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Delinquent FBAR Submission Procedures

July 5, 2026August 24, 2014 by Brotman Law

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Key Takeaways

On the cover page of the electronic filing, you will be required to select from options as to the reason for the late filing.
The IRS will not impose a penalty for the failure to file the delinquent FBARs as long as you properly reported the income on your U.S.
The audit process with regard to FBARs is similar to the selection process in place for tax returns.

Some taxpayers may not need to use the Offshore Voluntary Disclosure Program or the Streamlined Filing Compliance Procedure options, but still may have a delinquent FBAR or Foreign Bank Account Report. FinCEN has established a procedure to address this problem.[1]

Opting out of the Offshore Voluntary Disclosure Program – Part One

July 5, 2026August 24, 2014 by Brotman Law

Key Takeaways

[1] National Taxpayer Advocate report: https://www.taxpayeradvocate.irs.gov/userfiles/file/FullReport/IRS-Offshore-Voluntary-Disclosure-Programs-Continue-to-Burden-Benign-Actors-and-Damage-IRS-Cred…
[2]IRS memorandum regarding guidance for opting out https://www.irs.gov/pub/newsroom/2011_ovdi_opt_out_and_removal_guide_and_memo_june_1_2011.pdf

Opting out of the offshore voluntary disclosure program can be a difficult choice. An opt out is an irrevocable election made by a taxpayer to leave the safe harbor of the OVDP, and have his or her case handled under the standard audit process. This is different from removal, which is a determination made by IRS personnel to remove a taxpayer from the civil settlement structure of the OVDP because the taxpayer or taxpayer’s representative has not cooperated. The IRS has recognized that there are cases were opting out may be the better approach for the taxpayer. In these cases, the results under the OVDP are too severe given the facts of the actual case. If the violation was not willful and there is a low exposure for criminal penalties to the taxpayer, the standard audit procedure may result in a lower monetary penalty making opting out of the offshore voluntary disclosure program logical.

The OVDP Process – Part Four

July 5, 2026August 24, 2014 by Brotman Law

Example of the Penalty Structure in the OVDP Process

Key Takeaways

Under the OVDP Process
Outside the OVDP Process
Case Resolution in the OVDP Process

The Criminal Investigative unit is charged with assessing the penalty structure. The structure itself is nonnegotiable and the examiner lacks discretion to make any adjustments. The following is an example prepared by the IRS[1]:

The Offshore Voluntary Disclosure Process – Part Three

July 5, 2026August 24, 2014 by Brotman Law

Key Takeaways

Offshore Voluntary Disclosure – Interview with your examiner
Offshore Voluntary Disclosure – Waiver of the Statute of Limitations
[1]United States v.

Offshore Voluntary Disclosure – Interview with your examiner

The OVDI Process – Part Two

July 5, 2026August 24, 2014 by Brotman Law

The OVDI Process – After Preclearance is received

Key Takeaways

The OVDI Process – After Preclearance is received If a taxpayer makes all the requisite disclosures and receives the preclearance then they must make their disclosure.
Taxpayers or their representatives should mail their “ Offshore Voluntary Disclosure Letter ”[2] and “ attachment ”[3] to the following address:
Internal Revenue Service Voluntary Disclosure Coordinator 1-D04-100 2970 Market Street Philadelphia, PA 19104

If a taxpayer makes all the requisite disclosures and receives the preclearance then they must make their disclosure. Note these guidelines are subject to change. Consult the IRS’s website for the most recent OVDI procedures. [1] Under the IRS’s guidelines:

The Offshore Voluntary Disclosure Process – Part One

July 5, 2026August 24, 2014 by Brotman Law

Key Takeaways

(b) Identifying information of all financial institutions at which undisclosed OVDP assets were held.
(d) Executed power of attorney forms (if represented).
Have more questions regarding the Offshore Voluntary Disclosure process?

The precise procedures under the Offshore Voluntary Disclosure process are murky at best. They resemble loading a revolver and handing it to someone with an itchy trigger finger. As other countries and their foreign financial institution buckle to the pressures of FATCA, the value of self-disclosure is beginning to lose its luster to the federal investigators. The lack of precise protocols and standards can only be an indication of the fact that the Offshore Voluntary Disclosure rocess will have a short life as foreign compliance escalates and the Streamlined programs are taken advantage of those whose conduct was non-willful. Under the current regulations, what is in it for the taxpayer according to the IRS:

Streamlined Voluntary Disclosure for Non-Residents

July 5, 2026August 24, 2014 by Brotman Law

Eligibility: In order for non-residents U.S. taxpayers to be eligible to participate in the Streamlined Voluntary Disclosure for Non-Residents program they must:

Streamlined Offshore Voluntary Disclosure Penalties

July 5, 2026August 24, 2014 by Brotman Law

A Summary of the Streamlined Offshore Voluntary Disclosure Penalties

The Title 26 miscellaneous offshore penalty is equal to 5 percent of the highest aggregate balance or value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period. For this purpose, the highest aggregate balance or value is determined by aggregating the year-end account balances and year-end asset values of all the foreign financial assets subject to the miscellaneous offshore penalty for each of the years in the covered tax return period and the covered FBAR period and selecting the highest aggregate balance/value from among those years.

Key Takeaways

A Summary of the Streamlined Offshore Voluntary Disclosure Penalties
Streamlined Offshore Voluntary Disclosure Penalties – Miscellaneous Offshore Penalty
Streamlined Offshore Voluntary Disclosure Penalties – Retroactive Relief

Streamlined Voluntary Disclosure Eligibility

July 5, 2026August 24, 2014 by Brotman Law

Streamlined Voluntary Disclosure Eligibility Requirements

Key Takeaways

Streamlined Voluntary Disclosure Eligibility Requirements In addition to having to meet the general eligibility criteria described above, individual U.S.
(1) fail to meet the applicable non-residency requirement described (for joint return filers, one or both of the spouses must fail to meet the applicable non-residency requirements.
(2) have previously filed a U.S.

In addition to having to meet the general eligibility criteria described above, individual U.S. taxpayers, or estates of individual U.S. taxpayers, seeking to use the Streamlined Domestic Offshore Procedures described in this section must:

IRS Streamlined OVDI – Part Two

July 5, 2026August 24, 2014 by Brotman Law

Key Takeaways

Topic: IRS Streamlined OVDI – Part Two
All tax returns submitted under the IRS streamlined OVDI procedures must have a valid Taxpayer Identification Number (TIN).
Tax returns submitted without a valid SSN or ITIN will not be processed under the streamlined procedures.

All tax returns submitted under the IRS streamlined OVDI procedures must have a valid Taxpayer Identification Number (TIN). Tax returns submitted without a valid SSN or ITIN will not be processed under the streamlined procedures. However, for taxpayers who are ineligible for an SSN but do not have an ITIN, a submission may be made under the IRS streamlined ODVI procedures if accompanied by a complete ITIN application.