Have you met ROF BAFA?Article added by Michael Nelson on June 22, 2010
Michael Nelson

Michael Nelson

new york, NY

Joined: June 21, 2010

My Company

Let me refresh your memory. ROF BAFA is the new title of the old FBAR. "Report of Foreign Bank and Financial Accounts" (ROF BAFA) was created in October of 2008, and is defined as IRS form TD F 90-22.1. Although this form looks fairly innocent and straightforward, it is anything but. If you think that you have until June 30, 2010 to file the form with the IRS in Detroit, Michigan, you are wrong. Time is running out before your very eyes, and there is nothing you can do to stop the running of the filing deadline; no extensions and no excuses. Have you seen the above form? If not, then I encourage you to go online under the Web site of the Department of the Treasury's Financial Crimes Enforcement Network Web site for Money Services Businesses.

The original Foreign Bank Account Reports, (FBAR) began with the Bank Secrecy Act of 1970 (BSA), in which the U.S. Congress was concerned with the detection of strategies wherein U.S. persons intended and did make complex structures designed to make proceeds from crimes disappear and, therefore, evade tax and perpetuate and continue these illegal activities by utilizing foreign financial accounts. In 2001, the intended scope of the new tax legislation was to significantly broaden the efforts of the U.S. Treasury to commence increased criminal audits and tax investigations through the use of intelligence gathering. With the September 11, 2001 terror campaign against America, these efforts were readily enacted and funded under the label of international terrorism prevention and detection.

Of course, the events in the latter part of this decade added fuel to the IRS fire for more information and investigation. The United Bank of Switzerland and the Liechtenstein Global Trust Group provided the unfettered fleeing of billions of revenue from taxation.

What's the big deal with June 30th 2010?

The Report of Foreign Bank and Financial Accounts, hereinafter referred to as the "Report", has a due date of June 30, 2010 for the tax year 2009. While many tax practitioners and laypersons might think the Report must be postmarked by the U.S. Post Office on or before June 30, 2010, this is unfortunately not correct. The U.S. Treasury requires that the Report actually reaches their filing center in Detroit, Michigan on or before June 30, 2010. So, this is where the problem begins.

You can prove when the Report was placed into the U.S. mail via Certified Mail Return Receipt Requested, Registered Mail, or Delivery Confirmation. You might also be able to show when you utilized other private mail carriers, such as FedEx and UPS, but you will still be the person the U.S. Treasury looks to for providing extrinsic proof that the U.S. Department of Treasury actually was in receipt of your Report on or before June 30, 2010. There are many instances where the U.S. Postal Service failed to deliver mail in a timely manner. I, myself, have had mailings, even certified mailings, returned weeks later in a shrink wrapped plastic container with the pre-printed notice that although the U.S. mail service processes billions of mailings each day, some of these are destroyed or partially destroyed and not delivered.

In a recent Tax Court case between the Taxpayer, Lander Gibson, and the Commissioner of the Internal Revenue Service, Judge Vasquez heard the case in which IRS sought to deny a timely filed petition by the taxpayer based on the untimely filing. The case involved the petition sent by U.S. Mail but was not delivered until 120 days after the alleged mailing by Gibson. The judge noted that the petition was properly addressed to the Tax Court and that the in November and December 2001 and January 2002, the Tax Court was experiencing anthrax-related mail delays. The court also noted that as a result of an irradiation treatment, the postmark on the envelope was illegible. After filing motions with the Court, making an appearance at Federal Tax Court and providing a statement in court as to the veracity of his claim of timely mailing, the Judge found in favor of Mr. Gibson. All of this over a simple mailing issue. Now, if you take this case and ask Mr. Gibson to prove that the IRS got the petition by a certain date, he would not be able to prove his burden by showing that it is reasonable for the U.S. mail to deliver a petition within a certain time. He would not be able to depend on a type of reasonableness test that mail should reach the IRS within a few days or a week. At the time of writing this article, the taxpayers are almost positioned to fail by this mailing requirement if any link in the U.S. Mail systems fails to make a timely delivery.

In our office, we now send the mailings either via Certified Mailing with Return Receipt Requested or Certified Mailings, which allows us to confirm the receipt over the Internet. If the report is not delivered within a reasonable time, we will have to look at possibly sending another teport via an expedited service such as FedEx or UPS. There really is not a definitive answer. Can you take the report and hand deliver to a local IRS office? This matter is unclear, since the instructions require mailing to Detroit, Michigan.

The best answer is to file this report well in advance of the June 30, 2010 deadline and keep tracking the mailing over the Internet and then when delivered, print out this delivery confirmation from the Internet and keep in your files as proof should this ever be called into question. Remember that your records of accounts required to be reported on the report must be retained for a period of five years. If you fail to keep these records, then you expose yourself to possible civil and/or criminal penalties.

On the upside, the IRS has stated that should you fail to file a required report for a prior tax period and fail to make this timely filing, then you can file the delinquent report with an attached statement explaining why the reports are filed late and no penalty should be asserted "if" the IRS determines that the late filings were due to reasonable cause. So, if we can impute this standard of proof as applying to the current filing of the report and you keep all of your records as proof of mailing, the IRS, if they make the determination, will not assess penalties. The other problem that may keep you from filing a timely Report is not having all of the information necessary to file an accurate and comprehensive report. If this is the case for you, then you may look at filing the report now and subsequently, when you do have all of the information for an accurate and complete report, just re-file and check the box in the upper right corner of page one indicating "Amended". As a cautionary note, filing a non-compete report should be explained by an attached declaration as to why the report is incomplete and should include what steps are being taken to remedy the situation. Then, be sure to follow through with an Amended Report. Good luck to all of you out there who are facing this dilemma.

Here is the official address for your mailings of the Report:

Send completed forms to:

U.S. Department of the Treasury P.O. Box 32621 Detroit, MI 48232-0621

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