Many believe that you can bifurcate the Streamlined Process between the criminal aspect and civil aspect.  That once you have a non-willful opinion from the criminal tax lawyer, the process becomes civil and any competent civil tax lawyer or tax return preparer can by himself or herself complete the filings.  I believe this view to be mistaken.

First of all, the willful non-willful determination can only be made when all of the foreign financial statements and sometimes U.S. bank statements have been reviewed.  Only then will the tax attorney fully understand where all of the tentacles lead and what other communications or even entities may have been forgotten.  Even then, the non-willful opinion is unfortunately just an opinion.  IRS can reject the certification and find the taxpayer ineligible for the Streamlined Process.  There is no appeal from that determination.

Then, where it the taxpayer?  Right back in the criminal or quasi-criminal FBAR penalty soup. Obtaining the criminal tax lawyer opinion will not even necessarily insulate the taxpayer from perjury charges because, unless the lawyer reviews the underlying documents, facts will be taken as given by the client.  In my experience, clients often have a very tenuous grasp of past events relating to their offshore accounts.  Thus, there may be incriminating email or written communications that the client has forgotten about but which can be obtained by IRS directly from the foreign financial institution.

In the event of rejection of the non-willful certification, how the returns have been prepared and submitted may influence whether IRS chooses to indict and/or whether the reviewing agent decides that a draconian FBAR penalty is appropriate.  The returns themselves if carelessly prepared may be viewed as indicating that there is continuing criminal conduct.   In other words, these are not normal, run of the mill tax returns and must be prepared with a different and protective mindset.  Therefore, a lawyer experienced in criminal tax matters should not only determine the willful / non-willful issue but oversee the entire Streamlined submission just as in the case of an OVDP submission.

Is this overkill?  No. When dealing with potential criminal exposure, it is wise to be extraordinarily cautious than to later be regretful for not having been.  For the return preparer the regret may include angst from becoming a witness against his or her client and being sued by the client. Now, there may be some very vanilla cases at the non-willful end of the Bell Curve that do not require such close scrutiny by a criminally informed tax lawyer.  But, few cases are completely straightforward.  In most cases the old trusted saying will prove true: “discretion is the better part of valor.”

Personally, I do not accept engagements to give a willful/ non-willful opinion unless I am to oversee the Streamlined submission.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved