While many have never heard of the official IRS office of the National Taxpayer Advocate, its purpose is to assist taxpayers who are having problems with the IRS. Nina Olson, the current National Taxpayer Advocate, reports annually to Congress on taxpayer rights issues, speaking both to lawmakers and the IRS on behalf of tax-paying Americans.
This year, the voice of the National Taxpayer Advocate takes the IRS to task over what Olson characterizes as unfair treatment of citizens who have offshore accounts. She says too many innocent taxpayers are ensnared in complex tax-reporting regulations and then treated as if they are criminals. She calls on both Congress and the IRS to make changes to the severe Report of Foreign Banks and Accounts (FBAR) penaltiespeople face.
According to Forbes, Olson says FBAR penalties are out of proportion to any possible tax code violations. Sometimes, the publication notes, people who make reporting mistakes are stuck paying "over eight times the unreported tax, and over ten times the 75% penalty for civil tax fraud."
Olson says penalties should be scaled back dramatically and capped. And she argues that if a person resides where the assets are deposited, that shouldn't count at all as a "foreign account."
She also says that in cases in which a penalty applies, the IRS should waive it if it does not have evidence that the offshore account was part of criminal activity. And when the IRS alleges willful violations of tax reporting requirements, the burden of proof of willfulness should be on the agency, not on the person being accused.
We will see if Congress and the IRS enacts any of the proposals. Until they do, people who have offshore unreported assets risk criminal prosecution and civil penalties of 50% of the highest value of the unreported account every year that FBARs are not filed. At the Law Offices of Mark L. Horwitz we help people in dealing with criminal investigations and with entering and successfully completing the Offshore Voluntary Disclosure Program (OVDP).