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August 10, 2011

Offshore Voluntary Disclosure Initiative and FBAR

Hello all.  As many of you know, the Internal Revenue Service continues to promote its Offshore Voluntary Disclosure Initiative as a good option for taxpayers coming in from the cold.  Although we do not agree that the civil monetary penalties are fair under many circumstances, what we do agree on is that it is better than the alterntaive (i.e., federal prison).  One of the questions we frequently receive relates to the timing after you make a voluntary disclosure.  Here is a summary of that process, again, after disclosure.

After the complete disclosure is submitted, the case is assigned to a civil examiner for certification of completeness, accuracy, and correctness of the tax returns/voluntary disclosure.  This certification process is less formal than an examination, in that the examiner will not send taxpayer notices, taxpayer has no appeal rights related to the Service’s determination. But, the Service reserves the right to conduct an examination if needed.

The taxpayer generally will not hear from the assigned revenue agent/civil examiner until (i) the examiner has questions or needs clarification on the submission; and/or (ii) the examiner has a proposed closing agreement to submit.  A taxpayer should not expect contact from the Service simply indicating that the submission has been received and/or assigned.  The examiner may contact the taxpayer/representative, however, with questions, request additional documents, or make 3rd party contacts, to certify the accuracy of the amended returns.

As to the timing of review, the Service does not provide an estimate of time for the certification process, but states that there is “no way to predict”.  The best option is to simply submit the information as soon as possible to get the process moving and completed before August 31, 2011.  Ultimately, the taxpayer will finalize the process with the Service.  There will be a finite resolution through (i) closing agreement; (ii) no change letter; or the voluntary disclosure will be ‘bounced out’ of the program – and the taxpayer would receive a letter regarding same. 

All and all, the process works very smoothly and the Service is working with the taxpayers to come up with what the Service believes is a good result for both the government and the taxpayer. 

Please view the site disclaimer regarding the advice on this blog.

« Taxpayers Must Use The 2011 Offshore Voluntary Disclosure Initiative To Make Voluntary Disclosures Of Unreported Foreign Bank Accounts or Risk Criminal Prosecution | Main | FBAR and Offshore Voluntary Disclosure Initiative of the Internal Revenue Service »

August 10, 2011

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