Thursday, November 14, 2013

IRS Indian Initiative for Persons Outside OVDP; Also on Quiet Disclosures (11/14/13)

Reporting on a California State Bar Tax Section Meeting, Tax Notes reports that the IRS will soon (as early as the week of 11/11/13) ) "begin examining U.S. taxpayers suspected of holding undeclared accounts in Indian banks, according to Nicholas Connors, a supervisory revenue agent" with SB/SE.  Kristen A. Parillo, IRS Will Soon Examine U.S. Taxpayers With Undeclared Indian Bank Accounts, 2013 TNT 219-4 (11/13/13).  Some excerpts:
After receiving account information from Indian banks, the IRS has about 100 Indian bank account cases that it is sending out for examination across the country, he said. 
"I think California, because of the large Indian population, is going to get more than its fair share of cases," Connors said. "Within the Northern California/Bay Area, we're scheduled to pick up 30 or 40 of those." 
"Looking ahead, the offshore bank investigations are just going to grow," Connors said. In addition to India, "Israel is on the list of banks that is providing information to us, and from there it just keeps going on and on," he said. "Within Examination, there's talk that this could someday become a work issue for every single revenue agent in SB/SE where everyone will be working some type of offshore case."
Regarding Quiet Disclosures, Tax Notes reports:
The SEP team continues to examine quiet disclosures as well as cases regarding taxpayers who opted out of the IRS offshore voluntary disclosure program (OVDP), said Connors. "The guidance we're getting on quiet disclosures has been extremely harsh," he said. "Essentially those taxpayers walked past compliance three times: They didn't file correctly the first time, they didn't come in under voluntary disclosure, and now they're trying to hide it by slipping it in through an amended return. Don't expect much leniency if we have a quiet disclosure case; agents are being told to be aggressive." 
Again, I will repeat my mantra that the IRS has not said that the audit for persons who join OVDP and opt out will be more lenient than for persons who are audited after a quiet disclosure or a go-forward.  One could read the foregoing statement as hinting at that, but that is not been what the IRS has said to date.  All it has said is that those opting out of OVDP will be audited and get the audit result.  That is all that can happen to taxpayers who are audited after quiet disclosures or go-forwards.


  1. On the one hand it's refreshing to see the US realize that there are other countries besides Switzerland. In addition to Bermuda, there are also the Bahamas, Caymans, Turks and Caicos, and others in the Caribbean.

    On the other hand the same favorite phrases about skirting the law, secret accounts and hiding money overlook those with legitimate reasons for having foreign accounts (current or past residence abroad, sending money to/from foreign family members, etc.)

    The availability of data on correspondent accounts is nothing new. It is, however, a pain in the neck to process it. A canceled check will typically just have the name of the payee and the U.S. account number to which it was deposited. The government would have to obtain information identifying the account holder from the bank where the account was deposited. (Full name, DOB, SSN.) Then it would have to contact the individual. Maybe the funds came from his undeclared account. But they also could be from a declared account, a gift or loan from a foreign relative, purchase of an asset by a foreigner, etc. Depending on the explanation, the account owner might be asked for proof. Point is, payments are made to and from persons and businesses for a variety of reasons, not all of which will point to activity of concern to the IRS.

    The value of this seems to be mainly as a way to scare people into joining OVDI. I doubt that the IRS would be willing or able to commit the resources to dig into each cleared check, and would choose the ones with the most potential (large checks or many consecutive checks payable to the same payee.) On the other hand, those affected should keep in mind that once the government has their identifying information, they become ineligible to join OVDI. I don't know whether merely having a canceled check payable to "John Smith" would be enough or whether the government would have had to receive his DOB and SSN from the bank where the account was deposited.

  2. It's been years since I read Robinson Crusoe, but it seems that his inference from circumstantial evidence was correct, since the footprints might have belonged to Friday.

    On the other hand the evidence also brings to mind a reasonable doubt. Does the effect of wind cause footprints to become bigger? Or as moist sand dries along the edges of the footprint, does it fall into the depression of the footprint thus making the footprint bigger? I believe this effect does occur with footprints in the snow.

  3. It would be interesting if someone who knows how to work databases could analyze the spreadsheet to se what difference there is in sentencing between those over the median age and under the median age.

  4. Here's something else for all to consider about the Ninth Circuit's recent Irwin Schiff
    opinion. The Ninth Circuit concluded that the Journal of Taxation article about Mr. Schiff,
    which he attempted to move into evidence, would have "confused" the jury. No doubt. That
    article concluded Mr. Schiff's first attempted tax evasion conviction (U.S. v. Schiff, 801 F. 2d
    108 (2d Cir. 1986)) "overturned more than 40 years of settled tax law," specifically, Spies v.
    U.S., 317 US 492 (1943).

    Could anyone seriously argue that (a) Mr. Schiff did not rely on the Journal of Taxation
    article to form his belief that his conduct was lawful or (b) the jury should not have
    considered as evidence a scholarly article that informed Mr. Schiff he was once wrongly
    convicted of attempted tax evasion? I say the Ninth Circuit erred now as the Second Circuit
    erred then.

  5. I presume the author of this article considers the Holocaust some kind
    of a picnic, and it's survivor's despicable human beings for having
    survived the Third Reich, it's concentration camps and crematoriums.

    resultant mindset and the responsibility toward oneself to survive, no
    matter what political winds prevail is of no importance to the
    particular dictator out to fleece all and everything no matter where it
    may be secreted to make it through the next rainy day.

    That The STATE OF MIND, and life's sustained bad experiences are of NO-MATTER! and
    Premise that Uncle SHAM, is the White Knight where fairness equity and
    SUBSTANTIAL JUSTICE is the rule of the day!, is a PREPOSTEROUS CONCEPT.

    ONE DAY of Home detention imposed to a HOLOCAUST survivor for having an

  6. Irwin Schiff, is a True American Patriot, and a threat to the Establishment.

    The Legal system is part of the fiction, that common people (Peons and
    Peasants) have recourse to equity and substantial justice.

    When, one becomes too smart for their breaches....there is only treatment prescribed for you, and it is called a RAILROAD JOB.

    Why be polite and mince your words?
    The TRUTH shall make one FLEE.

  7. Thanks for your comments. I disagree, however, with the notion that, being a holocaust survivor is a get out of jail free ticket. Their experiences obviously are part of the overall factors that should be considered in the decision to prosecute initially, in the decision by jury or judge to convict, and in the sentencing. But it is and should not be a free pass to violate the law. That said, however, the holocaust survivors are quite elderly at this point (have to be 70+ years even for the youngest), so age and other factors will and should bear upon those decisions.

    Jack Townsend

  8. In addition to Holocaust survivors, there are those who experienced wars, revolutions, socialism, government expropriation, bank failures throughout the world. Unfortunately (per the anecdotal evidence I have from my lawyer) these factors are generally brushed aside by the IRS and it seems to treat everyone as the worst of the worst, without allowing for shades of gray which would mitigate (though not necessarily eliminate) penalties.

  9. I have no anecdotal evidence that this genre of factor is outcome determinative in the opt out audits, but I do know that they should be presented to the IRS and do believe that they will be considered, with all other evidence, in making the final determination. Keep in mind that the audit is "holistic" -- to review the overall circumstances that bear upon willfulness and nonwillfulness and reasonable cause. Of course, most of what the IRS knows about such factors will be in the "briefs" submitted by the taxpayer's counsel which ought facially to state a sympathetic case (if not, the taxpayer should probably not have opted out).

    Jack Townsend

  10. Irwin Schiff has no business being in a jailcell but the judge at his trial sure does.


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