Page 3 - Offshore account holders should beware: The IRS is still coming

For those whose offshore noncompliance was nonwillful, there is good news. The IRS's Streamlined Filing
Compliance Procedures will continue to remain in effect. The IRS's streamlined procedures allow taxpayers,
both those residing in the United States and abroad who meet certain eligibility criteria, to get into
compliance without paying substantial penalties. Indeed, for nonresident taxpayers, there are no
penalties. Resident taxpayers pay only a 5% miscellaneous offshore penalty.

However, the key criteria for eligibility to the streamlined procedures is that the taxpayer's noncompliance
must have been nonwillful. To reduce false submissions, the IRS requires that the taxpayer certify, in detail,
the facts concerning his or her nonwillfulness.

With the termination of the OVDP, more taxpayers may be tempted to submit false nonwillful certifications to
qualify for the more lenient streamlined procedures. They do so at great risk, as a false certification exposes
a taxpayer to criminal prosecution.

Nevertheless, for the taxpayer whose noncompliance truly was nonwillful (an ever-shrinking set given the
growing publicity accorded to offshore tax compliance), the streamlined procedures provide an excellent
opportunity to get into compliance going forward. Taxpayers who qualify need to act, however. The IRS has
stated that it may end the streamlined procedures at some point as well. And once taxpayers learn of their
offshore filing obligations, they no longer will qualify as nonwillful for future noncompliance.

Given the IRS's improved detection techniques, taxpayers with undisclosed foreign accounts should not roll
the dice and hope they will go undetected. Even though the reduced civil penalties of the OVDP have ended,
disclosing accounts voluntarily, just like disclosing any other tax noncompliance, is still an option and one
that is far superior to the alternative. Avoiding a criminal prosecution can and should be a powerful incentive.

Christopher M. Ferguson is of counsel at Kostelanetz & Fink (http://www.kflaw.com/) and focuses his
practice on civil and criminal tax litigation, complex commercial litigation, and other white-collar criminal and
regulatory enforcement matters. To comment about this article or to suggest an idea for another article,
please contact Sally Schreiber, senior editor, at Sally.Schreiber@aicpa-cima.com
(mailto:Sally.Schreiber@aicpa-cima.com).

© 2018 Association of International Certified Professional Accountants. All rights reserved.