One client, a ninety year old retired professor, established a bank account in Europe many decades ago when he temporarily lived there while teaching on sabbatical. He established the bank account for his day-to-day living expenses. After his return to the US, the account remained in Europe, slowly earning passive interest for many years. The client did not know that he was obligated to disclose the account on an annual FBAR, and pay tax on the interest that had accrued each year. The client came to realize that he had not been in tax compliance, and therefore entered the Offshore Voluntary Disclosure Program (OVDP).

This particular client already signed a will that dictates that at his death, his assets, including the foreign assets, will go to a scholarship fund at a US university. The full OVDP penalty would have significantly reduced the amount left for the scholarship fund. We argued that our client did not willfully fail to report the foreign account; that the account was set up not to evade US taxes; that the client is elderly and did not know his FBAR obligation, and that the foreign account was passive. Under these facts, we were able to persuade the IRS to limit the penalties to only $5,000 per year for the last five years. This was a great deal less than the standard penalty of 20% of the highest value of the foreign account, and much more was left for the scholarship fund.