Well, it’s finally June, and now that Spring is in the air,
our hearts and minds turn to thoughts of….Filing FBARS!
In case you forgot, an FBAR is the form you must file by
June 30 if you have signature authority over a foreign bank account. It is part
of the government’s effort to crack down on offshore bank accounts hiding
income otherwise subject to tax.
Failure to do so can subject you to HUGE penalties, as a Mr
Zwerner recently discovered. It seems Zwerner had failed to report an offshore
account for many years, using it to hide income, also not reported. Because of the
increased exposure to criminal prosecution and civil penalties, He had a change
in heart, voluntarily disclosed the account, and paid his back taxes for all
open years. He came clean BEFORE the government discovered him and hoped to
avoid criminal prosecution in so doing.
He got his wish, and avoided criminal prosecution. But he
didn’t count on the IRS auditing all his amended returns, and assessing
penalties for each of 3 years in the amount of 50% of the highest balance in the
account during each year. It went to trial and a jury ruled in favor of the IRS.
Zwerner owed penalties of $2.2 mil on an account whose
highest balance was $1.7mil!
How could he have avoided this? Timely filing of his FBARs
and claiming all his income on his tax returns is the simplest way to sleep
well at night. And that works in all four seasons.
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