The Tax Lawyer’s Blog

It should come as no surprise that taxpayers who get hit with the $10,000.00 penalty for failure to file Report of Foreign Bank and Financial Accounts (FBAR) are trying to get relief from the penalty by blaming their tax preparers for it. 

Here is an excerpt from a recently issued statement of the IRS Office or Professional Responsibility (”OPR”) titled Professional Responsibility and the Report of Foreign Bank and Financial Accounts (FBAR):

We understand that FBAR non-filers are blaming their preparers for their failure to file - stating that they have reasonable cause for failure to file because the practitioners did not ask about or explain the foreign financial account part of the return.

And here is what the OPR says about tax preparers’ legal responsibility for a taxpayer’s failure to file the FBAR:

A practitioner must comply with FBAR rules as part of his or her due diligence obligation under Section 10.22 of Circular 230:

§10.22 Diligence as to accuracy.
Each attorney, certified public accountant, enrolled agent, or enrolled actuary shall exercise due diligence:

(a) In preparing or assisting in the preparation of, approving, and filing returns, documents, affidavits, and other papers relating to Internal Revenue Service matters;

(b) In determining the correctness of oral or written representations made by him to the Department of the Treasury; and

(c) In determining the correctness of oral or written representations made by him to clients with reference to any matter administered by the Internal Revenue Service

Due diligence does not require that the practitioner “audit” their client.  However, it does require that a practitioner make reasonable inquiries when a client provides information that suggests possible participation in overseas transactions/accounts subject to FBAR requirements.

I wrote about the FBAR requirements in a blog post titled Tax Court Update - October 2008 - The Limits of Tax Court Jurisdiction.

Practice Pointer: Have your client sign a statement that says he or she did not have a foreign bank account during the tax year and keep the statement in your file.

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