Tax Notes Today has an article on a webcast yesterday on the offshore account initiatives. Andrew Velarde, No Acknowledgment of Filing Coming for Streamlined Process, 2015 TNT 37-4 (2/25/15)
1. There is and will be no acknowledgment of filing following entry into
the Streamlined procedures. The cashing of checks is not an indication
that the IRS has accepted the certification of nonwillfulness. If the
taxpayer desires closure, the OVDP program can be used.
2. There is no benefit to requesting pre-clearance in OVDP and then
pursuing the streamlined treatment. The notion apparently is that, if
the taxpayer is non-willful, he does not need the placeholder benefit
that pre-clearance might offer.
3. The article does have this from Kathryn Keneally, former DOJ Tax AAG:
Keneally
also warned practitioners they could be sending the wrong message when
they use pre-clearance for their clients when it isn't needed. "If
there's a pre-clearance and then there isn't an OVDP filing, that's also
saying something to the government," Keneally said. "If . . . there are
treaty request responses that actually disclose those accounts, or
there's a whistleblower, and that information comes forward, you're at
least risking some investigation into why you tr[ied] the pre-clearance
and then [did] not come in, because we have this mismatch," she said,
adding that "it is not a free pass" to take such action.
The OVDP requires income tax beyond years that would be open if the
taxpayer is nonwillful and requires a higher offshore penalty for those
joining OVDP after announcement of the Streamlined procedures, so the
cost of getting closure through OVDP is pretty great. The taxpayer
could opt out of OVDP and take an audit, in which case if the taxpayer
is nonwillful, the opt out audit should produce a result perhaps even
more beneficial than even the Streamlined result. But it will be a
hassle. So, those wanting the benefit of Streamlined are probably
better off to just do the Streamlined and just accept the uncertainties
involved. Practitioners were using the OVDP pre-clearance followed by streamlined
to have an argument that they should get streamlined if some event
occurred between the pre-clearance and the submission of the streamlined
documents. But, if the taxpayer really is nonwillful, ultimately bad
results would not obtain even with that interim event. And, if the
taxpayer is willful, the bad result can still obtain anyway. But imo. the more immediate risk is that the IRS might use the pre-clearance with
failed OVDP submission (nothing further done in OVDP) as a basis to do
at least preliminary work for an audit. And, of course, the IRS could
use information from other sources to start an audit. But, if the
taxpayer is really nonwillful, an audit should not be feared, however,
the IRS gets information. And, if the IRS gets information that
indicates willfulness, then the taxpayer should have joined and
completed the OVDP program.
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