I have posted often about the risk of using the Streamlined Filing Compliance Procedures, specifically about the risk of making a statement under penalties of perjury of the reasons the taxpayer believes his or her conduct in failing to comply with the filing and reporting obligations was non-willful. For example, see post of 3/12/16“For Whom the Bell Tolls on Streamlined Filings”).

These non-willful affidavits must be included in both Form 14653 for persons qualifying as residing outside of the U.S. and Form 14654 for persons not so qualifying and considered to be residing inside the U.S.

The IRS and Department of Justice continue to emphasize that they are mining the data received from third-party sources and will compare such information with the information included in Non-willful Certifications submitted with streamlined filings.

For example David Voreacos in “Justice Department examining declarations of innocence,” (Bloomberg Law, 7/1/16) quoted Department of Justice Tax Division trial attorney Nanette Davis from her comments at the NYU Tax Controversy Forum, “We’re taking all that data and scrubbing it for leads.” She is said to have also noted that some of the data received could lead to prompt indictments.

The data she is referring to relates mainly to that received from Swiss banks under the Swiss Bank Settlement Program. These banks who had entered into non-prosecution agreements with the DOJ were permitted under altered Swiss bank secrecy rules to hand over account information including communications and recordings of conversations. Thus, taxpayers who had accounts with any of these Swiss Banks or with Swiss banks under criminal investigation by the DOJ (Category 1 banks) who attempt to make streamlined filings are at great risk. But, this warning also applies to taxpayers who had accounts at any bank or financial organization on the IRS list of enabling banks that subject an OVDP participant to the higher 50% miscellaneous offshore penalty (See OVDP FAQ 7.2). These individuals probably should be entering the OVDP if they still qualify, that is, if IRS or DOJ still does not have their names).

As for streamlined filings, the lynchpin to a successful effort, continues to be a non-willful certification that is complete, truthful and accurate, and, which states both the helpful facts as well as facts that are not helpful or which tend to imply willfulness. One can and should explain the bad facts but trying to cherry-pick facts may get the taxpayer into a heap of trouble. That troubles-heap could include criminal sanctions, substantial civil FBAR penalties, and income tax assessments, interest and penalties for all years open under statutes of limitations provided for in the Internal Revenue Code, Bank Secrecy Act and general federal criminal code (Title 18 of the United States Code). For an extensive discussion of the impact of statutes of limitation see post of 8/10/15, “Statutes of Limitation and Streamlined Filings or File Forward Strategies.”

Robert S. Steinberg, Esquire
http://www.steinbergtaxlaw.com