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In U.S. v. Lambert, a woman’s husband opened a grocery store in the 1970s. He operated the store until the 1990s, when his son took over the business. According to the woman, she contributed some of her personal money to the grocery store and worked at the business part-time without pay. Although her primary duties were in the deli area, the woman stated that she occasionally assisted with office paperwork.

A common question for taxpayers who have significant foreign financial assets and accounts is, “what are my reporting obligations?” In fact, taxpayers with foreign financial holdings have a myriad of reporting obligations. Understanding the reporting obligations is absolutely essential to complying with U.S. international tax laws and staying out of trouble with the IRS.


Here, we will discuss some additional civil penalties to which taxpayers may be subject if they fail to participate in the Offshore Voluntary Disclosure Program.


OVDP Penalty: Failure to File Form 3520-A Reporting Ownership in Foreign Trusts

A California medical device inventor was recently sentenced to six months in prison followed by six months of house arrest after he was convicted of using offshore bank accounts to hide assets from the United States government. In United States v. Desai, a San Jose man apparently used numerous overseas bank accounts to conceal nearly $8 million in assets between 2007 and 2009. Although the man reportedly earned at least $1.2 million in interest from the offshore bank accounts over the course of three years, he only paid a total of $17,000 in federal income taxes.


One of the greatest advantage of participating in the Offshore Voluntary Disclosure Process is the immunity it provides from a variety of civil penalties. If a taxpayer has undisclosed financial assets or accounts which are discovered by the IRS, numerous penalties may apply, potentially creating a huge financial burden on the taxpayer. Participating in OVDP can massive reduce the financial impact of failing to disclose foreign financial accounts and assets. If a taxpayer who is eligible to participate in OVD fails to do so, the following penalties may apply.


The Southern District of Florida has dismissed an individual’s case against two business owners who allegedly used payroll taxes to fund their lifestyle. In Goldberg v.

The United States Court of Appeals for the Third Circuit has affirmed a district court’s prison sentence and restitution order in connection with a couple’s willful tax evasion. In United States v.

In Miller v. US, a Virginia-based medical practice allegedly failed to pay employment taxes withheld from workers’ paychecks during each year between 2006 and 2010. As a result, the organization owed the Internal Revenue Service (IRS) about $2.8 million in delinquent taxes. For about 20 years, the practice’s office manager was responsible for the company’s day-to-day administration and bookkeeping.

On June 30th each year, the Report of Foreign Bank and Financial Accounts (FBAR) must be filed by United States Taxpayers who have an ownership or signatory authority over certain foreign financial assets totaling at least $10,000. A taxpayer’s failure to timely file the FBAR may result in steep penalties of $10,000 or up to one-half of the highest balance of the asset.