The Supreme Court sided with the IRS in an appeal on excessive fines for unreported foreign accounts.
The streamlined domestic offshore procedures (SDOP) is a program offered by the IRS and is available to individuals and entities who have unreported income from undisclosed foreign assets.
Qualified filers must file amended returns for the last three years as well as file a delinquent or amended Report of Foreign Bank Account (FBAR) for the past six years. They must also submit a signed statement attesting that the failure to report foreign income resulted from non-willful conduct. In some cases, an individual can be charged a 5% penalty while waiving all other penalties & fees. If an individual fails to file the appropriate reports in due time they will be subject to a $10,000 fine in addition to a penalty fee of 50% of your total assets.
Recently, one taxpayer found herself subjected to these penalties.
(Reuters) – U.S. Supreme Court Justice Neil Gorsuch on Monday questioned whether a $2.17 million tax penalty assessed on a Massachusetts woman for not reporting a Swiss bank account was unconstitutionally excessive, saying the high court should have heard her appeal.
The conservative justice laid out those concerns as he dissented from the court’s decision not to hear Monica Toth’s appeal of a lower-court decision upholding the penalty, saying the case “would have been well worth our time.”According to her lawyers, Toth’s father had fled Germany for Argentina in the 1930s after he was assaulted. He became a successful businessman and before his death in 1999 gave Toth millions of dollars in a Swiss bank account.
Gorsuch, in his three-page dissent, noted that Toth’s father had always maintained a reserve of funds abroad. Toth, a Massachusetts resident now in her 80s, kept a Swiss bank account, “perhaps owing to his early formative experiences,” and encouraged his daughter to keep money there “just in case.” However, the account, yet failed until 2010 to report it to the U.S. government as required by the Bank Secrecy Act.
The IRS in 2012 assessed a $2.17 million civil penalty, saying her failure in 2007 to report the account on a so-called FBAR form was willful. (as opposed to the non-willful amnesty Jay Finn can get for you. After she did not pay, the government won a judgment against her for the $2.17 million plus nearly $1 million for late fees and interest. On appeal, Toth’s lawyers argued the penalty violated the U.S. Constitution’s 8th Amendment, which bars the government from imposing excessive fines on criminal defendants.
Believe it or not this elderly grandmother lost.
The streamlined foreign offshore procedures (SFOP) is a program offered by the IRS to report foreign income and is available to United States taxpayers who meet the Foreign Residence requirement. You must be a U.S. citizen or legal permanent resident and you must have lived outside of the U.S. in one of the last three years for at least 330 days. Qualified filers are still required to amend their U.S. tax returns for the last three years and report their foreign account information for the last six years.
If you are truly a foreign resident for a specific amount of time, the one-time 5 % penalty and all other more serious and expensive penalties can be waived. Contact our offices to learn about your options & avoid costly mistakes.