There’s a few different scenarios that we see and we’re going to run through those right now.
The first is that the IRS or the Department of Justice has not contacted you and you’re not in an OVDP. The second is if you’re under examination which is the IRS word for audit. Three is that the IRS has made an FBAR penalty assessment against you. Four is that you’ve lost your FBAR appeal, five is let’s say that you lost your appeal and now the IRS is suing you or actually technically the US government will be suing you. Six is the government is now investigating you criminally and seven is when a grand jury had turned an indictment against you by failing to file at that point.
So let’s talk about the first case. Let’s say that the IRS or the Department of Justice has not contacted you what should you do? Well, there are still time to act. I would advise you to watch our materials on the OVDP Program and the most common OVDP FBAR questions. It might not be as bad as you assume or you could continue to watch this especially this might give you the incentive to enter into a program. As I talked to one of the earliest FBAR defendants Jon McBride, he told me getting into one of the OVDP — and this is somebody who has gone through the whole process — is a no brainer.
Now let’s just think you are under civil examination or audit and you have not disclosed anything to the IRS. Believe it or not we have gotten cases where we have been able to get people into an OVDP who are in audit. This is possible to happen under some circumstances so don’t rule that out. Otherwise, you are going to want to treat your audit like a voluntary disclosure. Due to the examiners work for them, they are likely interested in just one foreign account if that is what clued them on to audit you. You might have more than one — you also might have different types of account like foreign life insurance. Also you might not know how to do the proper accounting so you’re going to be the one who wants to do that work for them. Basically you want them to open their case and close it as soon as possible. Also get your reasonable cause backs out there as soon as you can.
The third type of case is let’s say you’re under civil examination or audit and you’ve made a soft or quiet disclosure. Well my first concern here is the criminal exposure. I have been told that the IRS is looking to bring indictments against those who have done a soft disclosure or for those professionals who advics the clients to do a soft disclosure. And that is one of the big aspects about this is who is your adviser who told you to do this? Because he is likely going to testify against you so you might want to get what they told you out into the auditor as part of that record. Now if your case can be pulled out off the fire where there is not going to be, it’s not going to be elevated to investigation or referral to criminal investigation, they are treating your audit again like a voluntary disclosure. Do the examiners before them. They are really just again interested in one foreign account you likely have more than one. Also make sure your domestic income is 100% solid. That way it gives them the best basis that they’ll open this case close it out as soon as they can without this case sort of rubbing anyone the wrong way and somebody wanting to do more than it is absolutely necessary.
Now here’s a thing, this is the truth they really may be interested going to civil trial. That is assessing that FBAR penalty and then suing you to convert that judgment into something that actually can do to start Unlike a tax assessment, an FBAR hey have to sue your first. Tax assessment they can just send out letters and start levying, they probably actually have to sue you in order for anything more than intercutting your refunds occur.
Now let’s just say the IRS has made a FBAR Penalty Assessment. You’ve gone through an audit and there is an FBAR Penalty assessment. Or even if you went through an OVDP opt-out you’d have sustained FBAR assessment. Now in an OVDP opt-out you are in a much better position because the IRS has no leverage to file criminal charges not so when you have made a soft disclosure or just going through the regular civil audit with no OVDP attached. There is two types of FBAR assessment, there is a pre-assessment and post assessment either one gives rise to appeal. And that’s what we will be doing in this case if the IRS has made such an FBAR penalty assessment. One of the first things we would do is request Freedom of Information Act file on you to see what happened? Why did they assess the FBAR penalties? See the FBAR penalties procedures are so new to the IRS and these guys are overworked to begin with so the chances of them doing everything exactly right aren’t 100%. And so if you can win on a technicality that’s a win. So FBAR appeals are new as well and so there’s are a lot of things going on so the important thing is that you fight, you don’t roll over and you fight on the facts and you make sure you presented your best story.
Now let’s just say you went for an FBAR penalty appeal and it was upheld and that is FBAR penalty assessment is final, what should you do? Well as I said before the IRS Can be hell bent on assessing FBAR penalties especially if you made a soft disclosure. The key is not to roll over and to fight every detail. The IRS can start intercepting refunds at this point and there is no CSED on it or penalties. The CSED is what we use with tax assessment it means Collections Statute Expiration Date. The IRS has 10 years for the date of assessment to collect on back taxes. For FBAR penalties there is no such notation but what they do have to do is file a suit in civil court, they have two years to file a suit in Federal District Court to perfect that. So what you do want to get is that two years before they file a federal suit. If they don’t then you are stuck with getting your FBAR penalties through refund so that can be a win as well. It all depends on what their caseload is and it all depends on how much a sore thumb you’re sticking out. Did you rub somebody the wrong way or is this one where they are going to give your case a low priority to prosecute because well they like you, that’s is what we kind of want.
Now let’s just say that well the Attorney General of the United States that is the person who actually will be suing you, let’s say that they did assess you the FBAR penalty and now they are suing you, what should you do? Well in this case you need a litigation attorney and I mean an actual litigation attorney just to give you a hint. We are not litigation attorneys, we are not going to be, we are litigation support, we do everything at the administrative level. There are people who specializes in certain things. What we do is we work with trial attorneys to give them the support and detail that they need. We do a lot of the legwork for them. You know being in a trial, I have used to do it and it is just a totally different game and you’re constantly beaten by a process that is stacked against you. And so what you need to do is you need to give your attorney the support, your trial attorney the support so he feels – he or she feels that they can give it all. And they also need help from outside so that we can give them support and everything that we could go over and say we’re the IRS as well. We can just look at their cases. Take note, this is where – well were right here, they’re totally wrong, they have the wrong facts they have the wrong law that helps them out and that’s what we love doing.
It is much better to have an administrative record, and that is what we are doing that is what we are talking about up to this point five. You need to have that administrative record that supports your position rather than trying to create one when you are sued. The IRS, the Department of Justice, The Attorney General they love slam-dunk cases. That is what no one wants to have a lost. If you work for the government, getting a lost is horrible so they want to have cases that they can’t possibly lose. Now to win or create some negotiating realm usually you just need to make the case not a slam-dunk and that could create a huge victory for you.
Now let’s just say that you weren’t audited and there is no FBAR penalty against you but this is rather a significant – this is one of the worst that could be happening is that the US Department of Justice is investigating you for unfiled FBARs. Well here is the thing, we have done this before and there’s lots of people who are non–biased. Lots of people who made soft disclosures. Tens of thousands of people the IRS, the Department of Justice has to pick around to prosecute. Well what we’re trying to do when someone hires us is we are attempting this Jedi mind trick to say, “These are not the taxpayers you are looking for.” And really we are trying to give them a reason to go after someone who is not you, that’s really our job. There is a such a huge abundance of people who are non – compliance and for a lot of these FBARs, the Department of Justice has to weigh, they to risk how much resources how assured they are going to get a conviction because they want that press release. They really think if somebody were, a case there is a reasonable cause or is uncertain there is a lot of other people they can get to and that is what we want to happen.
Now the worst case here is if you have unfiled FBARs and now you have a grand jury has returned an indictment against you for tax evasion or willful failure to file an FBAR. In this case, this is what you need; you need a great criminal defense attorney. Be sure that they are actual litigators. Ask them their acquittal rate, do not be fooled by their websites. Ask them their acquittal rate. There are people who pose as expert litigators, they absolutely pose as expert litigators, and they have never litigated one criminal case in their entire life. They’re not going to tell you that but they will take your money. They will spend hundreds of thousands of dollars to negotiate a plea agreement that is rather unpalatable. And after you are presented with that plea deal that is rather unpalatable, you will say, “Well, let’s go to trial” and then they’ll you, “Oh, you need to get a trial attorney.” now you’ll be spending a lot for. So isn’t it better to hire a real criminal defense attorney to begin with? Again, that’s not me. I can’t tell you who the backwards are around the country, ones who actually get acquittals because the IRS, Department of Justice knows that they are against a real attorney don’t you think that there’s going to be a better deal presented that may avoid trial to begin with or maybe they just drop the indictment that does happen, why? Because there are some attorneys are better than others and so that is absolutely critical. Just ask their acquittal rate, don’t let them skirt around that issue, they should know it. And by the way, if it’s low if it’s not the highest acquittal rate. I do know I have a friend who has about an 80% which is insanely, not everybody has that high but even a few acquittals that means he’s a good litigator and you might want to give them your attention.
Now here’s the thing, all this FBAR litigation it’s all subject to change. It’s exciting work, this FBAR, because it’s all somewhat brand new even though the FBAR filing obligations has been around since the Bank Secrecy Act of 1970. It’s only recently that litigations occurred and the cases are very spare and you’re trying to apply fact patterns that might not apply at your case, the new law is being created all the time and then really it’s exciting work for attorneys, probably stomach turning work and now there’s also an FBAR Act of Litigation going on. And the same attorney who won the Citizen’s United Case is representing the plaintiffs in that case so that actually might have a chance of setting the apple cart. And there is also other FBAR litigations going on prosecuted by other fine attorneys, so who knows? The other is that there is a thing called Jury nullification. The public isn’t exactly thrilled with the US Government right now and the US Government makes Jury nullification appear as it’s illegal. And there is many commentators out there like Brent Reynolds of InstaPundit who has really put it out to word that Jury nullification exists. And so a lot of jury, if you told a jury that, “You’re going to imprison this person for five years because they didn’t pay all of their taxes and they didn’t file this form called FBAR” that you don’t know about.
So how would a juror feel about that? Do you think a juror would convict someone and what to take them away from their families, somebody who doesn’t really appear like a bunch of criminals, looks like just them who made a mistake on their taxes that may have been negligent or may have even been intentional. The law separates jury’s from their consequences but you know this can all change as word gets out what this law and that 50% penalty exist six times. Failing to file a form will put you in jail, a form. A form that is supposed to get drug traffickers, terrorists, is putting regular people behind bars. Well I think when jury’s are going to hear that this might turn different but again who knows what’s going to happen. It’s all subject to change. And because of that we want to thank you for watching. We want you to subscribe to our channel so you could keep up to date with a lot of the changes as they go along. Look for updates.
If you need assistance, emsil us: info@irsmedic.com or call our FBAR hotline at 888-727-8796.
This is Anthony Parent of Parent & Parent LLP. FBAR help for those not in FBAR Amnesty Program. Thank you for watching.
