National Taxpayer Advocate Slams IRS Offshore Programs & FBAR Penalties, Demands Change

The National Taxpayer Advocate Nina Olson is a strong and vocal advocate for taxpayer rights. Her annual report to Congress castigates the IRS for its unfair application of offshore account penalties, and its disparate treatment of innocent Americans caught in reporting snafus. Some of the report asks the IRS to change, to stop viewing anything offshore as illegal.

The report acknowledges that not only does the IRS need to change, but Congress also needs to act. The Taxpayer Advocate wants legislation to cut back on possible penalties. The FBAR penalties in particular are entirely out of proportion. The Taxpayer Advocate says the IRS main offshore program isn’t fair. This so-called ‘amnesty’ sometimes sticks innocent taxpayers with a penalty equal to over eight times the unreported tax, and over ten times the 75% penalty for civil tax fraud.

That makes no sense, she says. What’s worse says the report, those who were unrepresented generally paid even more. And if you came in on one of the prior IRS programs—showing that you were doing what the IRS asked—it’s now too late to get the better Streamlined deal. That penalizes taxpayers who did precisely what the IRS asked and is simply not fair, claims the Taxpayer Advocate. But there’s more.