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A Glimmer of Hope for Lower Criminal and Civil FBAR Penalties

By Sharon L. McCarthy
February 27, 2011

The year 2010 will go down in history as the year the great wall of Swiss bank secrecy officially collapsed. On June 17, 2010, the Swiss Parliament ratified the settlement agreement between the U.S. Department of Justice (DOJ) and UBS AG, and the process of turning over the names and Swiss banking information of approximately 4,450 U.S. taxpayers began. For taxpayers who missed the opportunity to participate in the Internal Revenue Service's special Off-shore Voluntary Disclosure Program (OVDP), which ended in October 2009, the chance of criminal prosecution is high.

This article addresses the potential penalties facing taxpayers with undisclosed foreign accounts and focuses in particular on the draconian penalties being issued across the board for failure to file Form TDF 90-22.1, Report of Foreign Bank and Financial Accounts ' commonly referred to as an “FBAR.” And we also discuss a recent decision out of the Eastern District of Virginia, which provides some small hope that the government will begin to exhibit a bit of flexibility in its approach to FBAR penalties.

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