Dart arrow hitting in the target center of dartboard

IRS Finally Does The Right Thing! Huge Changes to the IRS Offshore Voluntary Disclosure Program

The IRS recently announced major changes to its offshore voluntary disclosure program. Following is a summary of key changes to the program.

5% Penalty for Non-Willful Taxpayers

For taxpayers whose conduct was non-willful, such taxpayers will pay a one-time five percent offshore penalty. This penalty will be assessed on the highest aggregate value of the taxpayer's foreign accounts/assets, over the previous six years. In order to be eligible, taxpayers must certify under penalty of perjury that the failure to report all income and submit FBARs was due to non-willful conduct. Non-willful conduct is defined by the IRS as conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law. Individuals who are currently in the offshore voluntary disclosure program, but who have not received fully executed closing agreements may qualify for the reduced 5% penalty.

50% Penalty for Taxpayers Who Holds Accounts at a Bank Under Investigation

For taxpayers who enter the program after it becomes public that a bank where the taxpayer holds an account is under investigation by the IRS or Department of Justice, the offshore penalty is increased from 27.5% to 50% of the highest balance of the taxpayer’s foreign accounts/assets during the preceding 8 years. The current list of those banks include:

  • UBS AG
  • Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
  • Wegelin & Co.
  • Liechtensteinische Landesbank AG
  • Zurcher Kantonalbank
  • swisspartners
  • CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
  • Stanford International Bank, Ltd., Stanford Group Company, and Stanford
  • Trust Company, Ltd.
  • HSBC India
  • The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank
  • and Bank of Butterfield)

The IRS finally decided to do the right thing and realized that its program was too rigid and focused on taxpayers who willfully failed to report income from foreign accounts (i.e., criminals). However, one problem with these new changes, is that it rewards latecomers and penalizes taxpayers who previously entered the program and paid an offshore penalty of 20%, 25%, or 27.5%, based on when they entered the program. That is unfair and detrimental to our tax system which is based on voluntary compliance. The IRS should provide non-willful taxpayers who previously entered the program and paid a higher offshore penalty, an avenue for explaining why their noncompliance was non-willful and provide them refunds.

Please do not hesitate to contact me if you have any questions.

Pedram Ben-Cohen, Esq., CPA
BOARD CERTIFIED TAX LAW SPECIALIST
BEN-COHEN LAW FIRM, PLC
1901 Avenue of the Stars, Suite 1100
Los Angeles, CA 90067-6002
Office: +1.310.272.7600
Fax: +1.310.272.7601
Email: pedram@lataxattorney.com
http://www.LATaxAttorney.com

Download PDF

Client Reviews
I approached Mr. Ben-Cohen regarding a pending case with the State of California and my small business. During a time that was quite stressful, I found Mr. Ben-Cohen to be the perfect person to represent me and my company. He communicated with me in clear terms so that I understood everything that was taking place in a timely manner. He treated my situation with the type of candor you only find in a consummate professional and successfully negotiated a deal with the State of California that far exceeded my expectations. I found him to be kind, efficient, sensitive and nothing short of brilliant. I consider myself fortunate to have met him and highly recommend his services. I will not hesitate to use his firm in the future should a need arise. Google, We Care Spa
★★★★★
I am an international tax advisor and have worked with Pedram on more than a dozen difficult and challenging cases. Pedram's clients and fellow advisors highly respect him because he has an uncanny ability to quickly identify and work diligently to resolve his clients' issues. Pedram is pragmatic in his approach. He is transparent with his clients and dedicated to getting to a fair and reasonable outcome. I have attended an IRS Appeals conference with Pedram and would want no other attorney on my side. Pedram is extremely passionate in his work and representing his clients. He is also enjoyable to work with and develops very good relationships with his clients and fellow advisors. I highly recommend Pedram for any tax controversy work. Avvo, Curt
★★★★★
Top Drawer Tax Fraud Lawyer. Pedram got me out a CI jam I thought I would not resolve. He is also fair and reasonable with his billing. I interviewed 4 top Tax Fraud Lawyers in LA and went with Pedram...Glad I did! Google, Michael Jeppson
★★★★★
Pedram Ben-Cohen at Ben-Cohen Law Firm, PLC is one of the most incredible, creative, and caring attorneys I have ever dealt with. He gave us hope but also gave us the reality and worst case scenario. He fought for us tooth and nail. The attention and time Pedram put into the case was like no other. He charged us more than fair and was very reasonable in every aspect. He is not the kind of attorney that charges for every minute. I liked him very much not only as an attorney but as a person because he is very honest, is true to his integrity, and is dedicated to his clients. He loves what he does and has the passion to protect and defend his clients, which totally shows in his work and our outcome. We originally hired another attorney from a famous firm who basically did not give us much hope on our case . That is when we came to Pedram who won our case in a short amount of time and got us the outcome we were looking for. Because of Pedram and his creativeness, willingness, and dedication, he got us our favorable outcome. He is our go to attorney for sure, without a doubt. Avvo, Anonymous
★★★★★
A few years ago I had a major tax problem and I was looking for the right professional tax lawyer. I interviewed at least five experts and all of them were very professional. I am very picky. When I met Mr. Pedram Ben-Cohen, it took me no more than five minutes to decide that he was the one, and I was absolutely right with my intuition. He is very professional, knowledgeable, smart, and knows his job perfectly. In addition to all of his professional skills, as a person he is very friendly, pleasant, ready to help, and took care of me like I was his own family. I referred and recommended him to friends and family with tax problems and will continue to do so warmly to anyone. I know that he is able and will do his job the best way for his clients. He is my personal tax lawyer and expert and will remain so. Google, Shlomo Kattan
★★★★★
Contact Us
Contact form