I receive many calls from taxpayers considering how to bring their unreported offshore accounts into compliance. Sometimes and often with respect to expatriates, these individuals will have prepared their own returns and even attempted to represent themselves through some of the tangled web of rules concerning the OVDP, Streamlined Filing Compliance Procedures, Transitional Rules or opting out of the OVDP. Likewise, many calls originate from people who’ve divorced and have represented themselves in innocent spouse disputes with IRS. Usually, they call when something very bad and unforeseen to them happens in their case.
I always tell them that their self-representation likely has made more difficult the professional’s job of representing them. One client recently asked, “Why do you think that representation by a professional is often made more difficult when clients have represented themselves initially?”
I thought others might benefit from my response which is reprinted below.
While representing himself or herself, the client may:
- Admit facts government would otherwise have to prove.
- Waive Fifth Amendment rights against self-incrimination.
- Tell IRS too much which results in more questions being asked and other issues being raised.
- Give up documents that don’t have to be produced resulting in more questions being asked and more issues being raised; or, worse, incriminating themselves in a tax crime.
- Overlook procedural requirements that results in options that might have been available being ruled out.
- Misunderstand the law and make the wrong arguments because even lawyers who are not tax lawyers lack the tax background to fully grasp and appreciate many tax issues. Also, cases do not always stand for what a lay person thinks they stand for. This is one reason why CPAs sometimes misadvise clients on tax issues. They don’t know how to read a case. They are not lawyers and certainly not tax lawyers. No matter how much a client may read, he or she cannot make up for the training and experience of one who has lived with this mind twisting stuff for over 40 years. There is also an underlying conceptual framework to the tax law, although it might not seem so, that a tax lawyer has at his or her recall in evaluating facts and law, but which a client does not have to draw on.
- Finally, clients representing themselves don’t understand the process or how to deal with IRS at any level, agent, appeals or collections.
Thus, in my experience, coming into a case when the client has been proceeding without counsel is almost always problematical. That is not to say that such problems will be encountered in every case. But, it is common and reading Tax Court decisions in which the taxpayer has appeared pro see very cogently illustrates why.
Moreover, it is one thing for a client to self-prepare his or her tax return which may be perceived as straightforward, even though very little in current tax law is simple. The consequences of a mistake on a Form 1040 involve penalties that, although painful, will not destroy most taxpayers. It is quite another thing, for a client to self-represent when very serious consequences, possible jail time and draconian civil penalties, are at stake. These kinds of outcomes can destroy a person financially and emotionally.
© 2014 by Robert S. Steinberg, Esquire
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