How will bankruptcy affect FBAR penalties?

How will bankruptcy affect FBAR penalties?

FBAR penalties can be severe. We often have clients ask how bankruptcy will affect their FBAR penalties. http://ift.tt/1TUcrWR In this video, we talk first about how FBAR penalties are collected. Collecting FBAR penalties is not like collecting back taxes. Aside from intercepting tax refunds, the government actually has to file a lawsuit to collect FBAR penalties it has assessed. The government also has a limited amount of time to file a lawsuit to recover FBAR penalties. This is called the ‘FBAR Collection Statute Expiration Date’ (CSED). The FBAR CSED is two years from the date of the assessment of FBAR penalties. Generally, the IRS has 10-years to collect on an assessed tax debt. Normally, when you file bankruptcy, the CSED on taxes stops, or tolls. But with the FBAR — the CSED does not toll in Bankruptcy. So, if your bankruptcy petition is open for 12 months, that would be a year (plus some additional time) your CSED on taxes won’t run. This gives the IRS additional time to collect after you are no longer in bankruptcy (this assumes the Bankruptcy did not discharge your tax debts). Yet, if you file for Bankruptcy the two-year FBAR CSED continues to run! This means the government will be given at least 30-days to file a suit after the bankruptcy is withdrawn or closed-out. So, according the I.R.M 5.9.4.20.16, the technical answer is no, bankruptcy will not discharge FBAR penalties. But there are legal ways to use bankruptcy to your advantage. If you need assistance with a domestic of offshore tax issue, contact us. With over 10 years of experience, we know how to successfully navigate the muddy waters of the IRS. Any information you share will be subject to the attorney client privilege and will be kept confidential. http://ift.tt/24xCz51 IRSMedic, the Law offices of Parent & Parent, LLP 888-727-8796 info@irsmedic.com Serving taxpayers worldwide http://youtu.be/go9OR3WCnR0 IRS Medic