tag:blogger.com,1999:blog-1519969502186924526.post5586353396375977878..comments2023-10-24T08:00:53.865-05:00Comments on Federal Tax Crimes: Watch the Refund Statute of Limitations on OVDP Payments Related to Income Tax (11/16/13)Jack Townsendhttp://www.blogger.com/profile/14469823736335455874noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-1519969502186924526.post-85474908754784467332014-04-29T08:30:32.255-05:002014-04-29T08:30:32.255-05:00Jack, Would your answer change if that taxpayer ha...Jack, Would your answer change if that taxpayer had made the decision based on advice from a CPA (and not attorney), a CPA who is very experienced with over 60 OVDP cases?SSDnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-88246993963864360582014-04-29T07:57:19.365-05:002014-04-29T07:57:19.365-05:00SSD,
That is a good question, but as with many qu...SSD,<br /><br />That is a good question, but as with many questions in this program, there is no easy answer. Technically, reliance on a lawyer's advice on whether to join OVDI or do QD/GF is not a defense to any penalty for failing to file the FBARs.<br /><br />However, being able to show that, upon discovery of the problem, the taxpayer sought competent legal advice and followed the advice, even if the advice turns out to be wrong, could work in the taxpayer's favor. The IRS may be willing to give the taxpayer the benefit of the doubt because the taxpayer appears to have acted responsibly by seeking and relying on advice.<br /><br />But, just to circle back, that is not a defense to the penalty that applies to the conduct being penalized -- failure to file the FBARs. It is must a mitigating factor that could, in the context of the other facts, achieve a favorable result.<br /><br />Best regards,<br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-74912480068735233772014-04-28T21:26:01.580-05:002014-04-28T21:26:01.580-05:00Jack,
Let's say a taxpayer with good reco...Jack, <br /> Let's say a taxpayer with good record and no criminal prosecution risk makes some decision (QD/GF i.e. something other than OVDP) based on his lawyer's advise. But later on IRS audits him and consider his filing as willful conduct to avoid FBAR penalty. Can he argue that he should only be assessed non-willful penalties because he did everything as per the legal advice he got? <br />Thanks,SSDnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-71749226316784655472013-11-24T09:08:13.593-06:002013-11-24T09:08:13.593-06:00It seems that with the OVDI process, you are damn...It seems that with the OVDI process, you are damned-if-you-do and damned-if-you-don't when it comes to applying payments to the years they were intended for. The advantage of applying the payments to the years they were supposed to be made in is that it avoids Collections being started on OVDI years in which significant amounts of tax are owed. In OVDI, if payments are applied to only one year, they are not usually allocated as the taxpayer indicated until an examiner is assigned. For years in which tax is owed, this could quick start the Collections process as the taxpayer returns are entered into the system in OVDI, but it can sometimes take years for an examiner to be assigned. To avoid confusion, it would be easy enough for the IRS to develop a consistent policy on applying payments to years indicated by the Taxpayer and on the Refund Statute of Limitations within OVDI, but so far this has not been done.anon5percentnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-3040470543780182672013-11-24T08:25:38.361-06:002013-11-24T08:25:38.361-06:00Jack's answer is a good summary of the time fr...Jack's answer is a good summary of the time frame. Do not let IRS statistics on opt out processing time fool you. Your view of the opt out process timing can be a lot different than how the IRS measures it. In my case, I opted out about 6 weeks after the agent had started with my case (before a 906 was issued). The agent was clear with me that because of the agent's schedule and my schedule, work would not begin on the opt out until about 6 weeks after that. That was okay with me. Once the agent officially started to process my opt out, it took about 3 - 3.5 months before the agent informed me that the case would be closed. The agent likely entered 90 days for opt out processing in the IRS system files, but it felt a lot longer to me because it took me another 4 months to get all the refunds I was owed. The refunds were refunded year by year, not in one lump sum and one year took a lot longer than the others to receive.anon5percentnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-33374460917548591282013-11-23T08:14:47.806-06:002013-11-23T08:14:47.806-06:00It is simply common sense that the IRS should pay ...It is simply common sense that the IRS should pay that money back without special rigamarole. They are making individuals pay upfront when it is not really clear yet that the money is owed. When it turns out the money was not owed it should come back no matter what. The FBAR / OVDP mess is an entirely different case from noticing you made a mistake on your tax return ten years ago and paid too much and now want that money back. <br /><br /><br />But lawyers should be happy with this added and unfair complication, as it gives them more justification for existence.<br /><br /><br />But since when has the IRS as an institution actually cared about fairness or justice? Some of its employees do, but certainly not all.Sallynoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-25181083773768519052013-11-21T18:25:48.725-06:002013-11-21T18:25:48.725-06:00I have been reading through the various case filin...I have been reading through the various case filings from both parties. My personal feeling right now is it is 50 50 that this case could be won be either side and is probably headed to the appellate level no matter what happen in district. <br /><br /><br />A couple of broader thoughts though:<br /><br /><br />1. The case is being litigated by DOJ Tax representing the IRS even though the issues involved are mainly ones of Administrative Law. Perhaps the government would have better odds with more experienced administrative law attorneys.<br /><br /><br />2. There are some real problems in the final regs in my opinion effecting compliance with both the APA and Regulatory Flexibility Act. The type of analysis generally given accompanying most "controversial" government regs by most agencies is not in existance with these regulations. Specifically there is little data given as to how many institutions covered by the RFA are even impacted by these rules.<br /><br /><br />3. The District Court Judge has ruled against the government on some high profile tax regulations cases in the past such as the Loving Tax Preparer decision. In fact I think there are some signs in the Loving decision that this judge is going to rule for the plantiffs on their APA claims at the very least.<br /><br /><br />4. On other hand Administrative Law gives a LOT of deference to the executive branch and the IRS did go through a full notice and comment cycle when adopting these rules. Additionally the Loving decision made by the same District Court judge involved step one of the Chevron standard. This case as acknowledged by both side is exclusively dealing with step two(Both parties acknowledge the IRS's statutory authority under the IRC to issue the rules) of Chevron.Tim12278noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-41530062955986697302013-11-21T13:27:17.697-06:002013-11-21T13:27:17.697-06:00Yes, I did mean FAQ 25. I have now corrected it. ...Yes, I did mean FAQ 25. I have now corrected it. Thanks for letting me know of the mistake.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-45802306131016652272013-11-21T11:30:04.250-06:002013-11-21T11:30:04.250-06:00You mean FAQ 25 in your first sentence, right?You mean FAQ 25 in your first sentence, right?anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-41258965464988221512013-11-18T14:43:59.103-06:002013-11-18T14:43:59.103-06:00Jack, you are right, QD should be considered as fu...Jack, you are right, QD should be considered as full disclosure (if it is disclosed based on SOL) and it is to correct past error.ijhttp://ij.org/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-32486178949703465482013-11-18T14:34:16.209-06:002013-11-18T14:34:16.209-06:00I am not sure that QD would be considered not full...I am not sure that QD would be considered not full disclosure for whatever benefit full disclosure offers. This assumes that the amended returns and delinquent FBARs are squeaky clean and the taxpayer fully cooperates in any ensuing inquiries or investigations. GF is not a disclosure at all. But, if and when an audit starts, that taxpayer should fully cooperate. (Keep in mind that, since I think GFs are not good strategies for those with material criminal risk, when I talk about GFs I am including only those persons doing a GF that had no material criminal risk and thus would not be implicating their Fifth Amendment privilege.)<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-77826397936827910322013-11-18T14:30:55.230-06:002013-11-18T14:30:55.230-06:00You could ask the agent or, if you have a practiti...You could ask the agent or, if you have a practitioner involved (with 2848), there is a web portal that will permit transcripts to be reviewed.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-81924381021792299242013-11-18T14:22:03.119-06:002013-11-18T14:22:03.119-06:00I have not compiled this information for my opt ou...I have not compiled this information for my opt outs. I suspect that it is in the range of 4 months to 1 year. I think there are a lot of factors that cause times to vary.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-51751004774230066362013-11-18T14:20:36.659-06:002013-11-18T14:20:36.659-06:00I am not sure it is a "safe assumption that t...I am not sure it is a "safe assumption that the IRS will not be able to pursue most QD/GF cases," Perhaps I quibble. It is probably a true assumption but perhaps not a safe assumption for any particular individual.<br /><br /><br />I do think the IRS will be selective in pursuing QD and GF cases. The critieria it employs in that selectivity is not known nor reasonably predictable. The uncertain risk is that the criteria may cast a wider net than some think.<br /><br /><br />The key is whether to get in OVDI/P or choose QD or GF. As I have said frequently, those with material criminal exposure should get into OVDI/P. That same exposure, when overlaid to the civil side, should counsel against taking an audit -- whether an opt out audit, a QD audit or a GF audit. But, for those with no material criminal exposure (and resulting civil exposure), the choices are open for the well-counseled who can operate in an environment of uncertainty.<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-88964190520963236222013-11-18T13:53:37.277-06:002013-11-18T13:53:37.277-06:00It's not full disclosure but what counts is th...It's not full disclosure but what counts is the law, and Jack has pointed out that there is no legal obligation to make an OVDI disclosure (though OVDI may be a wise choice, depending on individual circumstances.) I hope I am paraphrasing Jack correctly.<br /><br /><br />Though the IRS wants to discourage QD/GF, and states that it is looking for such cases, one consideration is that the IRS is not a model of efficiency and does not have unlimited resources, as can be seen with the high level of earned income credit fraud (which is easily provable since it involves nonexistent dependents and/or false W2 forms, and there have been cases of hundreds of such refunds being sent to the same address.) I think it's a safe assumption that the IRS will not be able to pursue most QD/GF cases, and for those it chooses to pursue, it will be selective as to choose larger cases or those with worse facts, though it may also pursue a few small good facts cases just to show that there is no absolute safety for such cases. This does not help those chosen for further action, but I would expect a large number of QD/GF cases, by those for whom QD/GF makes sense, sill go through unchallenged. The key of course is to make an educated decision as to whether to do QD/GF or OVDI.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-61640672207658168482013-11-18T13:41:52.397-06:002013-11-18T13:41:52.397-06:00About how long does optout take from the time the ...About how long does optout take from the time the optout decision is made? How long does it take for the IRS to respond during the back and forth process? If there's no average, what's the time range? Thanks!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-39937116147505708532013-11-18T13:15:39.242-06:002013-11-18T13:15:39.242-06:00What I learned from this article:
If a US person ...What I learned from this article:<br /><br />If a US person fails to report a foreign bank account, he faces a penalty of up to $10,000 or 50% of the highest balance, per year. If a bank fails to report a non resident alien's account on Form 1099, the penalty would be up to $100. (Right now there is no penalty.)<br /><br />Under FATCA foreign banks would report US Person accounts of over $50,000. US banks, under the proposal, would report to the IRS only if the account earns over $10 interest/year. In other words, non-interest bearing accounts would not be reported, and foreigners wouldn't be foregoing much interest under the current near-zero interest rate environment.<br /><br />A foreign banker holding a nonreported account belonging to a US person is conspiring to defraud the US Government. If a foreigner files IRS Form W8 which currently exempts account information from being reported to the IRS, the banker and IRS are NOT "conspiring" but simply following US law.<br /><br />It would be "burdensome" (the word used in the article) for US banks to file a Form 1099 to report interest on foreign-held accounts, but it's not burdensome to do it for US accounts, as is currently being done.<br /><br />The proposal would reduce foreign investment in the US. This suggests there must be a good amount of undeclared foreign funds in US banks.<br /><br />The Texas and Florida Bankers suggest we should have reciprocity only with countries that hold large amounts of US funds but not with countries whose residents have undeclared funds in the US.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-56924421935593422622013-11-18T13:00:34.853-06:002013-11-18T13:00:34.853-06:00I am not sure whether 'not undeclared' in ...I am not sure whether 'not undeclared' in the first category means the same as 'declared' or whether I'm missing something.<br /><br /><br />In Category 3, it's not clear why only accounts reported after the bank notifies the customer of voluntary disclosure program are covered. Would an account already declared prior to that letter not be exempted from penalty?<br /><br /><br />It is also not clear how a bank can be expected to notify all its current (and presumably past) US-person customers of OVDI, since many may have moved or died. Also, although the bank would be able to identify those using a US passport to open the account as US person, how would it be expected to identify green card holders, or accidental Americans who themselves did not previously know of their US status?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-57115560511404995632013-11-18T12:46:54.268-06:002013-11-18T12:46:54.268-06:00Thanks for pointing out that the payment may be ma...Thanks for pointing out that the payment may be made before (and not necessarily contemporaneously) with the package. For those owing a substantial amount of tax, this would stop the accumulation of interest due. I wish my lawyer had told me that.<br />Of course, an early payment would also start running the clock for filing a claim for refund.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-17199507670780078652013-11-18T12:44:46.345-06:002013-11-18T12:44:46.345-06:00For those who submitted payment prior to the new p...For those who submitted payment prior to the new policy of allowing the taxpayer to indicate to which years the payment should be applied, is there a way of knowing to which year the payment has been allocated?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-52852497196637325722013-11-18T11:18:36.310-06:002013-11-18T11:18:36.310-06:00Jack, this seems reinforce my point as "QD/F...Jack, this seems reinforce my point as "QD/FD" should not be considered as full disclosure. Logically it does make sense as we are talking about correcting past error/mistake or confessing our past sin.ijhttp://ij.org/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-18875438875593136362013-11-18T09:15:22.631-06:002013-11-18T09:15:22.631-06:00Yes I do.
Thanks,
Jack TownsendYes I do.<br /><br /><br />Thanks,<br /><br /><br />Jack TownsendJack Townsendhttp://www.tjtaxlaw.com/noreply@blogger.comtag:blogger.com,1999:blog-1519969502186924526.post-38910317196900364702013-11-17T20:08:27.586-06:002013-11-17T20:08:27.586-06:00Jack, do you find it troubling that this superviso...Jack, do you find it troubling that this supervisory revenue agent is basically endorsing the idea that taxpayers should be punished for declining to do something they have no obligation to do? Either he doesn't know what he's talking about (because an audit is an audit is an audit) or he's right that the IRS will be unduly harsh with taxpayers who choose (as they're entitled to) not to make voluntary disclosures. Either way, I find this very troubling.Michael J. Millernoreply@blogger.com