Worldwide Tax Daily Quotes Mark Matthews on Jonathan Pollard and the FBAR Hammer Penalty
Excerpt taken from the article "Spy vs. Tax: Could a Swiss Bank Account Expose Jonathan Pollard?" by William Hoke for Worldwide Tax Daily.
Mark E. Matthews of Caplin & Drysdale Chtd. said that while most federal prisoners don't have enough income to trigger a federal filing requirement, a U.S. person with millions of dollars in a foreign account would probably have taxable income and would certainly have a foreign bank account report filing requirement. A taxpayer who runs afoul of the FBAR requirements can be fined half the maximum value of the unreported account or $100,000, whichever is greater, for each year in which a violation occurs.
"That has been the hammer penalty in the offshore program," Matthews said. He added, however, that the IRS issued guidance in May stating that it generally will assess an FBAR penalty of presumptively 50 percent -- and no higher than 100 percent in some cases -- of the highest aggregate balance of all unreported foreign financial accounts during the years under examination. "The IRS was apparently worried about the Eighth Amendment's prohibition against cruel and excessive punishment," he said.