Excerpt taken from article.
The Justice Department is investigating an employee welfare benefit plan whose participants may have foreign bank account reporting obligations.
The DOJ announced July 13 that it had sued Tracy L. Sunderlage, his wife, Linda Sunderlage, three related Illinois companies, and a West Indian company to block them from operating an allegedly fraudulent welfare benefit plan through the Professional Benefit Trust Multiple Employer Welfare Benefit Plan and Trust (PBT plan).
In the alleged scheme, owners of small, closely held companies made purportedly tax-deductible contributions to a welfare benefit plan. The DOJ said the money was routed to investments offshore that were held exclusively for the owners' personal use and was transferred back to them when they ceased to participate in the plan.
It is unclear whether PBT plan participants would fall under the FBAR rules, because plan documents and other relevant information are not publicly available. However, a U.S. person's ability to control the disposition of the account is generally indicative of an FBAR filing requirement. The inability to control the disposition would likely not result in an FBAR filing requirement, said Mark D. Allison of Caplin & Drysdale.
If participants have an FBAR filing obligation, they will need to act quickly to take advantage of the offshore voluntary disclosure initiative (OVDI). The OVDI offers taxpayers reduced penalties if they voluntarily disclose offshore financial accounts. (For prior coverage, see Tax Notes, Feb. 14, 2011, p. 735, Doc 2011-2714, or 2011 TNT 27-1.)
‘‘People who participated in this plan really need to talk to a tax lawyer as soon as possible,'' said Christopher S. Rizek, also of Caplin & Drysdale. He explained that filing amended returns and preparing other paperwork for submission can make participating in the OVDI a time-consuming process. Much of the filing requires technical accounting work, so it may be too late to begin a filing that will be due August 31, he said. Allison agreed but said that assuming he could gather all of the information necessary for an OVDI filing, ‘‘participation in the program would have to be strongly considered.'' If the PBT plan participants lacked knowledge of their ownership or control over the foreign accounts, potential FBAR penalties could be reduced, he said.
Click on attached pdf to read more on Offshore account holders' FBAR obligations.