Tax Law Offices of David W. Klasing, PC comments on new IRS Offshore Guidelines

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Tax Law Offices of David W. Klasing, PC

Nov 30, 2018, 16:43 ET

IRVINE, Calif., Nov. 30, 2018 /PRNewswire/ -- The Tax Law Offices of David W. Klasing, PC provides commentary on the new IRS offshore guidelines. The Internal Revenue Service previously operated a program known as the Offshore Voluntary Disclosure Program (OVDP), which offered noncompliant taxpayers mitigated civil penalties – in addition to protection from criminal prosecution – in exchange for voluntarily reporting foreign income which was previously concealed from the IRS. On September 28, 2018, the IRS permanently closed the OVDP, marking the end of an era – and leaving many to wonder what would come next. Our IRS tax attorneys now have breaking news updates on this developing situation. On November 20, 2018, the IRS issued a memo describing new procedures for all voluntary disclosures, including both offshore voluntary disclosures and domestic voluntary disclosures, after September 28, 2018, the date of the OVDP's closing. Note that these procedures primarily affect taxpayers who are concerned about criminal liability. For others, it is likely sufficient to follow alternative procedures, such as delinquent FBAR & international information return submission procedures, or the offshore or domestic streamlined voluntary disclosure procedures. If you need to report undisclosed domestic or foreign income, you should consult with an experienced criminal tax defense attorney, who can help you choose the right strategy to reenter compliance and reduce your exposure to criminal tax prosecution.

Do not discuss potential domestic or foreign criminal tax issues with anyone other than a properly trained and experienced criminal tax defense attorney as the very tax professional you turn to for help can be forced to testify against you if the communication is not conveyed while under attorney client privilege. The common pattern of non-filed foreign information returns combined with even de minimis amounts of unreported foreign income can in and of itself create exposure for criminal tax prosecution if evidence exists (badges of fraud) that the foreign information reporting was avoided to facilitate evasion of U.S. taxes related to non-reported offshore income.

The IRS is applying a new "civil resolution framework," summarized below. In addition to all disclosures received after September 28, 2018, this civil resolution framework may also be applied, "At the Service's discretion… to non-offshore voluntary disclosures that have not been resolved but were received on or before September 28, 2018."

Update #1: Under the new rules, voluntary disclosures will typically cover a six-year period.
Update #2: Here, the memo provides simply that "Taxpayers must submit all required returns and reports for the disclosure period."
Update #3: IRS auditors "will determine applicable taxes, interest, and penalties under existing law and procedures."
Update #4: The IRS will allow auditors to seek the withdrawal of "preliminary acceptance." Under the new guidelines, preliminary acceptance is granted (or denied) by IRS-CI at the outset of the process.
Update #5: The IRS will update the relevant portions of the Internal Revenue Manual (IRM) to reflect these changes. The affected sections will be updated within the next two years.

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Public Contact: Dave Klasing Esq. CPA, [email protected]

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