Can a Court Require You to Use Overseas Money for FBAR Fines?

Can a Court Require You Use Overseas Money for FBAR Fines?

Taxpayer with FBAR Penalties Forced to Repatriate Money

The FBAR refers to Foreign Bank and Financial Account Reporting. In recent years, the Internal Revenue Service has gone after taxpayers worldwide who have failed to timely report the FBAR. In prior years, the IRS would issue penalties upwards of $10,000 per account, per year. Luckily for Taxpayers, the Supreme Court in Bittner curtailed the IRS’ abilities to issue non-willful FBAR penalties. Still for Taxpayers with several years of unreported foreign accounts – and especially those taxpayers who are deemed willful, penalties can reach into the 7 and 8-figures. And, even if a Taxpayer keeps their money overseas, the courts can order the Taxpayer to repatriate the money back to the United States, which is what occurred in the recent case of U.S. v Kelly.

• • • “ORDER REQUIRING DEFENDANT JAMES J. KELLY, JR., TO REPATRIATE FOREIGN ASSETS THIS CAUSE is before the Court upon the Plaintiff United States of America’s Motion for an Order to Repatriate Foreign Assets (ECF No. 69) (“Motion”).

      • IT IS HEREBY ORDERED as follows:

        • The United States’ Motion is granted.

        • As of July 31, 2023, Defendant Kelly is indebted to the United States in the amount of $979,264.10, which amount is comprised of civil penalties pursuant to 31 U.S.C. § 5321(a)(5), pre-judgment interest pursuant to 31 U.S.C. § 3717(a), post-judgment interest pursuant to 28 U.S.C. § 196l(a), late payment penalties pursuant to 31 U.S.C. § 3717(e)(2); plus a surcharge often percent of the debt owed in accordance with 28 U.S.C. § Case 2:21-cv-12570-GAD-DRG ECF No. 79, PageID.1126 Filed 10/23/23 Page 1 of 3 2 3011, in the amount of $97,926.41, for a total amount of $1,077,190.51 (the “Outstanding Debt”); statutory additions continue to accrue.

        • Defendant James J. Kelly, Jr., is ORDERED to forthwith repatriate assets held overseas in an amount to satisfy the Outstanding Debt into a United States bank account in the State of Michigan in his name over which this Court has jurisdiction, inform counsel for the United States in writing of the name and address of the bank and the complete bank account number, and notify the Court of his compliance with this Order within (30) days. The notice shall also identify the name and address of the bank, as well as the last four digits of the account number. 4. Defendant James J. Kelly, Jr., shall maintain the repatriated funds in the U.S. based bank account pending further order of this Court.

        • After the funds are repatriated to the United States pursuant to this Order, the Defendant James J. Kelly, Jr., shall not encumber, liquidate, transfer, spend, or dispose of such funds until further order of the Court.

          • SO ORDERED

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.  Contact our firm today for assistance.