Taxpayers who do not necessarily meet all the factors under the IRS's streamlined filing compliance procedures for previously unreported offshore accounts should nonetheless apply to the program if they are low-risk account holders, senior IRS officials said December 6.
The streamlined program, introduced August 31, was meant as a way to allow low-risk, noncompliant account holders to come clean to the government. It introduced a $1,500 threshold for tax due in a year, as well as factors that would increase a taxpayer's risk. Those taxpayers that had no risk factors and met the $1,500 threshold would have their applications "processed in a streamlined manner," the IRS said at the time.
Just because a taxpayer fails to qualify under the criteria as being low risk is not a reason to avoid applying to the program, said David Horton, director of the IRS Large Business and International Division's international individual compliance function. Missing one of the factors only means that a revenue agent will review the taxpayer's application, Horton said at the American Bar Association Section of Taxation's annual National Institute on Criminal Tax Fraud in Las Vegas.
"That does not mean there's going to be an audit," he said. "It means it's going to be reviewed and could be subject to examination." Some practitioners who spoke with Tax Analysts said they had viewed the program as having strict guidelines and that only those taxpayers who had no indicia of higher risk and who met the dollar threshold could apply.
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The IRS "will not necessarily beat up on a taxpayer just because he's a little bit over or doesn't meet one of the criteria," said Christopher Sterner, IRS deputy chief counsel (operations). "It's just we're not guaranteeing that the returns will just be processed without any further inquiry from the Service."
Nor does the IRS have any plans to revisit the $1,500 threshold or the risk criteria, Sterner said. It was set up that way based on what the IRS heard from taxpayers, he said, adding that the streamlined processing is an approach that allows low-risk taxpayers to become compliant. "I don't think people should be afraid to use this process if they really are a low-risk taxpayer," he said. It is highly unlikely that the IRS will increase the threshold, he told Tax Analysts later.