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New Streamlined FBAR Filing

New ‘Streamlined’ FBAR Filing

If you work with clients whom you believe have funds in foreign countries, it makes sense to inform them that they are obligated to file a Foreign Bank and Financial Account Report, TD F 90-22.1, also referred to as the FBAR. If they live mainly overseas, they may benefit from some of the recent revisions in IRS procedures for persons who neglected to file FBARs in the past.

All U.S. persons who have a financial interest in or signatory authority over foreign financial accounts with a total account balance upwards of $10,000 at any point during the calendar year must file an FBAR. U.S. citizens, as well as permanent legal residents, or “green card” holders, and those who are physically present in the U.S. for more than 183 days during the calendar year qualify as U.S persons and are responsible for filing. Intentionally neglecting to file an FBAR can result in both criminal and civil penalties

The civil penalty is the greater of 50% 

of the account balance, or $100,000. The IRS can assess this fine annually. Over the last few years, the IRS has had a number of programs under which errant taxpayers who did not file FBARs could be spared the criminal penalties and just pay a lower civil penalty. The latest version is the 2012

Offshore Voluntary 

Disclosure Program (OVDP). In this version, taxpayers are required to file eight years of amended returns along with multiple additional documents, checks for overdue taxes, a 20% “accuracy related” penalty on the taxes pursuant to Internal Revenue Code Section 6662, interest on the totals, plus a onetime “offshore penalty” equivalent to 27.5% of the highest balance in the offshore accounts. Late filing and late payment penalties (under Internal Revenue Code Sections 6651(a)(1) and (2)) could also apply according to the specific circumstances.

For persons for whom their combined offshore account balances never exceeded $75,000 at any time during the past eight years, the penalty is reduced from 27.5% to 12.5% under OVDP. All other penalties continue to apply. The penalty can be as low as 5% penalty in very rare situations.

The IRS’ website offers an explanation of the 2012 OVDP in a list of more than 50 FAQs, many with subparts. There is also an OVDP hotline one can call for answers to their questions that inevitably arise after reading the FAQs. Nonetheless, for taxpayers venturing for the first time into the OVDP, and its alternative programs, there are multiple pitfalls. 

Towards the end of the summer season, the IRS put new, more efficient, Filing Procedures for non-resident, non-filer U.S. taxpayers who “unwittingly” failed to file FBARs, but then were apprised of their responsibility and wished to comply. Non-residents, including dual citizens, who have not filed U.S. tax returns may be able to take advantage of the new provisions. Ironically, if tax returns were filed then the so-called Streamlined Procedure is not an option.

The new Streamlined Filing Compliance 

Procedures became effective on the 1st of September. Qualifying taxpayers will only 

Be required to file three years of  tax returns instead of the usual eight under OVDP. The IRS does not levy FBAR fees or any other 

penalties on people who qualify. Participants 

fill out a questionnaire, which asks such potentially incriminating questions as “Did you know you had a Report of Foreign Bank and Financial Accounts (FBAR), Form TD F 90-22.1, filing requirement when you failed to file an FBAR?” and “If you used a tax professional, did you disclose the existence of the accounts/entities you hold outside your country of residence to your tax professional?” 

To be eligible for the Streamlined Procedure, taxpayers must have resided outside of the U.S. since Jan. 1, 2009, must not have filed a U.S. tax return during the same period, and are required to present a “low level compliance risk.” To be considered a low level compliance risk, the tax due for 2009, 2010 and 2011 must be less than $1,500 in each of those years. That said, even if the tax due is that low, the presence any of the following factors would cause compliance risk to rise and render the taxpayer ineligible to participate.

These factors are:

  • If any of the returns submitted through this program claim a refund;
  • If there is material economic activity in the U.S.;
  • If the taxpayer has not declared all of his or her income in his or her country of residence;
  • If the taxpayer is under audit or investigation by the IRS;
  • If FBAR penalties have been previous-ly assessed against the taxpayer or if the taxpayer has previously received an FBAR warning letter;
  • If the taxpayer has a financial interest or authority over a financial account(s) located outside his or her country of residence;
  • If the taxpayer has a financial interest in an entity or entities located outside his or her country of residence;
  • If there is U.S. source income; 
  • If there are indications of sophisticated tax planning or avoidance.

If the IRS finds that the application Streamlined Compliance Procedure does not qualify, the taxpayer may not participate in the basic OVDP, and may also be required to submit to a complete audit and could possibly incur full blown FBAR penalties, and even criminal prosecution. Attorneys should never recommend the Streamlined Compliance Procedure to their clients without laying out all the risks.

A lot of immigrants, and even U.S citizens who live abroad, hold accounts for which they are responsible for filing an FBAR. The IRS continues to ramp up its enforcement activities with a multitude of international agreements and more abundant resources dedicated to seeking out unreported foreign income. As a result, many taxpayers are subject to potentially confiscatory penalties, and it is in their best interest to consider all of their options carefully.

 


Charle Butler
Charle Butler
2021-03-12
Verified
I was hesitant to hire the Spodek Law Group. I read reviews and knew they have a great reputation. However, I thought I would spend money and not see or speak to my attorney. From the beginning to end of my case Todd and the entire staff were available and willing to help. We worked towards and end result that was way above my expectation and Todd delivered. I am forever grateful for patience and long days and night spent working on my case. Thanks Todd and the entire team!
Mesonista parsons
Mesonista parsons
2021-03-05
Verified
My attorney at Spodek was Abigail. She was very knowledgeable and helpful with all my questions and concerns, as well as responsive. Her fees are affordable and Abigail took the time to make sure I understood everything relating to my case. I highly recommend Abigail and will request her services in the future.
debabrata chakraborty
debabrata chakraborty
2021-03-03
Verified
Todd A Spodek is the experienced and best criminal lawyer at USA. He is very professional and always respond on time. Alex also very cooperative and always help me. They took care me and my problem like family member. I am 100% satisfied for their professional service. My result was unexpected and amazing. They dismissed my case. I am really grateful to them. I will recommend you to go there if you want to solve your problem. I wish all the best for them.
Asata Hendricks
Asata Hendricks
2021-03-02
Verified
Truly appreciate the work the guys did!. Exceptional team & I know they care about each and everyone of their clients. I am super thankful to be referred to Spodek Law Group and I am grateful Todd & Alex were able to work diligently to achieve an outcome I am pleased with. Despite COVID they stayed on top of things and kept me informed every step of the way. Very thankful.
Mike Moroff
Mike Moroff
2021-02-26
Verified
I'm very satisfied with the services rendered by Todd, Alex and Mary Lou. I whole heartedly recommend Spodek Law Group . I've worked with and have retained other attorneys in the past with Todd's firm being the cream of the crop for many reasons. A very serious legal matter was resolved after a year's hard work and effort. Todd expertly guided me through the process and was able to navigate and make the good journey bearable as well as successful. Mary Lou initially provided excellent assistance before referring my case to Todd. Alex's support was effective and timely. The customer portal (MyCase) is an invaluable communication tool that also kept track of my case. Various aspects of my case were explained and there were several options provided but I made the final decision of how the case would be handled. The legal fee was reasonable considering the effort and amount of work plus it was a flat fee regardless of the length of time required to conclude my case. Todd made himself available to me and we had many scheduled meetings to go over the progress and to discuss the next steps. I felt more confident after many discussions with him. You will not go wrong choosing Spodek Law Group for legal matters.
Josh Katz
Josh Katz
2021-02-24
Verified
Being that it was the first time that I was in need of an attorney, I was afraid and hesitant and knew I needed the absolute best. It is beyond understood why Spodek Law Group has a reputation of being the top, if not the best law firm in New York. Alex and Abigail were there every step of the way even at the most unconvenient hours. I could not have asked for more. They are extremely good at what they do and they delivered much much more than just winning my case. A big thank you to Alex and Abigail for all the guidance and counseling and their upmost loyal support that extended far more than just legally. If you need the absolute best than don't hesitate to hire Spodek Law Firm.
L.C.
L.C.
2021-02-24
Verified
I cannot tell you how thankful I am to Todd and Alex for their hard work and dedication to my case. I had never been in any trouble before but I had an unfortunate event occur and in the midst of COVID-19 at that therefore I knew I needed a team that was dedicated to my success. Today- my case has been finalized and I’m walking away with no record and can continue life as a mother and a Grad student worry free. I cannot express enough gratitude for their assistance.
AnnMarie Soliman
AnnMarie Soliman
2021-02-23
Verified
I received a summons and called Spodek law group for a free consultation. Alex took my call and was very quick and responsive. He was available anytime through multiple platforms and very reassuring when needed. They are extremely organized and thorough. They got my case dismissed! I’m very grateful. Thank you Alex and Todd!

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"Spodek Law Group have offered me excellent support and advice thru a very difficult time. I feel I've dealt with someone who truly cares and wants the best outcome for you and yours. I'm extremely grateful for all the help Spodek Law Group has offered me. I can't recommend them..."

David Bruce

"Spodek Law Group was incredibly professional and has given me the best advice I could wish for. They had been helpful and empathetic to my stressful situation. Would highly recommend Spodek Law Group to anyone I meet."

Rowlin Garcia

"Best service I ever had. Todd is absolutely class personified. You are in the safest hands with spodek. They have their clients interest in mind."

Francis Anim
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