Category Archives: OVDP

Mr. Bedrosian (a pioneer in FBAR history) meets Mr. #FBAR: The good, the bad and the ugly

Why the Arthur Bedrosian meeting with Mr. FBAR is important

Synopsis:

The Bedrosian FBAR case is an incredibly important victory for taxpayers. Judge Baylson first ruled that FBAR “willfulness” in the “civil” context did NOT require knowledge that filing an FBAR was a legal duty (the criminal standard). He then ruled that Mr. Bedrosian’s failure to report the account was a form of negligence that did NOT meet the required standard of “willfulness”.

Perhaps the message is:

The failure to file an FBAR will be “willful”, if the circumstances of the failure, were evidence of conduct that the FBAR statute was designed to punish.

 

In other words, it is possible to know about Mr. FBAR, fail to file Mr. FBAR and NOT be “willful”!

The “Readers Digest” Version …

The Bad …

The District Court held that the test for what constitutes “willfulness” in the “civil FBAR penalty” context is not the test used in a criminal context – “the intentional violation of a known legal duty”. All that is required is that the person voluntarily NOT file an FBAR. (One need not know that he is violating a legal duty).

The Good …

The failure to file an FBAR can be a form of “negligence” that falls short of “willfulness”. In other words, one can know about the FBAR requirement, fail to file the FBAR and still fall short of “willfulness”.

The Ugly …

The IRS had initially taken the position that Mr. Bedrosian’s misadventures in FBAR were nonwillful. But, they changed their mind.

Round 1 goes to Mr. Bedrosian. Will the IRS appeal?

Mr. Bedrosian has earned a place in FBAR history. He is a true “FBAR Pioneer”. His “Adventures in FBAR” place him in the club of: Mr. Pomerantz, Mr. Hom , Mr. Kentera, Mr. Horsky and Mr. Warner. Fortunately, mere visitors to American do not yet have to file the FBAR. Interestingly, Mr. FBAR appears to have been the “role model” for a Russia foreign bank account reporting laws.

To learn more about the FBAR Odyssey of Mr. Arthur Bedrosian …
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Dewees 2: Why did he participate in the 2009 #OVDP Horror Show?

In an earlier post I explained why the Canada Revenue Agency assisted the IRS in collecting a $133,000 U.S. dollar penalty on a Canadian resident. The bottom line was that he was presumably NOT a Canadian citizen and therefore did NOT have the benefits of the tax treaty. This post is to explain where the penalty came from in the first place.
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U.S. “culture of penalty” and inflation: First, inflation used to increase the size of #FBAR penalty base and then to increase the size of actual penalties

Introduction: Penalty as a part of American Culture

The above tweet links to a wide range of examples of America’s culture of penalty.

The purpose of this post is to explore how inflation results in the facilitation of enhanced penalty collection in America today.

What is inflation?

In its simplest terms:

“Inflation is defined as a sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. Under conditions of inflation, the prices of things rise over time. Put differently, as inflation rises, every dollar you own buys a smaller percentage of a good or service. When prices rise, and alternatively when the value of money falls you have inflation.”

Source: Adam Hayes, CFA

(Note his use of the words “goods and services“. Are FBAR penalties and the S. 877A Exit Tax consumer goods or government services?)

Inflation can either be helpful or can be hurtful. Some benefit from inflation and others are hurt by inflation. At a minimum, inflation will always erode the value of cash.

Effect of inflation on owners/lenders of cash: When it comes to cash inflation will hurt the owners/lenders of cash. This is because inflation will erode the value of cash.

Effect of inflation on borrowers of cash: Inflation will help he borrowers of cash. This is because inflation erodes the value of the cash that must be repaid.
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Part 2: Be careful what you “Fix For” – Mr. Kentera meets Mr. #FBAR in the “Twilight Zone”

Introduction …

This post is one more of a collection of FBAR posts on this blog. The most recent FBAR posts are here and here.

The “unfiled FBAR” continues to be a problem for certain Homeland Americans with “offshore accounts” and all Americans abroad,  who continue to “commit personal finance abroad”.

The above tweet references a recent post which discussed how to “fix past compliance problems“. The introduction included:

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Be careful what you “fix for”! A Holiday Gift: What to do about the unfiled #FBAR

As 2016 comes to an end …

I suspect that history will show that that the growth in renunciations of U.S. citizenship (and abandonment of Green Cards) continued in 2016. Absent a change in the way that the United States treats its “U.S. Persons Abroad”, I suspect that the growth in renunciations of U.S. citizenship will continue.

The purpose of this post and a short summary …

This blog post will hopefully encourage those with U.S. tax issues to consider whether they can deal with minor/unintentional FBAR violations as a “stand alone single problem”. There may be no need to escalate and expand one single problem into a multi-dimensional full blown tax problem that may end up with unintended and unanticipated costly professional fees as well as undue time spent!  Read on and learn why.  Keeping a calm head is most important, even if it is most difficult to do in the face of the scary situation of not being in compliance with the U.S. tax and regulatory regime.

This post consists of the following six parts:

Part 1 – Problems, more problems and the expansion of problems

Part 2 – Looking For Mr. FBAR

Part 3 – It often begins with a chance meeting with Mr. FBAR

Part 4 – How the compliance problems of “Homeland Americans” (particularly Green Card holders) differ from the compliance problems of “Americans Abroad”

Part 5 – Focusing specifically on the problem of FBAR non-compliance

Part 6 – Dealing with the tax professionals: Beware of how they can expand the number of problems

 

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