE) -- Dennis Brager, founder of the Brager Tax Law Group, reminds taxpayers and tax preparers, who are filing a tax return on extension due October 15, to disclose their offshore accounts. All U.S. individuals and entities who have a financial interest in or signatory authority over foreign financial accounts with total balances over $10,000, at any time during the year, need to check the appropriate box on their tax returns. In addition, certain other foreign assets in excess of various reporting thresholds need to be disclosed. Account holders should also have filed an FBAR (Foreign Bank and Financial Accounts Report) form with the IRS by June 30th.
"Unfortunately, many taxpayers are unaware of the FBAR," says Brager who is a California Tax Specialist and former Senior Tax Attorney with the IRS. "I'm surprised that some tax preparers are still unaware of the serious consequences that can flow from not filing an FBAR." If the taxpayers did not file an FBAR, they are still obligated to indicate offshore funds on the tax return, which the IRS may cross-check to determine if an FBAR was filed.
"When the IRS catches the taxpayer who has not filed an FBAR," says Brager, "the penalties can lead to large fines and even jail time." The civil penalty for knowingly failing to file an FBAR is the greater of $100,000 or 50 percent of the total foreign account balance. Each year of non-compliance can lead to separate and cumulative penalties.
For those individuals who have failed to file the FBAR form by June 30, there are several options to help alleviate some of the high penalties and fines, according to Brager. One option is the Offshore Voluntary Disclosure Program (OVDP) where some taxpayers may be eligible for penalties as low as five percent of the account balance, although most will pay a 27.5 percent penalty.
Another option is the "Streamlined" Filing Compliance Procedure for non-resident, non-filer U.S. citizens. In order to qualify, taxpayers must have lived outside of the U.S. since January 1st, 2009, cannot have filed a U.S. tax return during the same period and must present a "low level compliance risk."
"There are other options," adds Brager. "However, this is an extremely complicated process that should be navigated with a qualified tax litigation attorney, who can counsel the taxpayer on the IRS' disclosure programs. If the IRS discovers the account first, the penalties can be ugly."
Based in Los Angeles, but with a worldwide client base, the Brager Tax Law Group is a tax litigation and tax controversy law firm, which represents clients with tax disputes with the IRS, the California Franchise Tax Board (FTB), the State Board of Equalization (SBE) and the Employment Development Department (EDD). All of the firm's tax lawyers were former trial attorneys with the IRS.