Get in Line Brother #8 - Enablers' Exposure from IRS Voluntary Compliance Initiative

The IRS initiative for offshore accounts and entities offers benefits only to the taxpayers involved. Those benefits are substantial indeed -- avoidance of criminal prosecution and substantially reduced penalties -- and offer a strong incentive for taxpayers to join the program. Many of those taxpayers had U.S. tax professionals who were enablers as to the foreign accounts and foreign entity structures. These enablers' activities may come under scrutiny as the taxpayers open their kimonos. Since the taxpayers must cooperate and disclose, tax professional enablers who came close to or crossed the magic line should have some concerns. Much of the planning by tax professionals that I have observed in the offshore context involves strained and technical interpretations of the Code that often defy common sense, and we know from the spate of tax shelter enabler prosecutions that the Government will prosecute and convict on strained interpretations that cross the line. At a minimum, tax professionals who assisted clients in their offshore adventures should seriously consider whether they should be involved in their clients' decisions with respect to this new IRS incentive for foreign accounts and structures. Can these professionals render objective advice as to whether the taxpayer should even enter the program? And, assuming the clients decide to enter the program, can these professionals properly represent the clients in effecting the required cooperation and disclosures where they may be tempted to shape the cooperation and disclosures to protect their own interests rather than the clients' interests?

And, on a related topic, could the clients -- or some of them anyway -- enter a dialog with the IRS about avoiding at least the penalties by delivering up the professional on a silver platter?

And, could the clients even qualify for whistleblower rewards if the professional has enabled others? (In this regard, taxpayers tempted to hunker down and not join the program might consider whether they are at risk of being discovered by this process as other taxpayers disclose the role of the common professional.)