Beware of International Tax Fear Mongering
It seems like clockwork that each day our firm is contacted by a different taxpayer who has unfortunately found themselves in (perceived) tax trouble, and had already reached out to some self-proclaimed tax experts online — only to find themselves on the receiving end of an intense fear-mongering “consultation.” While there are only a handful of Board-Certified Tax Law Specialists who specialize exclusively in international tax, many attorneys falsely claim they are experts in international tax law. These days, it seems like the same three or four general tax law firms who do not specialize in international tax — but want to market themselves as specialists in international tax and offshore compliance — have taken to unnecessarily scaring taxpayers into believing their noncompliance is much worse than it really is. They accomplish this by devising fictional stories about how the IRS will just show up at a person’s doorstep and arrest them, simply because the person missed reporting some foreign accounts (read: this is not how the IRS operates). It is unfortunate because most taxpayers are in FBAR and FATCA non-compliance situations that are readily solvable. Let’s take a look at five international tax fear-mongering scenarios that you should try to avoid.
The IRS Cannot Just Take Your Money
Recently, several taxpayers have reached out to us after speaking with one firm and particular, having been told that after receiving a CP15 Notice for Form 3520 — and even before they submit the protest letter within 30-days — the IRS can automatically start taking money out of their bank account. Of course, this is not true, but the sales pitch is that (of course) if the taxpayer immediately retains the firm, then they can prevent this from happening. In fact, the IRS has various hoops it must jump through and hurdles it must overcome before it can issue a levy – which is the primary method they use to withdraw money from your account for international CP15 penalties. The firm then charges an exorbitant fee to prevent the non-existent seizure from happening.
Reasonable Cause Can Avoid or Abate Penalties
Taxpayers can submit a reasonable cause statement in order to try to avoid penalties upfront and/or to abate penalties after they have been issued. The problem is that there is no particular form used to submit a reasonable cause statement. Likewise, these self-proclaimed international tax experts are not actually international tax specialists — and oftentimes do not know how to even craft an effective reasonable cause letter. Therefore, they resort to scaring taxpayers into believing the only thing they can do is voluntary disclosure or a quiet disclosure — the latter of which is illegal, and if you find any attorney online marketing that they will prepare a quiet disclosure for you, you should reach out to their local Bar Association.
Not all FBAR Violations Are Willful
Yes, there are various lower threshold levels for willfulness when it comes to foreign banks and financial account violations (intent is not required). But, that does not mean that you are willful just because you are scared and some attorney is telling you that the IRS is going after everybody for willfulness. It is simply not the case and most violations tend to be non-willful.
Criminal FBAR Enforcement is Rare
The IRS only seeks to prosecute a few thousand tax cases a year. That includes all the different types of tax fraud and evasion cases, and the number of those that involve FBAR is small. In addition, you will find that in criminal FBAR cases, oftentimes it includes various other tax crimes and other crimes in conjunction with the non-reporting — such as money laundering, tax evasion, and structuring—and not just because your sweet grandma left you a bank account that you were unaware you were required to report to the IRS.
You Can Always Switch Counsel
Taxpayers who find themselves being represented by fear-mongers typically want to seek out other counsel but are concerned that the attorney is going to report them to the IRS. The reason why taxpayers are concerned about this is that the attorneys tacitly make it sound like the taxpayer does not have the opportunity to seek out other counsel and if they do…who knows what can happen. At any point during representation, taxpayers are able to terminate their current attorney or other tax professional and seek other counsel. If you find yourself feeling uneasy about your current attorney, you have the absolute right to seek different counsel — and the attorney does not have the right to secretly submit your information to the IRS.
About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax and specifically IRS offshore disclosure.
Contact our firm today for assistance.