Winema Gaven Bowman Offshore Bank Transfers | Page 3

attention to what you are doing and without going to the IRS Criminal Investigation Division. If you
amend all past tax returns to report all income, check the box on Schedule B, and file all past due FBARs,
haven't you (quietly) fixed everything? Arguably, yes. You would send in all the money you owe or wait to
be billed. If you have been paying foreign taxes on your foreign earnings, your foreign tax credits could
even net out the U.S. tax, so you might not owe back taxes.
If you reported and paid tax on all your income but did not file FBARs, you should attach a statement
explaining why they were late. Perhaps you had never heard of FBARs or were told by your accountant
you were in full compliance. You can avoid penalties if you had "reasonable cause" for not filing FBARs,
but the grounds for waiving penalties aren't terribly clear.
8. Inconsistency Will Hurt You
Can you amend your tax returns, reporting your worldwide income and checking the foreign account box,
but not bother filing delinquent FBARs? By checking the tax return box acknowledging your foreign
account, you are admitting you have an FBAR filing obligation. So not also filing the delinquent FBARs
seems risky.
Even though FBAR penalties are big, there have been some indications the IRS may not be pushing them
too hard. If you don't file a pile of old FBARs, perhaps it won't be obvious you didn't file in the past? A tax
lawyer cannot recommend this, but some clients are probably choosing not to file old FBARs.
9. Prospective Compliance Only Is Risky
Can you start filing complete tax returns and FBARs prospectively, but not try to fix the past? Some
people think the IRS is so overwhelmed with FBARs and tax returns that you might be OK, but the risks
are enormous and I cannot recommend it. The IRS may ask about the lack of prior FBARs and of prior tax
returns disclosing a foreign account. If they ask questions, you should respond through your attorney and
you can't lie.
10. Keeping Money Offshore Is Still Legal
Should you close all your foreign accounts and bring your money home? You are entitled to have money
and investments anywhere in the world as long as you disclose your foreign accounts. If you are
considering not trying to clean up your past tax returns and FBARs, you may be tempted to close your
foreign account. However, closing your foreign account doesn't relieve you of the obligation to file
accurate tax returns and FBARs. Tying off the problem prospectively may make sense, but can make your
lack of compliance even worse if your actions are viewed as efforts to conceal your previous offshore
activities. For that reason, don't take any of these steps without professional advice.
There's widespread confusion and noncompliance involving foreign bank accounts and the situation is
unlikely to get better. Get some professional advice and try to get your situation resolved.