Questions Surround Standards of Willful Path Conduct Under Streamlined Version of OVDP
The Daily Tax Report quoted Scott D. Michel regarding
questions raised on the streamlined version of OVDP. Key areas of
uncertainty included, how far back the IRS will look to assess
willfulness and which version of the program will be offered to
taxpayers living in the U.S. For the complete article, please click on
the link above to view a PDF.
Excerpt taken from the article..............
Questions Raised
Some practitioners said although it is still relatively early in the process, there are numerous questions about how the program operates and more guidance is needed. (lol..)
S.D.M, said some questions relate to the version of the streamlined program offered to taxpayers living in the U.S. One is whether a 5 percent penalty would be available in cases where taxpayers only had signature authority over a foreign account. Taxpayers also want to know whether the domestic version of the program is available for those who didn't file tax returns at all for their foreign accounts. Right now it appears it may only apply to those who want to file amended returns.
Another key area of uncertainty is how far back the IRS will look to assess willfulness. The streamlined program calls for taxpayers to submit three years of delinquent returns and six years of delinquent FBARs, or Reports of Foreign Bank and Financial Accounts, also known as the Financial Crimes Enforcement Network (FinCEN) 114.
In considering willfulness it isn't clear whether the government would look three years back, six years back, or to the start of the account. Another question is how the IRS will handle situations where a parent was willful and their son or daughter is now dealing with the account.
"We're struggling with these questions,"
The Caplin practitioner said in the bigger picture, many taxpayers are in a difficult position because they have accounts in Swiss banks that are preparing to hand over a huge amount of information to the IRS under a program that allows the banks to escape prosecution if they pay hefty fines and disclose their U.S.-owned accounts. "These taxpayers would like to be able to signal to the IRS, in a way that would protect them from disclosure by a bank, that they're entering the OVDP," Michel said.
my response :
The following questions remain -
1. Will U.S. persons be held to a tougher standard than expats?
2. What will constitute in the eyes of IRS a conscious effort to avoid learning about the reporting requirements?
3. The IRS Internal Revenue Manual says not checking the box on Schedule B of Form 1040 will not alone establish willful blindness, but does not say what facts will?
4. Under what circumstances will willful blindness be asserted?
5. What are the largest facts leaning towards non-willfulness?
I think we will be out of luck after 5 years into the OVDI/P conundrum to further expect guidance from the IRS - not because they would be unable to but it would seriously hurt and restrict their mission of maximizing penalty revenues. To leave so many questions unanswered is not by chance but by design.
Again nothing has changed unfortunately when I have to read hyperbolic threats from tax lawyers (it seems now always to be the same 5 or 6 names mentioned in the press to whom I have spoken many times) a.k.a independent IRS subcontractors without the statistics to back them up with regards to possible criminal prosecutions, no criminal protection , aggressively prosecuting cases or walking into the lions den fear mongering remarks etc.
DOJ Tax and IRS still publicize indictments, pleas, convictions and sentences -- to encourage taxpayers to comply ..lol !
“We see evidence as to how the IRS interprets non-willfulness and they're going to hold taxpayers to a pretty high standard. The test is, did you know in your stomach that you were supposed to be telling the government about these accounts? But that test goes to knowledge of the legal obligation and should not necessarily mean per se that the failure to disclose was willful. Very few people who are actually residents will qualify. Those people may be held to a tougher standard because there is a greater expectation of awareness of IRS requirements. You'd better be prepared to address why your client is not willful and you must be prepared to address why your client is not willfully blind. You're being asked to disprove a negative.“
Questions Raised
Some practitioners said although it is still relatively early in the process, there are numerous questions about how the program operates and more guidance is needed. (lol..)
S.D.M, said some questions relate to the version of the streamlined program offered to taxpayers living in the U.S. One is whether a 5 percent penalty would be available in cases where taxpayers only had signature authority over a foreign account. Taxpayers also want to know whether the domestic version of the program is available for those who didn't file tax returns at all for their foreign accounts. Right now it appears it may only apply to those who want to file amended returns.
Another key area of uncertainty is how far back the IRS will look to assess willfulness. The streamlined program calls for taxpayers to submit three years of delinquent returns and six years of delinquent FBARs, or Reports of Foreign Bank and Financial Accounts, also known as the Financial Crimes Enforcement Network (FinCEN) 114.
In considering willfulness it isn't clear whether the government would look three years back, six years back, or to the start of the account. Another question is how the IRS will handle situations where a parent was willful and their son or daughter is now dealing with the account.
"We're struggling with these questions,"
The Caplin practitioner said in the bigger picture, many taxpayers are in a difficult position because they have accounts in Swiss banks that are preparing to hand over a huge amount of information to the IRS under a program that allows the banks to escape prosecution if they pay hefty fines and disclose their U.S.-owned accounts. "These taxpayers would like to be able to signal to the IRS, in a way that would protect them from disclosure by a bank, that they're entering the OVDP," Michel said.
my response :
The following questions remain -
1. Will U.S. persons be held to a tougher standard than expats?
2. What will constitute in the eyes of IRS a conscious effort to avoid learning about the reporting requirements?
3. The IRS Internal Revenue Manual says not checking the box on Schedule B of Form 1040 will not alone establish willful blindness, but does not say what facts will?
4. Under what circumstances will willful blindness be asserted?
5. What are the largest facts leaning towards non-willfulness?
I think we will be out of luck after 5 years into the OVDI/P conundrum to further expect guidance from the IRS - not because they would be unable to but it would seriously hurt and restrict their mission of maximizing penalty revenues. To leave so many questions unanswered is not by chance but by design.
Again nothing has changed unfortunately when I have to read hyperbolic threats from tax lawyers (it seems now always to be the same 5 or 6 names mentioned in the press to whom I have spoken many times) a.k.a independent IRS subcontractors without the statistics to back them up with regards to possible criminal prosecutions, no criminal protection , aggressively prosecuting cases or walking into the lions den fear mongering remarks etc.
DOJ Tax and IRS still publicize indictments, pleas, convictions and sentences -- to encourage taxpayers to comply ..lol !
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