California Offshore Asset Protection Attorney, Sebastian Gibson
Offshore Asset Protection - IRS Offshore Accounts Penalties Advice by A Knowledgeable Asset Protection Law Firm
If you’ve been searching for California asset protection lawyers or offshore asset protection attorneys in California and haven’t found the asset protection attorney in which you can be confident when retaining a lawyer for your asset protection, voluntary disclosure, offshore trust protection and family limited partnership matters in California, Sebastian Gibson is the asset protection attorney you’ve been looking for.
California Asset Protection Lawyer
With over thirty years of experience handling international matters, with law degrees in both California and in Great Britain, and years of international experience in London as well as decades of experience in California, California asset protection lawyer Sebastian Gibson brings a wealth of experience to the table and was chosen one of the 2011 Top Lawyers by Palm Springs Life Magazine.
Offshore asset protection attorneys were overwhelmed during the 2009 Voluntary Disclosure Program. And yet, the number of U.S. citizens with offshore accounts who haven’t yet disclosed their offshore accounts to the IRS is estimated at somewhere between huge and enormous. As offshore asset protection attorneys will tell you, those U.S. citizens and residents face severe remedies if or when the IRS obtains knowledge of them.
Under the 2009 Voluntary Disclosure Program, for which the deadline has passed, in lieu of all the penalties that the IRS could wield against the voluntary disclosing taxpayer, including the FBAR penalties, the IRS would assess an accuracy or delinquency penalty of 20% of the tax owed plus interest on the tax, and a penalty of 20% of the largest balance in the foreign bank account or entity during the previous six years. This was the price one paid for a taxpayers one way ticket out of the mess they found themselves in.
A taxpayer after making a voluntary disclosure could disagree with the 20% penalty, but if the taxpayer did, the case was subject to a complete examination and once complete, any penalties the IRS felt warranted would be imposed. Those penalties could be substantially higher than the 20 percent penalty. If the taxpayer still disagreed with the IRS position, the taxpayer’s recourse was to appeal.
The program was a good deal for the taxpayer willing to part with some of his or her long-hidden account assets. Penalties at the disposal of the IRS include those for failing to report the foreign bank account, the yearly FBAR penalty of 50% of the account each year, the 75% civil fraud penalty for failing to report income, and additional penalties for failing to file informational returns such as those described below. However, the taxpayer was required to submit amended returns for the prior six years.
Because there is no statute of limitations whatsoever for the 75% civil fraud penalty, a taxpayer being audited is generally fearful that should the IRS agent find evidence of fraud, the taxpayer may be referred to the Criminal Investigation Division of the IRS where a thorough fraud investigation may be conducted well beyond any six-year criminal statute of limitations.
Penalties just for failing to file the FBAR, Report of Foreign Bank and Financial Accounts by June 30th each year, can be the greater of 50% of the total balance of the foreign account or $100,000.00, and there is no cap on the amount that can be penalized. An account with one million dollars in assets can thus incur penalties for the taxpayer who fails to report it for six years of three million dollars.
The civil statute of limitations for failing to file the FBAR yearly, is six years. And if that isn’t enough to keep a taxpayer up at night, the statute of limitations for criminal prosecution for failing to file FBARs is five years. The criminal penalties for failure to file an FBAR are up to $250,000 and five years imprisonment and $500,000 and ten years imprisonment if in tandem with violation of any other U.S. law.
The statute of limitations on prosecution for tax evasion with respect to income from an offshore account is six years, starting from the date the tax return is due, or if later, the last affirmative act of evasion by the taxpayer. In the event the Criminal Investigation Division makes a referral to the U.S. Department of Justice for a felony indictment of a taxpayer, the taxpayer can face five years in prison and fines of up to $250,000. A person who fails to file a tax return at all is subject to a prison term of up to one year and a fine of up to $100,000. Penalties and fines vary.
In addition to the yearly requirement of taxpayers to file a FBAR by June 30th each year, a taxpayer must also report their worldwide income on their Form 1040, mark the box indicating they have a foreign account, and complete Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. This form requires the taxpayer to disclose transactions which include the creation of a foreign trust, transfers of property or assets to the foreign trust, and receipts of distributions from foreign trusts or other such entities. The penalty for failing to file this form, is 35% of the reportable amount, i.e. 35% of the gross value transferred to or received from the foreign trust.
A taxpayer with a foreign trust must also file form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner if the taxpayer has an ownership interest in or authority over a foreign trust. The penalty for failing to file this form is 5% of the value of the trust.
The failure to file a complete and correct Form 3520 or 3520-A can result in an additional penalty of $10,000 for every 30-day period the taxpayer fails to comply after 90 days have passed since notification by the IRS that the information return has not been filed, up to the amount of the assets transferred.
A person receiving a gift from a foreign trust may also be subject to a penalty of 5% per month up to 25 % of the value of the gift.
The list of IRS penalties facing U.S. citizens and residents with offshore accounts who have failed to report them to the IRS goes on and on. But there is no more severe a penalty than the FBAR penalties which, when explained by offshore asset protection attorneys to holders of offshore accounts results in reactions from hysterics to outright disbelief.
In addition to the FBAR yearly reporting requirements, many taxpayers are unaware that their reporting obligations begin as soon as they create a foreign trust. IRC Section 6048(a) requires the responsible party to provide written notice of any reportable event on or before the 90th day. These reporting requirements include the amount of money or other property transferred to the trust and the identity of the trust and each trustee and beneficiary. A reportable event includes the creation of any foreign trust, the transfer of any money or property to it by a U.S. person, and the death of a citizen or resident of the U.S. if he or she was treated as the owner of any part of it, or if any portion of the trust was included in the decedent’s gross estate.
The penalty for failing to comply with IRC Section 6048(a) is 35% of the gross value of the property transferred. An additional penalty of $10,000 is assessed for each 30 day period after the 90th day, up to the value of the gross reportable amount.
Beneficiaries must also report any distributions from a foreign trust, the name of the trust, the amount of the distributions and any other information prescribed by the IRS. Separate filings must be made for each foreign trust from which the beneficiary receives a distribution. The penalty for doing so is 35% of the gross reportable amount and an additional $10,000 for every 30-day period the taxpayer fails to comply after 90 days have passed since notification by the IRS of a failure to report.
A U.S. taxpayer with a foreign corporation must also file Form 5471. There are varying penalties for failing to file this form. Generally the penalty is $10,000 but additional penalties of $10,000 per month up to $50,000 can be imposed after notice is given by the IRS or the penalty waived altogether upon proof of reasonable cause.
Taxpayers are also required to report transactions between a 25% foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the U.S. and a related party. The penalty for failing to file this Form 5472 informational return is $10,000 with an additional $10,000 each month up to $50,000 starting 90 days after the taxpayer has received notice from the IRS of a delinquency.
A taxpayer must report transfers of property to foreign corporations with Form 926. The penalty for not doing so is ten percent of the value of the property transferred up to $100,000 per return and with no limit if the failure to report was intentional. For failing to report interests in foreign partnerships utilizing Form 8865, the penalty is $10,000 with an additional $10,000 each month up to $50,000 starting 90 days after the taxpayer has received notice from the IRS of a delinquency.
If a taxpayer has an accountant prepare amended returns that are false, misleading, or incomplete, those actions can result in a further criminal investigation completely separate from the underlying failure to file the proper returns or to report all of the taxpayer’s income the first time around.
The statute of limitations on a tax deficiency and the substantial understatement penalty is three years to six years, depending upon whether or not there was more than a 25 percent omission of income. As stated herein, however, there is no civil statute of limitations for fraud, and the difference in the penalty percentages can result in a difference in the hundreds of thousands of dollars.
In determining whether civil fraud exists, an IRS agent looks for "badges of fraud." Such badges are not a good thing for the agent to find. They are affirmative acts performed by the taxpayer that provide the agent with circumstantial proof of willfulness. This is the key element in a fraud case being pursued by the IRS. The more badges of fraud, the stronger the case.
Badges of fraud include checking the "no" box on tax returns in answer to the question about having an interest in a foreign bank account. Making false statements to an IRS agent is another. Repeated flying in and out of Switzerland or any offshore jurisdiction to collect interest or make deposits would be additional badges of fraud.
What many wealthy taxpayers fail to realize, is that time is not their friend. Every year they fail to report their ownership of a foreign bank account and any income from their account on their U.S. tax returns and who fail to file FBAR’s for any year in which those financial accounts are in existence, are committing new crimes. While past years drop off with statutes of limitations on penalties, new years are added on at the front end of their crimes and until the taxpayer comes forward, they will never be out of peril from criminal prosecution and some of the most serious civil tax penalties.
There is absolutely no ceiling on the civil penalty for failing to file FBAR’s. That penalty is the greater of $100,000 or 50% of the highest balance of the account. That penalty alone can not only wipe out a taxpayer’s foreign financial account, it can also wipe out additional domestic assets of the taxpayer. The civil fraud penalty of 75% on the taxes a taxpayer has failed to pay is nothing to shrug off either.
In compliance with IRS requirements, as offshore asset protection attorneys we must advise you that any U.S. federal tax advice and offshore accounts penalties advice contained in this informational article by our asset protection attorneys is not intended to be used nor is it published in order for it to be used and you may not use it for the purpose of avoiding penalties or fines under the Internal Revenue Code. It is not intended to be used nor is it being published in order to promote, market or recommend any specific transaction, tax-related matter or estate planning tax scheme to any party.
California Asset Protection Attorney, Sebastian Gibson
Sought out to be a writer for California’s two largest and most prestigious legal newspapers, California asset protection attorney Sebastian Gibson’s articles have been published in the Los Angeles Daily Journal and the San Francisco Daily Journal. Today thousands and thousands of people visit this website and his blogs monthly for useful advice and thousands more follow him on Twitter for his humor.
One of the best asset protection attorneys for people in California to follow for his humor and wit, one of the funniest California asset protection lawyers as well as one of the top humorous California asset protection attorneys people follow on Twitter, California asset protection attorney Sebastian Gibson has been called "brilliant," "hilariously funny" and a "legend."
It matters more than you think who you call for your asset protection and other legal matters. When it matters most, call California asset protection lawyer Sebastian Gibson. When it’s time to hire a California asset protection attorney, hire a legend.
