On certifying non-willfulness in transition to streamlined and other tidbits from Agent Bayer

- Although by law the IRS has to prove "willfulness," the IRS is not put to this burden until the taxpayers takes the Service to court. Unfortunately, many taxpayers caught in this unfortunate climate do not necessarily have the resources to fight the determination. Some IRS agents have an attitude of forcing the taxpayers to fight it out.
- The cases the government has won lately sets a very broad definition for "willfulness" by looking to how the question on Schedule B was answered. The agent cited that as a reason for imposing willfulness penalty.
- An agent will be assigned to review the non-willfulness certification and penalty computation. If the taxpayer is not eligible for non-willfulness treatment or there are issues with the penalty computation, they will be notified.
- Now that the Streamlined Procedure has been offered to US residents, taxpayers who do not go through one of the approved routes will be severely punished if detected.
- A taxpayer with good facts who gets rejected on Streamlined can still opt out of OVDI/P. All of this suggests that a robust statement of non-willfulness and reasonable cause should be included with the certification.
- Under transition you are apparently not redoing your original submission but updating it with more recent (compliant) years.
- The penalty base also includes tax-compliant unreported foreign accounts [ I suppose this would be because they are reportable on Form 8938], as well as foreign stocks/bonds not held in a financial account.

A request for transitional treatment might not be as simple or as liberal as many people initially thought, although no one seems to really know yet.  

The agents I spoke with informed me that the IRS is taking a more strict non-willfulness approach to requests for transitional treatment. On its face, in a type of closed world analysis, a taxpayer’s scenario is either clear as day non-willful or not so clear. If not so clear, then it’s an automatic rejection. This doesn’t necessarily mean, however, that it’s willful, so opting out is still a possibility. In an opt out, you are permitted to submit additional information, respond to agent questions and walk the taxpayer through an interview with the IRS.  In the request for transitional treatment, however, I have been informed that nothing additional will be permitted once our certified statement and request for transitional treatment is submitted. One agent even said that it is her understanding that “merely not knowing about the FBAR requirement,” alone, is not enough to qualify for transitional treatment. 

Even less sure how strict the IRS will be on those who are only now coming forward through the 2014 new streamlined procedures… Certainly the IRS can’t be as strict as it claim’s it will be with taxpayers requesting transitional treatment.

 http://federaltaxcrimes.blogspot.ch/2014/07/rumors-on-workings-of-streamlined.html