A little-known administrative waiver program set forth under the Reasonable Cause Assistant provisions of the Internal Revenue Manual may help people late with filing or paying taxes for the first time escape additional penalties. The program, in place since 2001, is known as “first-time abate,” and it is a veritable “get out of jail free” card for otherwise innocent business and personal tax filers who can make a reasonable cause argument as to why their taxes were untimely.
Tens of thousands of Americans with offshore bank accounts could now potentially be facing prosecution under the Foreign Account Tax Compliance Act (FATCA). More than 30,000 taxpayers have, since 2012, disclosed foreign accounts under a streamlined IRS program which offered a grace period against additional penalties in exchange for future compliance with offshore account reporting and payment regulations. Those taxpayers living in the U.S. ended up paying five percent of their previously undisclosed assets pursuant to the program; overseas residents paid nothing at the time of disclosure.
This week was the deadline for filing FBAR disclosures on foreign accounts. Fittingly, a Texas federal judge also ordered an entrepreneur, of the arts-and-crafts chain Michael’s, to pay significant taxes and penalties for schemes that utilized offshore tax havens.