Recent Revisions to the IRS Offshore Voluntary Disclosure Programs
By: Randall P. Andreozzi
Recent revisions to the IRS Offshore Voluntary Disclosure Programs illustrate that the Service is becoming more aggressive and less tolerant with those taxpayers who have not yet come forward to report their interests in foreign bank accounts. The IRS on June 18, 2014, published new Streamlined Filing Compliance Procedures. The new Programs – one for U.S. residents and one for offshore residents – appear at first glance to offer remarkable deals to U.S. citizens who have not reported their foreign bank accounts. For example, the Program for offshore residents offers no penalty, and the Program for U.S. residents demands an up-front penalty of 5% of the unreported account value.
It is what lies below the surface of the new Programs that reveals that the new Programs are fraught with hazards. Taxpayers must certify under penalty of perjury that their failure to comply with the reporting requirements was not willful. Willfulness as it relates to foreign bank account reporting is a complex statutory concept, and the courts have been struggling with the issue in cases over the past several years.
Even if the taxpayer pays the money and provides the certification of non-willfulness, the Programs provide no assurance or protection against criminal prosecution or the severe civil penalties for willfulness. For example, the taxpayer could be prosecuted for tax evasion, filing a false tax return, intentional failure to file tax reports, and even proffering a false instrument (the certification itself) to the IRS. According to the IRS, the civil penalty for willful failure to file FBARs is 50% of the highest aggregate account value, per year.
According to an IRS official, the Service intends to review all Streamlined submissions it receives. IRS will cross check this information against information it receives from other sources (cooperating banks, whistleblowers, etc.), and will pursue criminal and civil penalties if it perceives the taxpayer’s conduct as willful, regardless of the payment of up-front penalties or submission of certifications.
Andreozzi Bluestein’s criminal and civil tax litigation groups are led by attorneys with decades of combined experience with Internal Revenue Service Office of Chief Counsel and the United States Department of Justice. We have successfully navigated many of our clients through the IRS’ 2009, 2011, and 2012 Offshore Voluntary Disclosure Programs as well as through the IRS general voluntary disclosure program. Our team of attorneys and paralegals are uniquely qualified to assist taxpayers through these difficult and trying situations.
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