Reginald called our office in early 2014. He was a US citizen who had been living in Germany since the 1990s. He met and married a wonderful woman and they had a beautiful family together. All things said, he made his life there and Germany was his home. Reginald was very successful in his career and made a good living working a job that he loved.
Reginald had moved to Germany for work, and his employer provided him with US tax preparation services with a well-known — and well-respected — tax firm in Germany. This firm prepared all of his US returns while taking the position that none of his earnings in Germany were taxable in the US due to the US-Germany tax treaty.
In the early 2000s, his tax returns were audited and the same German accounting firm represented him in the audit. The case went all the way up to the U.S. Tax Court, where the accounting firm reached a settlement with the IRS that Reginald’s German income was not subject to tax in the United States – there were no changes made. At no time during this process did anyone, not Reginald’s accountant, not the IRS examiner, and not the IRS Attorney who worked on the case, tell Reginald about FBARs.
Missed returns: aka the snowball effect
As often happens, following many years of filed tax returns showing no income and no taxes owed, Reginald “postponed” filing his return for a year because he was busy. One year quickly turned into five years; it’s easy to fall into the trap of putting it off for “just one more year.” Finally, one day in 2009, Reginald was watching the local news when he heard about how the U.S. government was going after ex-pats for not declaring their worldwide income or their local (local = outside the US) bank accounts. Reginald realized that he had a major issue.
Reginald did his research and looked for an FBAR tax firm that could help him. He found a different high-priced and well-known tax firm in Germany. After consulting with them, he decided to hire them to help him through the IRS’s 2009 Offshore Voluntary Disclosure Initiative. Reginald was determined to be a cooperative client and he provided the firm with all the information and documentation they needed. For a lawyer, he was an ideal client – he provided information that was needed but trusted his lawyer to take care of all the details. He trusted that his lawyer would protect his interests and handle everything properly.
Working with the IRS is not a one-way street
Fast forward to 2014 (yes, 2014!)
Reginald was STILL involved in his Offshore Voluntary Disclosure. He was somehow not enrolled in the IRS’s 2009 OVDI (in fact, we still don’t know which years’ program he was enrolled under and the IRS has no idea how his case moved from 2009 to whatever it is now). He received a letter from the IRS providing him with 30 days to submit all of his amended returns and FBARs because it has never been done (we later found out that they were done, but the IRS lost them and the other firm didn’t bother to respond to the IRS’s requests to re-submit everything).
And, although he thought that this firm was filing his tax returns and FBARs each year, he found out that they had never done this – he didn’t have any tax returns or FBARs filed since the day that he hired the firm. To make matter worse, since the firm filed his tax returns incorrectly and wasn’t keeping careful watch, the IRS was actively collecting against Reginald by issuing levies and filing liens. In short, this firm had completely failed him.
Success with the IRS comes from maintaining communication
Reginald found us on the internet and had a consultation with us see if we could fix what his other attorneys had done (or not done!). We took over the case and within 60 days (after receiving approval for additional time from the IRS Revenue Agent), we prepared all new tax returns and FBARs for Reginald. Through this process, we found that he did not owe nearly as much as the other firm said he did.
In fact, since we finished the process in early 2015, the IRS is set to give Reginald a sizable refund for what he overpaid on his taxes during the Voluntary Disclosure process. We also developed a good relationship with the Revenue Agent assigned and when the new procedures were announced in 2014, we were able to get Reginald approved under the transitional procedures to pay NO FBAR penalties or even a 25% OVDI penalty.
While it was a long road to success, it was worth it.
Learn what our other clients, besides Reginald, have to say about working with our firm.
