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IRS gives Internal Revenue Manual Voluntary Disclosure Consideration if……. was published by JD Supra on 10/16/18.

When IRS reviews a criminal tax case, consideration is given to various factors such as whether a voluntary disclosure was made, whether prosecution exists, the health, age and mental condition of the Taxpayer and whether a solicitation of tax returns has occurred. 

It has been the practice of IRS that a voluntary disclosure will be considered along with all other factors in the investigation in determining whether criminal prosecution will be recommended. A voluntary disclosure does not assure a Taxpayer of any rights. It simply has been the “internal practice” of IRS that Taxpayers which voluntarily disclose are significantly less likely to be recommended for criminal prosecution.  Taxpayers with illegally sourced income are given no consideration. Voluntary Disclosures are assessed by the IRS-Criminal Investigation Unit and its counsel.

A Voluntary Disclosure Occurs and is Considered by IRS when the:

  • Taxpayer communication is truthful, timely, and complete.
  • Taxpayer shows a willingness to cooperate with the IRS in determining his or her correct tax liability.
  • Taxpayer makes good faith arrangements with the IRS to pay in full the tax, interest, and any penalties determined by the IRS to be applicable.

A Voluntary Disclosure is Timely if IRS receives it BEFORE:

  • Initiating a civil examination or criminal investigation of the Taxpayer or has notified the Taxpayer that it intends to commence such an examination or investigation.
  • Receiving information from a third party (informant, other governmental agency, or the media) alerting IRS to specific Taxpayer noncompliance.
  • Initiating a civil examination or criminal investigation directly related to the specific liability of the Taxpayer.
  • Acquiring information directly related to the specific tax liability of the Taxpayer from a criminal enforcement action (search warrant, grand jury subpoena).   

IRS Examples of a Voluntary Disclosure

  • A letter from an attorney that encloses amended returns from a client which are complete and accurate (reporting legal source income omitted from the original returns), which offers to fully pay the tax, interest, and any penalties as accurately determined by the IRS.    
  • A disclosure made by a Taxpayer of omitted income facilitated through a barter exchange after the IRS has announced that it has begun a civil compliance project targeting barter exchanges.  IRS has not commenced an examination or investigation of the Taxpayer or notified the Taxpayer of its intention to do so. The Taxpayer files complete and accurate amended returns and makes arrangements with the IRS to fully pay the tax, interest, and any penalties as accurately determined by the IRS.   
  • A disclosure made by a Taxpayer of omitted income facilitated through a widely promoted scheme in which the IRS has begun a civil compliance project and already obtained information that might lead to an examination of the Taxpayer.  IRS has not commenced an examination or investigation of the Taxpayer or notified the Taxpayer of its intent to do so. The Taxpayer files complete and accurate returns and makes arrangements with the IRS to fully pay the tax, interest, and any penalties as accurately determined by the IRS.   
  • A disclosure made by an individual who has not filed tax returns after the individual has received a notice stating that the IRS has no record of receiving a return for a particular year and inquiring into whether the Taxpayer filed a return for that year. The individual files complete and accurate returns and makes arrangements with the IRS to fully pay the tax, interest, and any penalties as accurately determined by the IRS.   

IRS examples of what is NOT a Voluntary Disclosure for IRS    

  • A letter from an attorney stating his or her client, who wishes to remain anonymous, wants to resolve his or her tax liability.
  • A disclosure made by a Taxpayer who is under grand jury investigation.
  • A disclosure made by a Taxpayer, who is not currently under examination or investigation, of omitted gross receipts from a partnership, but whose partner is already under investigation for omitted income skimmed from the partnership.
  • A disclosure made by a Taxpayer, who is not currently under examination or investigation, of omitted constructive dividends received from a corporation that is currently under examination.
  • A disclosure made by a Taxpayer after an employee has contacted the IRS regarding the Taxpayer’s double set of books.  

Don’t be a victim of your own making

On March 13, 2018, IRS announced the termination of the Offshore Voluntary Disclosure Program (OVDP) as of September 28, 2018 (Notice IR-2018-52).  OVDP has been available to Taxpayers that willfully failed to report foreign financial assets and pay all tax due in respect of those assets. The program was designed to protect Taxpayers from potential criminal prosecution and provide terms and a resolution for the Taxpayer’s tax, penalty and interest obligations.

If you are a Taxpayer with unreported foreign financial assets and have failed to file foreign information returns, consult your specialized Tax Representative NOW as there is a greater urgency to come forward now.  

https://www.jdsupra.com/legalnews/irs-gives-internal-revenue-manual-29103/