It is no secret that complying with FBAR obligations are a complicated and burdensome process. However, expats and other U.S. taxpayers with foreign assets must satisfy their FBAR disclosure obligations if their foreign assets and accounts exceed certain thresholds. For FBAR, covered individuals are required to file when their aggregate foreign accounts for which they have a financial interest in or signature authority over exceeds $10,000. Clearly, $10,000 is not an especially significant sum of money. Therefore, even individuals who consider themselves part of the middle class can incur significant FBAR penalties.
Individuals often wonder if they have options once they have entered into the IRS collection process for IRS penalties related to an FBAR penalty. If you have already received an IRS letter stating the penalties you owe, you may still have options. However, if you have received IRS Letter 3708 your window of opportunity to handle the situation is quickly closing.
CPA Ted Kleinman can help you handle FBAR obligations and FBAR penalties. Mr. Kleinman is dedicated to helping U.S. expatriates and other taxpayers handle their international tax obligations. To discuss how Ted may be able to help you call U.S. Tax Help at (541) 923-0903 or contact us online.
When Will I Receive Letter 3708 Demanding Payment?
IRS Letter 3708 is a demand for payment regarding an FBAR penalty that has already been imposed. Therefore, you will not receive this notice until after an FBAR penalty has been imposed against you under Section 5321(a)(5) or 5321(a)(6) of Title 31 of the U.S. Tax Code. In fact, even after you have an FBAR penalty imposed against you, it is highly likely that you will first receive IRS Letter 3709. IRS Letter 3709 will contain information and an explanation regarding how much the IRS believes that you owe and an explanation of how the penalty or penalties assessed against you apply to your particular scenario.
What Options Do I Have to Respond to the IRS’s Payment Demand?
If you have received IRS letter 3708 it is not a foregone conclusion that you will face the full extent of fines, penalties, and interest that the IRS is attempting to impose. However, continued delay in a situation of this type can result in the forfeiture of certain appeal rights and a high likelihood that you will face the penalties.
Essentially, you have two options in how to respond to the letter. First, you could decide that the fine and penalties were properly assessed and imposed. If you decide that this is the correct course of action, you must submit your full or partial payment to the IRS within 30 days of the date on the letter. Your payment should be accompanied by information including the fact that this payment is to satisfy an FBAR obligation, the FBAR year, and the relevant Social Security number or employee identification number. If you are unable to make a full payment of the fines and penalty, you can make a partial payment or apply for an installment payment agreement. However, installment payments and late payments will incur additional interest and penalties. In the case of an installment agreement and collection enforcement actions, an 18% servicing fee will be imposed. If you fail to pay, collection costs can also be imposed.
Your second option to engage in an appeal of the penalty. There are numerous appeals options available, however, some of these options can foreclose certain rights and additional appeals in exchange for a more expedient decision. You should discuss you appeal options individually with an experienced tax professional. However, you should not delay in seeking advice and guidance after receiving IRS Letter 3708. If you wish to appeal the determination you are required to submit your appeal in writing within 30 days of the date listed on IRS Letter 3708. When filing your appeal you should be prepared to present evidence showing that the penalties were improperly imposed, the debt isn’t delinquent, or that it is not legally enforceable.
Work with an Experienced U.S. Tax Accountant for FBAR and International Tax Concerns
U.S. tax accountant Ted Kleinman provides tax preparation and related tax services for U.S. expats and others with international tax obligations. Ted can assist you if you are facing FBAR penalties or other tax concerns due to foreign accounts, income, or assets. To schedule a no cost review of your FBAR or tax concerns call (541) 923-0903 or contact U.S. Tax Help online.