In the Report at pp. xxxiv and xxxv, the Taxpayer Advocate criticizes the IRS's implementation of its statement in the 2009 OVDP that “[U]nder no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes.” The IRS did the old bait and switch on that seemingly clear statement. The Taxpayer Advocate lays it out pretty well in her report. The relevant excerpt (with footnotes) is here. I have cut and paste the relevant excerpt without the footnotes are follows:
[*xxxiv]
K. IRS’s Inconsistency and Failure to Follow Its Published Guidance Damaged Its Credibility With Practitioners Involved in the Offshore Voluntary Disclosure Program
U.S. persons are generally required to report foreign accounts on Form TD F 90–22.1, Report of Foreign Bank and Financial Accounts (FBAR) and to report income from such accounts on U.S. tax returns. The IRS “strongly encouraged” taxpayers who failed to file these and other similar returns to participate in the 2009 Offshore Voluntary Disclosure Program (OVDP ), rather than quietly filing amended returns and paying any taxes due.136 It warned that those making “quiet” corrections could be “criminally prosecuted.” OVDP participants would generally be subject to a 20 percent “offshore” penalty in lieu of various other [*xxxv] penalties.137 The IRS announced, however, that “[U]nder no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes.”138 Taxpayers who would not be subject to significant penalties because their violations were not willful, or because they qualified for the “reasonable cause” exception, believed this statement applied to them.Addendum on 7/1/11: Tax Notes Today published an article yesterday titled Jeremiah Coder, Taxpayer Advocate Issues Assistance Order on Offshore Cases, Criticizes Disclosure Program, 2011 TNT 126-1 (6/30/11) which discusses the Taxpayer Advocate's report on the IRS's bait and switch. (The article is available here with permission of Tax Analysts, the publisher of Tax Notes Today.) In addition to the Taxpayer Advocate report, Coder confirmed "The Taxpayer Advocate Service (TAS) has issued at least one taxpayer assistance order (TAO) to the IRS involving an offshore account disclosure." There is no indication as to the precise nature of the TAO.
On March 1, 2011, more than a year after the 2009 OVDP ended, the IRS “clarified” its seemingly unambiguous statement.139 It would no longer consider whether taxpayers in the 2009 OVDP would pay less under existing statutes on the basis of non-willfulness or reasonable cause. Such taxpayers could either agree to pay more than they believed they owed or withdraw from the 2009 OVDP and face the possibility the IRS would assert massive civil penalties and seek criminal prosecution. Both options were problematic. Withdrawal would waste all of the resources already expended on the 2009 OVDP application and would not bring the taxpayer closure or certainty, as advertised. Moreover, in any future examination the IRS might have to request and review the items that were before the examiner processing the 2009 OVDP submission.140
Pressuring taxpayers who would pay less under existing statutes to remain in the program and pay more than they believe they owed was even worse. It violated longstanding IRS policy along with most conceptions of fairness and due process.141 The IRS’s inconsistency and failure to follow its published guidance damaged its credibility with practitioners and could be subject to legal challenge.142 In 2011, TA S will continue to communicate with taxpayers and practitioners to determine the impact of the IRS’s apparent reversal, advocate for the IRS to abide by the plain language of the original terms of the OVDP (as reasonably interpreted by the public and many of the IRS’s examiners), and document our findings in the National Taxpayer Advocate’s 2011 Annual Report to Congress.143
Jack
ReplyDeleteWhat is your opinion on whether the FAQ 35 interpretation by the IRS could be open to legal challenge ? I'm not a lawyer, but frankly it always struck me as saying that penalties would not exceed maximum wilfulness penalties (that would really only help taxpayers who owned non FBAR reportable income yielding assets). The TAS has access to internal IRS memos (I presume ?), so it should have been able to glean whether there was really a bait-and-switch, whether the original intention was just to clarify that penalties would not exceed statutes, or whether (as I suspect) somewhere in between -- The IRS likely did not have clearly formulated policies and expected to snare big time tax cheats and were rather caught of guard by the number of smaller fish who had good nonwillfulness arguments (or at least arguments where willfulness could not be proved). Finding that these cases were taking too much time, bogging down the process (and possibly some abuse by practitioners who asserted relief for ALL their clients), it decided to bring down the hammer and withdraw it in the name of administrative efficiency (with an obvious negative impact on equity).
[Although I think it was only withdrawn for cases where it had not been asserted.]
I think legal challenges are likely to be weak, but the question is whether its likely to lead taxpayers and practitioners to mistrust the IRS in the future. In the OVDI at least, there seem to be no grounds for doubts on penalties. And really, barring truly unusual cases, it would be hard for anyone to make unwillfulness cases after 2009/2010.
Is "Taxpayer Advocate" part of IRS ? If so, it is under the same leadership, and how that would help taxpayers ?
ReplyDeleteI might ask TA's help if OVDI wants to include my RRSP into FBAR penalty.
We've discussed the FAQ 35 bait and switch issue further below in this blog, and I've written about it here and in an article to which Jack linked below.
ReplyDeleteI believe that if challenged in court, the IRS reversal on FAQ 35 would be rebuked by a court. The practical issue is whether a taxpayer would want to litigate the issue against the IRS and become the test case.
My FAQ 35 consideration request was denied for a technical reason. My 906 closing statement wasn't calculated until March 2011, 18 mos after joining the OVDP program.
ReplyDeleteUnfortunate for me, sometime in February that FAQ 35 window had slammed shut.
John McDougal (IRS) is reported to have said that FAQ 35, as written “wasn't the intention of the Commissioner.”
The intention was to compare to the “Maximum” Civil penalties allowed. The FAQ 35 was just a “miscommunication” within their own Division. Ok. Really?
This recent TAO order is beginning to deal with the main problem of both the OVDP and OVDI programs. It is the denial of any "discretion" and the inability of anyone to apply a “reasonability test” if results come out as absurd.
I understand the IRS goal as stated in the 2009 OVDP was a “uniform and coordinated approach designed to make exposure to civil penalties more predictable and offer uniform penalty structure.”
However, at the end of the process, prior to issuing a 906 is where discretion could and should have been applied.
That would have assured that "someone", somewhere did the “penalty reasonability test” as related to the compliance objective in the letter and spirit of IRM 4.26.16.4.
The application of non discretionary ‘technically determined’ OVDP penalty, leads to penalties like ours that are 9 times the tax failure, Why? Our home value is added to highest aggregate due some non substantive rental income. There is no remedy for this except to try the irrevocable “Opt Out”.
The IRS, to its credit, has attempted to modify the OVDP program since I first entered on Oct 12, 2009. There are new provisions in the 2011 OVDI that attempt to eliminate some smaller sinners from the egregious penalty structure because the non discretion issue trapped them.
I think they began to realize their OVDP was bringing in a lot of small fish who were not the target of the program in the first place.
However, the approach of layering additional technical adjustments <$10K, <$75K, etc, still doesn’t address the core problem which is the lack of discretionary decision making somewhere, anywhere in the process.
It is just adding some pretty arbitrary thresholds to re-define the penalty application! Let you breach any of those "Technical” barriers by even $1, and the penalty applies. End of Story. Black and White. No discretion allowed!
So, after 21 months of arduous work and audit, the only option for us now, is either to take the ‘irrevocable’ Opt Out, Pay Up, or be kicked out. To get a discretionary Appeal review you have to waste a lot more IRS and Taxpayer resources, and take a BIG risk.
The Irony, for us, is that I was actually in sympathy with the intent of the OVDP program when it started. I support the attempt to get the big tax cheats into the system.
For the cheating “Whales” that have come into compliance it is a great and fair deal.
However, it is a “Minnow” fertilizer factory for us.
I think the IRS has gotten hung up on “uniform” penalties when they should have been focusing on an ‘appropriate and reasonable” penalties. Justice is never uniform. Each case is different. There is nuance. I didn’t think we punished jay walkers and bank robbers “uniformly” by putting them in the same penal system.
We are have 10 days left of 20 day window to take the ‘irrevocable’ Opt Out. It feels like we are in the countdown to execution.
If the OVDP or OVDI process provided an avenue for a Big Picture “reasonability test” on the penalties (with some higher level management discretion to adjust) before a field agent sent out the 906, I would have less complaints. I may still not like the result, but at least you would know the spirit of the discretionary guidelines in the IRM was applied.
Then you would have measured and nuanced justice, not a “uniform” justice-by-the-numbers process which can and does end with absurd results.
Jack,
ReplyDeleteI am not sure "due process" can be applied here.
In OVDI, a taxpayer has agreed to let IRS to colletc tax and FBAR penalty (25%, 12.5% and 5%) by signing a waive agreeement on statute of limitation. So for tax years from 2003 to 2010 -- a taxpayer can redo (amending). It seems to me the benefit should also apply to the taxpayer who can make RRSP tax deferral election.
A rejection/denial on taxpayer back filing RRSP f8891 election seems to me a violatoin of "due proecess"
This issue was deceptive entrapment plain and simple.
ReplyDeleteFAQ 35 drew in many who thought they could mitigate penalties based on prior IRS practices and the published guidance. IRS applied it inconsistently and then unilateraly pulled the plug on the matter. The office of the Taxpayer Advocate Services has confirmed this. IRS should make it right. Some of us got screwed in 2009. I say review all 2009 cases and appply only the 5% penalty. If someone paid higher, send them a refund. I am heading out to my mail box to see if my 15% is here yet. Thanks in advance Mr. Shulman. Now I may be able to put my 3 kids through college instead of sending them back to my native country of Egypt to join the protesters.
Anon123
Jack has a link to this article on this blog. These two gentlemen(attorneys) figured out the scam back in September of 2010.
ReplyDeletehttp://www.martindale.com/taxation-law/article_Caplin-Drysdale-Chartered_1153562.htm
Yep, and the new opt out rules are just giving the IRS ammunition to strong arm folks further. Either accept the rough shot application of the 20% penalty under the 2009 OVDI program or be pushed out of the OVDI program and face more scrutiny and more onerous penalties. What crap!
ReplyDeleteFolks who have not disclosed their foreign accounts (willfully or non-willfully) are petrified and thinking harder of ways to rescind their citizenships or hide from the IRS. Also, I now see some wealthy foreigners who were thinking of moving to the USA deciding not to given the onerous tax system and the recent behavior of the IRS (e.g. presumed guilty with no way of proving innocence).
Personally, with the IRS’s behavior and the overall USA situation, I too would leave the USA if I was a bit younger and had no family here. But I’m not going anywhere. However, now seeing gifted foreigners deciding for other countries makes me even more concern that we (and the IRS) is just worsening our future.
Hey guys...
ReplyDeleteTo those of you commenting on the IRS 'bait and switch', let me add my comment. I guess, to be fair, we really don't know if it was intentional or not, but we do know, that a lot of Practitioners relied on the language of FAQ 35 to advise OVDP participants of the liabilities of joining the program and possible out comes.
The attorney we used, surely did, and the result was his assessment was totally wrong when FAQ 35 was with drawn and we were hammered with an unexpected penalty.
This John MacDougal, whoever he is, has to be the responsible party for the change. I might believe him when he says it was a miscommunication in their Department that FAQ 35 was written that way, and that was not the intention of the Commissioner, but that begs the question.
Does the IRS honor its commitments and representations or not? Can it just change rules mid stream?
In this case, they have not, and frankly it ruins the reputations of those in the IRS trying to administer their non-discretionary uniform-utopia-one-size-fits-all-justice-by the-numbers-program. It DOESN'T WORK. Especially when you get flooded with small fry, and not as many Big Cheats as you expected.
I would suggest, that all of you write Commission Shulman a letter. I expressed mailed an overnight letter on the 29th. His address is...
Internal Revenue Service
1111 Constitutional Ave, NW
Washington, Dc 20224-0001
Now I could probably win the contest when it comes to cynicism, but "Nothing ventured, nothing gained!" And, sometimes, they do respond to an avalanche of complaints.
Letters to Shulman do get answered eventually, and it forces them to look again at the situation. With this current effort by the TAS you do have support with some sectors within the IRS on the issue. It can not hurt for him to get a few letters from harmed OVDP participants, and you never know, it might help.
I have gotten an individual reply from Shulman's office before. It was specific to my concerns and not just a form letter. I understand from conversations I have had with a SB/Fraud and Bank Secrecy Director, that there is a commitment in his office to respond to tax payers letters, so start flooding him with them.
Maybe Anon123 can get a refund to put his kids through school. You never know!
One thing we do know, “Hope” isn't a good strategy if you are trying to effect a positive result. You have to take some self help here, and a letter coming as a personal plea from you instead of a just a practitioner or an Attorney POA writing it, might be more effective than you think.
Also, you might contract the Tax Advocacy Office. They are tuned into this issue now, and looking for examples of folks being harmed by IRS practices.
http://www.irs.gov/advocate/article/0,,id=212313,00.html
What have you got to lose? Give it a try. Read their item number 4. The worst thing you can do is nothing at all!
Jack as posted the link to the TAS report to Congress, so you can reference it in your letters...
Good luck. He needs to receive more than just one letter! :)
You will just get a "the dog ate my homework" letter back. Like TAS indicated, a legal challenge may be in order.
ReplyDeleteYea..maybe, but no harm in writing the letter. It has an emotional benefit, as you get to release frustrations in writing, rather than just talking to yourself! Also, you have something you can give it to the TAS, as I did. It provides a good record of my efforts to communicate. Like I said, "Nothing ventured, nothing gained". I have 21 months of time and energy in the process so far, so what is a few more hours to construct a letter? I have been in touch with the TAS and supplied them the letter also. They were real interested, so that is something. Each has to decide for themselves how to proceed, and how much effort to put into it, but why not a letter to the top? Like I said, I don't think you can out do me in cynicism, so I am realistic. I don't have the Big bucks for a legal appeal, and there aren't any attorneys rushing forward to volunteer their time for this,(they are too busy with real clients) so in the end, I am probably screwed. Such is life. I am becoming a fatalist. :)
ReplyDeleteWho knows? Maybe an ambitious law firm will pursue action on behalf of the class of OVDP 2009. Please do not get me wrong. Those out of compliance should pay the price to get right. The price however should be the price depicted and not one based on deception. Also, there seems to be a big question as to if faq 35 was applied consistently when it was applied. If not, that is a big issue. Why did discloser Joe get 10k per year penalty when discloser Bob got the 20% which was a lot more if they had similar circumstances? The fact that TAS has published this matter in their report raises a red flag to say the least.
ReplyDeleteHow would a taxpayer currently in the 2009 OVDI request a TAO? Is there a specific form to fill out? Does it need to be done through a tax attorney or can she do it herself?
ReplyDeleteTo Anonymous @ 8:40 am:
ReplyDeleteThere was such a suit. I am trying to get the documents on it now and will probably report on it when I do. I do understand, however, that the plaintiff dismissed the suit. But I should know more later today.
Jack Townsend
Jack
To Anonymous @ 11:00 am:
ReplyDeleteTaxpayer Advocate assistance is sought by filing Form 911 (here: http://www.irs.gov/pub/irs-pdf/f911.pdf). I don't recall that I have ever filed one.
As with most dealings with the IRS, an attorney is not required. The presence of a qualified attorney, however, often makes the processing easier and avoid needless footfaults.
Jack Townsend
This time around at least, there should be no misunderstanding on the terms of the plan. Anyone who gets in should have a good idea of what they're letting themselves in for if they join and if they don't.
ReplyDeleteIn an odd, perverse way, whatever the intention of FAQ 35, it might have benefited those who came in, since it seems clear that the IRS/DoJ are serious and intend to get tougher and tougher on offshore accounts.
Its pretty clear that (to use Mr. Michel's descriptive phrase) the velvet glove for offshore matters was put away sometime at the end of 2008/2009 as the IRS/DoJ figured out how to break open offshore banking secrecy. And the mailed fist is getting tougher and tougher.
Jack
ReplyDeletePurely a technical issue, but does the TAS have authority to issue relief on FBAR cases since these are technically Title 31 penalties, not tax penalties ? I would assume so, since the TAS has authority over IRS procedures in general, not just tax penalties. And in the OVDP, the penalty is a misc penalty, not a FBAR penalty.
Jonf,
ReplyDeleteWhat if IRS/OVDI rules against back file election on f8891 ? The OVDI penalty is highly linked how IRS treats taxpayers' missing filing ? No tax due, no OVDI base penalty... so the issue is how IRS treats people with RRSP problem inside OVDI.
Can I count on TAS to help me out in case I get OVDI penalty on RRSP ?
To Anonymous @ 11:00 am:
ReplyDeleteMy interaction with the TAS has been positive, and they have taken an active interest. It might not work to my benefit in the end, but what have I to lose? I think my concerns are genuine, my penalty extreme for the failure, and least they have been attentive. They listen and you get a hearing. If nothing else it makes you feel better.
I would recommend contacting them either via the form that Jack mentioned, or call on the phone. They will direct you to the proper way and assist you on opening a TAO.
I can understand Jack's point that having an attorney assist you could be beneficial, and avoid pitfalls. In my case, I really feel I can't afford to spend any more money as it will be hard enough to raise the current penalty, so am doing it alone. I am aware that this might be ill advised.
You have to do your home work and become as knowledgeable with the arcane technical and legal rules they live by, but I keep hoping that reason will prevail somewhere.
Realistically, I know is is probably misplaced hope. But the OVDP was created by man, and not handed down from Mount Siana to Moses in granite tablet form. Creating rules with no discretion or forcing you into irrevocable Opt Outs weren’t mandates from God. Man created them and man can adjust them. Right now, they may not be in the mood or have any desire to change anything. They apparently are in the confiscation game to cover revenue shortfalls from huge deficits rather than just trying to increase compliance. That is a discouraging thought, but you have to try something outside the OVDP process, so I recommend contacting them. No harm.
This development gives taxpayers in the 2009 OVDP a third option with respect to penalties. The prior options were to pay the penalty and close the matter or opt-out and be subject to full audit and potentially higher penalties. Now taxpayers might pay the penalty, then file for a taxpayer assistance order (TAO) and if successful pursue a refund of penalties.
ReplyDeleteMaybe 15000 TAO's will be in the pipeline.
ReplyDeleteActually, the TAS has been able proactively to get an extension from the 906 decision while they review the case. This slows things up a bit so you can breathe and don't feel totally railroaded into the either/or decision. "Pay up, Opt out, or get Kicked Out."
ReplyDeleteGiven your choices, I do think the TAS is a good option to consider, even if the IRS appeal process eventually rules against the TAO, (which is likely) they have to report to Congress why they ruled that way, and that gets more visibility of how the IRS is treating relatively minor offenders who voluntarily joined the OVDP and are now facing some pretty bleak choices.
I hope more folks reach out to the TAS for assistance, if they truly think the OVDP or OVDI process is disproportionately grievous for their offence, and the Opt out with its threats of Maximum penalty outcomes is not appropriate for their failure.
Like I said, no harm, and the TAS is more sympathetic to your story than a typical IRS auditor or the OVDP which has no appeal process. They are friendly, and structurally aligned to be on your side, although if you are really grievously in the wrong, don't expect miracles.
Give it a try. What can it hurt? The most they can say, is we can't help you, but before they do that, they will at least review your case. Right now, you are NOT getting any review as the OVDP/OVDI programs are just a penalty-by-the-technical-numbers program regardless how ridiculous the penalty outcome for the failure.
Let's face it, if you had failed to report some Capital gains, or social security taxes, and now were voluntarily disclosing it, you would not be facing these types of Penalties. The FBAR is just the hook that allows some pretty draconian penalty application / confiscation scheme. Without it, you are just another tax failure, now voluntarily disclosed, and like Geithner, you might not even be subject to any penalties at all.
July 11, 2011 3:28 PM
But since there is no FAQ #35 for OVDI 2011, I doubt the TAS will be able to help much there. Excluding the unlikely possibility that Congress will take a hand.
ReplyDeleteBut then, at Congress's (or some members') prodding, the IRS did back off its 501(c)(4) initiative targeting the rich donors. See http://taxprof.typepad.com/taxprof_blog/2011/07/irs-calls-.html
ReplyDeleteOh, what could I be thinking? That's the rich and they are entitled not to be bothered by the IRS (or pay taxes at all). Now, the IRS has its OVDI program because there is a lot of little fish to fry and, if some of the really wealthy get caught up in it, well, certainly that is not intended and is at most collateral damage to getting the small fish (and they may get off relatively lightly anyway (think Olenicoff)).
Jack Townsend
With or without a FAQ 35 in the OVDI, I do think the penalty structure can be grim, and very disproportionate for some types of failures, even with all the new little exceptions they have built into the rules. Great deal for the Whales, but can still be killer for the smaller fish if you exceed some arbitrary threshold by $1.
ReplyDeleteThe inability for some built in review or adjustment before issuing a 906, with the only recourse being irrevocable 'opt out" with all the uncertainty that can create given the Maximal IRS FBAR penalty mindset, is just plainly wrong.
This might still be something the TAS is interested in looking at, as it speaks to a systemic issue.
The IRS has seemed to forget that penalty discretion outside the OVDI means there is no floor or how low the penalty can be. They don't have to exercise just the maximum, but you don't know that they won't do that outside the program now. They just seem focused in the maximum direction. They just are looking at the ceiling these days instead of the floor, and stumbling/tripping along in a non constructive way if compliance, and not just collections, is really a part of the OVDI objective.
This might interest the TAS. Ask them, and find out.
The FAQ 35 2009 ovdi language is absent in 2011 ovdi. FAQ 7 OVDI 2011 clearly mentions "In lie of all other penalties including FBAR" in one of the bullets as well as in the numerical example for the penalty. So where do you get the $10,000 and $100,000 FBAR penalties. They are mentioned for someone not falling under OVDI.
ReplyDeleteSo ... I am failing to understand the discussion or I am missing the point.
Can someone help explain. Thanks
Good write up by Asher on this matter here:
ReplyDeletehttp://www.assetlawyer.com/wordpress/?p=1041
Anon123
I have read that article by Asher along with the bombshell one he wrote earlier.. however that is all in reference to 2009 OVDI FAQ 35. I dont think there is anything like that in OVDI 2011. The only thing it says is that the penalty of 25% includes all FBRAR. Only if you dont come under the amnesty than the penalty can be 100k+.
ReplyDeleteAgain I still do not see Asher's point with reference to the 2011 ovdi.
Now if the IRS violates its terms under FAQ 7 and its numerical example than the taxpayer is ripped and betrayed.
Asher,
ReplyDeleteI just read your post...
http://www.assetlawyer.com/wordpress/?p=1041
Really appreciate your advocacy in this regard and your communication with the TAS. I have encouraged folks who feel they have been unfairly handled in the OVDP, to appeal to them, as they have been very helpful.
If you are still reading this blog,I have a question.
I have heard, from a TAS source, that there is a "secret or unpublished memo" regarding FAQ35, that the IRS refuses to make public even to its agents. This might shed light on their thinking and why they made the change. Everything I have heard about the FAQ35 withdrawl, as been verbally transmitted to me, but agents have been unable to produce anything in writing. Maybe there is something, and you have seen it, and I have not, so correct me if I am wrong or misinformed.
Have you or any other practitioner thought of a FOI request to obtain this memo, and all notes, emails, letters and conversations surrounding the change in application of FAQ35 for the OVDP. I doubt they would like that very much, but the TAS would,I bet. I thought we were supposed to have transparency in government these days, and this retraction and the memo changing it certainly is just the opposite...
Just a thought.
To Anonymous, July 24th at 1:16pm
ReplyDeleteYou are correct that my articles about FAQ 35 are in the context of the 2009 OVDP and not the 2011 OVDI. You are also correct that FAQ 35 is not available under the 2011 OVDI. My discussion concerns how the IRS offered FAQ 35 as one of the terms of the 2009 OVDP and then rescinded FAQ 35 for 2009 OVDP participants.
There are many OVDP cases still open, and Jack and others on this Blog have been discussing the 2009 OVDP still, which makes the FAQ 35 issue still timely, even though, as noted, there is no FAQ 35 under the 2011 OVDI.
Thank you for reading my articles and commenting.
To Anonymous, July 25th at 2:03am:
ReplyDeleteI have not seen any "secret" FAQ 35 memo. From my discussion with Internal Revenue Agents, the rescission of FAQ 35 was made by IRS policy makers and notice was distributed to IRS field agents via e-mail. Field agents will not release the email to the public nor to tax practitioners.
A FOIA (Freedom of Information Act) application is interesting. However, one issue is that I don't anticipate the IRS providing the responsive documents, if at all, in the short term. In the interim, OVDP participants have a narrow window to either pay or opt out and challenge the penalty, and a pending FOIA request would do very little to keep the window open longer. If a client wanted to challenge the IRS via the TAS, then a FOIA request might be helpful.
Thank you for reading my article and commenting.
Asher,
ReplyDeleteI agree that they would not be responsive to a FOIA request in the short term, but it gets their attention, and does provide discovery for later if you are disputing or appealing their handling of the OVDP penalty.
Given the IRS attempt to close these OVDPs out, participants may have no choice left, as you point out. However, maybe, just maybe, it would make them more flexible in rethinking how to apply some discretion in their penalty application. Maybe be not. It might just be wishful thinking on my part, but I do know, that the TAS is frustrated with the OVDP policy makers that they had a written finding, and have kept it out of public view.
BTW, ACA... American Citizens Abroad has been very interested in your writing. I have directed them to it. Good work. Really appreciate it.
Asher
ReplyDeleteThanks for responding regarding my issue with FAQ 35 isssue on 2009 OVDI and your comments in the bombshell and other article. According to my reading of the 2011 OVDI it is clear that the IRS presents OVDI as an opportunity to come clean with a penalty of 25 % which includes FBAR penalties(willful or not is not mentioned). If you dont take the opportunity than you take the risk of the 100,000 per instance of FBAR outside of OVDI depending on the willful or not determination.
Is my reading of the OVDI 2011 correct ??
Thanks and I appreciate your insights on your website articles.
To Anonymous @ July 11, 2011 3:33 PM:
ReplyDeleteCan you (or any other reader) please tell me where you read/saw that "TAS has been able [] to get an extension from the 906 decision"? Thanks indeed.
ASM,
ReplyDeleteI didn't just read it. It happened to me.
I appealed to the TAS, after I had received the 906, and letter 4728 (Opt Out Status letter).
I was within a few days exhausting the letters 20 day count down to Opt Out, pay up, or be removed.
The TAS worked with the local and Regional office to get a 30 day extension while they reviewed my case.
I have a very professional Case Officer assigned to me. My case is still under review and they are working with the auditor that did my OVDP. I don't know the outcome yet, but it appears hopeful, as all are trying to find a more reasonable penalty solution. It appears some discretion is being applied. Of course, everything depends on the facts of the situation, so can't speak to this in general terms or provide any certainties. Each case is different. All I can say to you, is at least give it a try. I think you will find a sympathetic ear, and an honest assessment of whether or not they can be of assistance.
Hope this helps...
To Anonymous July 26, 2011 10:39 PM:
ReplyDeleteThank you, this was helpful indeed. I'm looking fwd to your thoughts/insights once you receive a (hopefully positive) determination from TAS.
Does anyone have any further update on this? Any IRS response to the TAS letter? Outcome of aby TAOs? The posts above mention TAS is sympathetic and listening to folks' cases. Based on number of requests for help, are they doing anything towards making OVDP/OVDI fairer for the smaller fish?
ReplyDeleteOn a separate note, does anyone know if there has been any litigation yet by a "small fish"?
Like someone mentioned in a previous post, I can't believe this cannot be corrected.
The TAS has been very helpful with my request for FAQ 35 consideration. Without their intercession, I was refused that consideration, so that is something positive. Still waiting the outcome from the correspondence back and forth between the TAS and the auditor, so no final results yet to report. I am somewhat hopeful, but you never know. I may still be forced to Opt Out and/or just bend over and take it. I don't know how seriously the IRS takes the TAOs it receives. This IRS desire to collect revenues seems to trump everything. Hopefully the recent letter from the NY State Bar to Commissioner Shulman will have some impact and give better clarity on how the IRS handles the Minnows. Would encourage you to contact the TAS also. The more small fry failures they hear from the better the possibilities the IRS will listen.
ReplyDelete