We are writing this message because of unusual circumstances. The IRS Amnesty Program concerning off shore accounts has generated a continuing stream of inquiries to our tax litigators. Although the IRS offshore account disclosure program has ended, problems persist for taxpayers who did not participate. Solutions to these problems exist, but they require careful analysis.

I. The Problem

In March, 2009 the IRS offered a six-month “voluntary disclosure” program to taxpayers with undisclosed foreign accounts and undisclosed foreign entities.

The IRS offer was simple: Immunity from criminal prosecution if taxpayers amended all tax returns from 2003 to the present. The amendments were to reveal earnings on previously unreported accounts, payments of the additional tax and interest, payment of an accuracy related penalty of 20% of the tax due, and a penalty equal to 20% of the highest account value from 2003 to the present. The amnesty program was extended from its original closing date and ended on October 15, 2009.

Our tax attorneys represented over 75 clients who entered the disclosure program. The IRS nationally received over 15,000 applications to enter the program, and approximately 1,500 were filed in Oakland, California.

The IRS has stated they intend to seek maximum penalties for all unreported offshore accounts for taxpayers who did not participate in the program. This may include the “FBAR” penalty, which may be as high as the greater of 50% of the account or $100,000 (or $10,000 per account per year for non-willful violations), the 75% fraud penalty, and additional information return penalties. Moreover, the IRS announced it will pursue criminal prosecutions where appropriate.

The IRS is devoting substantial resources to this unprecedented enforcement effort, and the Bay Area is the epicenter for many of the IRS’s investigative efforts. The Oakland District has Special Agents and Revenue Agents who are specifically tasked to identify taxpayers who did not participate in the amnesty program.

The IRS also has the resources of the U.S. Department of Justice and U.S. Attorneys. They have given priority to the prosecution of taxpayers who did not disclose their foreign accounts and chose not to participate in the amnesty program.

The IRS is emphatic about the importance of this issue.

II. The Solution

Sideman & Bancroft tax attorneys have the experience and familiarity with IRS civil and criminal procedures to effectively represent and protect the rights of taxpayers who did not participate in the voluntary disclosure program. In many instances, taxpayers with undisclosed foreign bank accounts or foreign entities can still take steps to avoid criminal prosecution. For those taxpayers who are contacted by the IRS, the initial response can be critical to the final outcome. Please call us for further information or to discuss your particular situation.

Related Attorneys

Richard J. Sideman, Wendy K. Abkin, Steven M. Katz, Emily J. Kingston, C. Jean Ryan, and Jay R. Weill.

This publication is for informational purposes only and is not intended to provide legal or tax advice, or to create an attorney-client relationship.

Pursuant to IRS Circular 230, unless expressly stated to the contrary, any tax advice is not intended and cannot be used to (i) avoid penalties under the Internal Revenue Code or (ii) promote, market or recommend any transaction or matter to another party.