- 1 IRS Offshore Disclosure
- 2 Voluntary Disclosure is Not a Criminal Admission
- 3 Submitting a “Placeholder” Submission
- 4 Inappropriately Relying on a KOVEL Letter
- 5 Streamlined Submission Experience is Not the Same
- 6 Streamlined or Reasonable Cause When a Person is Willful
- 7 Get Into Compliance with Experienced Counsel
- 8 Krantz Attorneys, A PLC
Avoidable Mistakes Taxpayers Make When Disclosing Foreign Accounts
We are passionate about representing clients (in nearly 70-countries) with IRS offshore disclosure.
Mr. Krantz is a Board-Certified Tax Law Specialist (less than 1% nationwide) with a Master’s in Tax Law, and Enrolled Agent Status (highest credential awarded by the IRS.)
Offshore Disclosure is ALL we do.
Many times, new clients will come to us after first speaking with, or retaining a less experienced attorney who offered a free consultation, or artificially reduced fee.
IRS Offshore Disclosure
IRS Offshore and Voluntary disclosure can be a confusing area of law. When taxpayers make mistakes, it is typically because they relied on inexperienced counsel.
Technically the general catchall term is called IRS Voluntary Disclosure (Practice).
And, while there is a traditional IRS Voluntary Disclosure that was established 50 years ago and identified in the Internal Revenue Manual (IRM), it is not the same as the traditional OVDP/OVDI (which ended on September 28, 2018).
There are also Streamlined Voluntary Disclosures, Reasonable Cause Submissions, Force Disclosures, Delinquency Filings, etc.
Here are the five (5) most common mistakes to be aware of:
Voluntary Disclosure is Not a Criminal Admission
By entering into the voluntary disclosure program, you are not entering a plea of guilty. It is not an admission of criminality. We have had clients contact us, telling us they were pushed into Streamlined or Reasonable Cause (even when they were willful), because if they entered the traditional IRS Voluntary Disclosure, or OVDP, it was an admission of guilt – which is absolutely false.
Rather, you are simply acknowledging that for one reason or another, you are out-of-compliance and are not submitting to either the streamlined program (non-willful) or reasonable cause (negligence).
In other words, you are representing to the IRS that there is a problem, you are aware of the problem — and you want to fix the problem.
Submitting a “Placeholder” Submission
This is a common misconception. A client will contact us to let us know they are in the process of working with an attorney on their case….but it just doesn’t feel right, and they are unsure how experienced the attorney is.
Generally, the attorney does not advanced tax credentials such as an LL.M., EA and/or CPA, is not “Board-Certified” — and Offshore Disclosure is just a small part of the firm’s general practice.
Before submitting the full disclosure, the representative will reach out to the IRS to let them know that they are working on getting into compliance.
While the thought is honorable, the strategy is terrible. Why? Because all you are doing is letting the IRS know that you are out of compliance.
Just because you alerted them that you want to get into compliance does not mean you will get into compliance. Why would the IRS believe you…since you are already out of compliance. All you are doing is making their job easier for them.
In other words, the IRS is not going to take your word for it, and all you are doing is tipping them off that you are out of compliance.
Inappropriately Relying on a KOVEL Letter
There are various benefits to using a dually licensed Attorney/EA or Attorney/CPA when it comes to your offshore disclosure submission that a non-dually licensed attorney cannot offer.
Since non-dually licensed Attorneys do not prepare or sign your returns, they will usually send your submission out to a CPA, and then just mutter off to you that it’s okay, the accountant is “Kovel,” without any explanation to you as to what that means – and what that doesn’t mean.
A Kovel letter provides a very-limited protection, and does not include information you provide to your CPA for the preparation of your tax return.
Unless your Attorney is also an EA or CPA, they will not be able to effectively answer tax questions for you (knowledge which comes from several years of dual tax preparation and legal experience), which negatively impacts the time and effectiveness in preparing your case.
So what happens when you have a tax question? You are at the mercy of the CPA, since the Attorney cannot answer your tax question.
This type of inefficient Offshore Disclosure representation is costly, and ineffective. And, if it is during tax season, it can take weeks before the CPA responds.
All the while, the IRS clock is ticking!
Most importantly, it increases the number of people who you have to share your confidential information with – and puts your privileged and confidential information at greater risk than if you use a dually licensed Attorney/EA or Attorney/CPA.
Really, how many people outside of the firm you hire do you want to trust with your confidential information, right?
Click here to learn more about Kovel Letters.
Streamlined Submission Experience is Not the Same
Recently, clients have told us they spoke with Attorneys who claim a 100% success Streamlined Disclosure submission rate, but that when they dove into it a bit further, something seemed off…
…The clients were right, because that figure that doesn’t really tell the whole story.
Generally, a completely successful streamlined case means the IRS no longer has the right to audit, examine, penalize, or investigate the case.
Under most situations, streamlined program clients will have more than $5,000 of unreported income each year from specified foreign assets, accounts, investments, etc.
Therefore, under the updated rules, the IRS generally gets an automatic six (6) years to audit or examine individuals for each year – instead of three (3).
This means that since the modified/newly updated streamline program only started in mid-2014, even with the first batch of cases, the IRS would still have six (6) years to audit, which would mean they have until at least 2020 to audit the return.
Streamlined or Reasonable Cause When a Person is Willful
It a common misconception that even if a person was willful, they can submit to Streamlined or Reasonable Cause if the foreign balances are low, income was minimal, or they were in the U.S. for only a few years.
This is terrible advice that can get a client into very deep trouble with the IRS.
Get Into Compliance with Experienced Counsel
Offshore Disclosure is complex. It is a specialty area of tax law, which requires a experience firm that specializes exclusively in IRS Offshore Disclosure.
Krantz Attorneys, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board Certified Tax Law Specialist credential
- Learn more about Krantz Attorneys’s Case Accomplishments
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Ezra holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Krantz's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
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