The Department of Justice Tax Division acting assistant attorney general, Caroline Ciraolo, speaking at the Federal Bar Association Tax Section annual tax conference (reported by Nathan J. Richman, Tax Analysts Tax Notes Today, March 9, 2015), stated:

We are taking particular interest if we find evidence of an account holder claiming non-willful conduct in a streamlined compliance filing or delinquent submission only to find that evidence produced by the Category 2 banks suggests otherwise. We are using information gleaned from the program to open new investigations, pursue new targets around the globe, and we will continue to do so as the information is developed.

The reference to Category 2 banks refers to Swiss banks participating in the DOJ Swiss Bank Settlement Program under which the DOJ is receiving information. The DOJ is using that information to verify certifications of non-willfulness under the Streamlined Filings Procedures.

Jack Townsend in his Federal Tax Crimes blogs discussed the likelihood of one being prosecuted for a false certification. Jack compares the analysis to a spectrum at one end being non-willful and at the other end being willful. I prefer to analogize to the Bell Curve because it’s more visual. The left-hand flat extreme deviation represents non-willful and the right-hand flat extreme deviation willful.

So, what are the odds of being prosecuted for one’s certification?

  • Those at the left will likely not be prosecuted for an unintentional factual error in their certifications.
  • Those at the right-hand extreme deviation are willful and will also face perjury charges and possible extended stature of limitations issues if they certify that they were non-willful.
  • For those in the middle bulge of the Bell Curve astute legal analysis and sound judgment are required to determine whether it is wiser to proceed under the more risky Streamline Filing Process than to have the client enter the no-prosecution safety-net of the OVDP.

Townsend surmises that those in the middle may have their certifications denied for want of sufficient facts to establish non-willfulness but will not be charged criminally. That assumes that the certification is truthful and contains no material false statements or misleading statements.

Remember also that the Streamlined Filing Process offers not specific timetable for obtaining closure on one’s voluntary disclosure. It is simply a filing process with penalty relief (no penalty for qualifying non-U.S. persons and a 5% penalty for U.S. persons). The IRS may re-open the issue of non-willfulness at any time within the statute within the statute of limitations (or, without limitation if fraud is found) as it receives information from its varying sources.

The lesson to be gleaned: Make the certification factual and truthful; and, do not cherry-pick facts, leaving out negative facts, or exaggerate so as to make the certification misleading.

© 2015 by Robert S. Steinberg, Esquire All rights reserved.

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