IRS to Begin Examining All Non-Willful Certifications of Offshore Accounts – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on July 1, 2014

According to one Internal Revenue Service (IRS) official, the agency will soon begin reviewing all taxpayer certifications of non-willful noncompliance that it receives through the new streamlined filing compliance procedure set up for US taxpayers with undeclared overseas accounts.

During the June 20 New York University School of Continuing and Professional Studies tax controversy conference, Jennifer L. Best, a senior advisor to the IRS deputy commissioner (international), said that the IRS will not hold “quiet disclosures” against taxpayers who wish to use the new procedure. “We’ll decide if there’s any reason for further inquiry” on the certifications, said Best, adding that existing audit classification criteria will apply to all returns filed using the new procedures just like it would for any timely filed return.

These comments followed an IRS announcement on June 18 explaining that the agency was expanding its streamlined offshore voluntary disclosure procedures for both US residents and nonresident US taxpayers. The new procedures feature lower to zero penalty rates compared to the agency’s standard Offshore Voluntary Disclosure Program, but qualification requires that taxpayers be able to certify that their noncompliance with tax filing requirements was non-willful.

The definition of what constitutes “non-willful” noncompliance has presented some problems. John C. McDougal, a co-panelist at the tax controversy conference and special trial attorney in the Office of Chief Counsel, Small Business/Self-Employed Division, referred to this definition as a “gray area.” McDougal added that, although they cannot give much guidance to help taxpayers with the facts and circumstances test used by IRS agents, “the concept of willfulness is well enough documented in the case law” that practitioners should be able to help their clients make those determinations.

Notably, the lowered penalty rates under the new streamlined procedure are not available to taxpayers who have already entered into the Agency’s OVDP and paid penalties. This lack of a refund on the difference between that penalty and the new penalty is due to the “difference between OVDP and streamlined compliance procedures,” according to Best. She added that the penalty base and rates are lower in the streamlined disclosure procedure in order to allow non-willful taxpayers to become tax compliant.

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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