Some taxpayers with undisclosed offshore accounts are attempting to either enter the Offshore Voluntary Disclosure Program (OVDP), indicating willful failure to disclose accounts, or adhere to the Streamlined Filing Compliance Procedures (SFCP), indicating non-willful failure to disclose accounts, without the aid of an experienced attorney. The reasons below outline why willfulness determination should be entrusted to an attorney.
1. If a taxpayer chooses to make a streamlined submission, that taxpayer is then barred from later applying to the Offshore Voluntary Disclosure Program (OVDP) and vice-versa. Furthermore, if the IRS challenges a streamlined submission that has severe indicia of willfulness, the taxpayer could then be subject to numerous penalties that could leave the taxpayer in a much worse position than had the taxpayer entered OVDP. Taxpayers should note that a streamline submission must survive three levels of scrutiny: (1) IRS examiner determination (2) manager review of the IRS examiner determination (3) committee review of both the manager and IRS examiner’s determinations. Therefore, the taxpayer must choose prudently with evidence paramount to surviving a strict review.
2. It is crucially important to consult with an international tax attorney to get a legal opinion on whether a taxpayer should apply for the streamlined filing compliance procedures or enter OVDP. The improper use of the streamlined filing compliance procedures can be a major trap for the taxpayer who deliberately or incorrectly chooses this route.
3. An international tax attorney should conduct a risk-based analysis using a myriad of legal factors applied to the taxpayer’s facts and circumstances to determine the issue of willfulness. This will provide the taxpayer with practical and sound advice in this extremely aggressive environment of searching out non-compliant taxpayers. Taxpayers should take care to engage an international tax attorney with significant experience and technical skills. Leaving a decision like this to guesswork or chance is not advisable.
About Five Stone Tax Advisers
Five Stone Tax Advisers has years of experience negotiating directly with the IRS to get the best possible outcome for you. Our International Tax Advisory and Compliance unit has a team of tax attorneys, certified public accountants and enrolled agents that form a single sourced point of contact that will provide services for all the legal, compliance and financial reconstruction aspects of these cases.