Janet Novack has an interesting post in Forbes. It revolves around the Offshore Voluntary Disclosure Program.
The idea behind the OVDP is that a taxpayer who the IRS doesn’t know about who has (for example) secreted away funds in a foreign bank account (or accounts) overseas comes clean. He files amended tax returns, FBARs, pays a fine but does not face criminal prosecution. As Ms. Novack notes, the way it normally works is that a tax attorney will send a name and social security number to the IRS; the IRS will tell the attorney to go ahead or not to. The client (through the attorney) sends the IRS a detailed questionnaire; the IRS then sends a formal letter approving entry into the program.
All should go smoothly then, right?
Well, apparently not so for certain individuals who used Bank Leumi. The IRS has apparently sent rescission letters to some individuals who used Bank Leumi for hiding their funds. A tax attorney who I’ve met and highly respect, Robert McKenzie, is quoted in the piece, “I’m upset that I gave advice, relying on the government letter, only to find I couldn’t rely on my government to do it properly.’’
I suspect there will be significant legal ramifications from this. Consider if you are one of those individuals, and you are subsequently a subject of a criminal prosecution. I’m certain an argument will be made that the IRS cannot rescind the acceptance; that constitutes some form of “double jeopardy.” I’m not an attorney, so once again I’m sailing into waters I should avoid (well, I’m definitely not giving legal advice here). At minimum, how many tax attorneys are going to trust the IRS the next time?
When I see Mr. McKenzie later this year (he’s usually an instructor at a continuing education seminar I take), I’ll ask him about this. I suspect the words I hear will be the ones he uses to excoriate White Sox fans.
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