In recent years, the IRS has greatly expanded its voluntary disclosure program, where taxpayers who have committed intentional or unintentional violations of the tax code can be brought back into compliance without facing criminal tax charges or the most severe civil penalties. Although the popular offshore voluntary disclosure program (OVDP) for foreign bank and financial accounts has ended, most of its components have been rolled over into the agency’s new, comprehensive disclosure program.
While this program is an excellent option for many taxpayers who are out of compliance, it does not come without its downsides. The IRS, for example, can, in some circumstances, share information disclosed during this process with state and local authorities who can use it to assess further penalties against you. Our skilled Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing can evaluate your situation and disclose all risks to you before you decide to enter a voluntary disclosure program.
What is the Voluntary Disclosure Program?
The voluntary disclosure program allows taxpayers who have committed past tax crimes to be brought back into compliance in almost all cases without facing criminal tax charges. The key is that you must disclose your fraudulent behavior and correct the returns before the IRS opens an audit or a criminal tax investigation into your returns. At the Tax Law Offices of David W. Klasing, our skilled Tax Lawyers and CPAs have years of experience successfully guiding our clients through the voluntary disclosure program and bringing them back into compliance. In fact, at times our voluntary disclosure work has accounted for 80% of our book of business.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed returns coupled with affirmative evasion of payment) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney-Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
What Kind of Information from the Voluntary Disclosure Process Can the IRS Share with State and Local Authorities?
While the IRS’s voluntary disclosure program might shield the taxpayer from criminal tax charges stemming from IRS-initiated criminal tax investigations, it does not necessarily foreclose criminal tax charges by state or local (or other federal) agencies with whom the IRS has shared your information. This begs the question of what kind of information that you disclose during the voluntary disclosure program the IRS is permitted to share with state or local agencies. The answer is that they can sometimes share a lot of information, but it depends on the circumstances. You should always consult with a skilled Tax Attorney like those at the Tax Law Offices of David W. Klasing before entering into any sort of disclosure agreement with the IRS.
According to one blogger’s recent chat with Grace Albinson from DOJ Tax CES and Richard “Rick” Goss, from IRS International Operations, Criminal Investigation, the following are some of the instances in which your return and other information can be shared with other agencies.
Disclosures to State Agencies Involved in Tax Administration
According to Ms. Albinson, Section 6103(d) of the IRS code allows for disclosure to state agencies of return information shared with the IRS by taxpayers. However, the agency is only required to disclose information in states “with which the Commissioner of the Internal Revenue Service has entered into an agreement regarding disclosure.” These disclosures can only be made for state tax administration purposes. This includes state agencies involved in criminal tax enforcement but not agencies involved in non-tax enforcement. As such, information shared with the IRS as part of the voluntary disclosure program cannot be shared for investigations by non-tax agencies into non-tax crimes. If you disclose information that can implicate you for state tax crimes, however, there is a chance you can still be prosecuted at the state level even if voluntary disclosure gives you a pass on federal criminal charges.
Disclosures That Are Made in Order to Assist the IRS with Tax Administration
This is somewhat of a loophole explained by Mr. Goss that could end up being a major deal for some folks. If, for example, something in your return suggests that you are involved in the Los Angeles drug trade, the agent will be permitted to contact local, state or federal drug enforcement authorities to find out if they have an open investigation into your activity or any other information that could corroborate their suspicion. The agent cannot disclose specific information about crimes for which the taxpayer is being investigated. However, they can ask questions that might cause the agent or investigator from the other agency to infer something that could, in turn, lead them to open a separate investigation into your conduct.
Disclosures to Certain Federal Agencies Made for Non-Tax Reasons
As per Ms. Albinson, there are certain situations where the IRS may be compelled to share information, including that obtained through the voluntary disclosure program, to certain federal agencies for non-tax purposes. For example, return information must be handed over if compelled by an ex parte order of a district judge or federal grand jury investigating you for tax or non-tax crimes. Agents are also permitted to disclose information “which may constitute evidence of a violation of any Federal criminal law (not involving tax administration) to the extent necessary to apprise the head of the appropriate Federal agency charged with the responsibility of enforcing such law.” Additionally, return information other than taxpayer return information typically must be handed over upon request from a department head. Information can also be disclosed to federal or state agencies if it involves an imminent danger of death or physical injury to a person or people, is necessary to prevent a defendant from fleeing, or the information is related to terrorist activities.
If You Are Considering a Voluntary Disclosure Program with the IRS, Call Our Skilled Tax Lawyers Today
The above situations are only some of the times that the IRS is permitted to share information given to them during the voluntary disclosure process with agents at other state, local, or federal agencies. Before signing up for any sort of voluntary disclosure program, it is crucial to have a skilled tax lawyer and CPA like those at the Tax Law Offices of David W. Klasing assess the particulars of your situation and be sure you are not opening yourself up to serious liability. Call us today at (800) 681-1295 to set up a consultation.
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
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Questions and Answers on Unfiled Back Taxes
- What are the common issues that non-filers face?
- Risk of audit after filing delinquent prior year returns
- Can substitute return deficiency be discharge in bankruptcy
- Substitute return modified by subsequent delinquent return?
- Do I file every delinquent return for each missing year?
- How does the IRS identify non-filers?
- How important is it to the government that I didn’t file?
- Delinquent tax return criminal prosecution likelihood
- Will I get a refund on a delinquent tax year?
- What happens after enforcement action has begun?
- Should I use an attorney, EA or a CPA to represent me when I re-enter the tax system?
- Why do people drop out of the tax system?
- What happens after the IRS identifies me as a non-filer?
- IRS has not previously filed substitute returns
- Tax attorney representation when re-entering tax system
- How will the government force me to file returns?
- What penalties can IRS impose on delinquent tax filings?
- What should I do to re-enter the tax system?
- Can Law Office of David W. Klasing help me re-enter system?
- Will tax collection taken by authorities affect my credit
- I concealed bank accounts from the government
- Forgetting or failing to file tax return
Questions and Answers about Offshore Voluntary Disclosure Initiative (OVDI) (CANCELLED)
- Why hire David W. Klasing to represent me in an audit
- 2011 Offshore Voluntary Disclosure Initiative FAQ
- Key Features of Initiative
- Eligibility For This Initiative
- 2011 OVDI Process
- Calculating The Offshore Penalty
- Statute of Limitations
- FBAR Questions
- Taxpayer Representatives
- Case Resolution
- What not to do!
- What to do!
- FBAR Reporting and Expired Voluntary Disclosure Program
- How the Law Offices of David W. Klasing Can Help
- Bank account overseas I didn’t report on my income tax
- Do I have to maintain information on overseas bank accounts
Questions and Answers about FBAR Compliance and Disclosure
- Potential charges for not participating in the 2014 OVDP
- How many tax returns will I amend for my FBAR filing?
- FBAR Voluntary Disclosure program end
- Can I make a voluntary disclosure after the deadline?
- Can I use IRS Voluntary Disclosure if I Can’t Pay?
- Potential reporting requirements and civil penalties
- What Happens if You Don’t Disclose Foreign Accounts
- Criminal charges if you refuse voluntary disclosure
- Characteristics of FBAR voluntary disclosures
- What is required to make a valid voluntary disclosure?
- 2012 Offshore Voluntary Disclosure Initiative Objectives
- What is an FBAR?
- Filed amended returns without making a Voluntary Disclosure
- Undisclosed foreign accounts: What exchange rate to use
- Why did the IRS announce the 2012 OVDI at this time?
- Should I consider making an offshore voluntary disclosure?
- Why to consider making a Voluntary Disclosure
- 2012 OVDI program vs. the voluntary disclosure practice
- Foreign bank account asset reporting/filing requirement
Questions and Answers About Foreign Tax Audits
- Does the Fifth Amendment apply to foreign accounts?
- How is evidence cultivated from foreign sources?
- How is tax loss determined?
- How might an FBAR audit be resolved?
- Is a penalty assessment ripe for judicial review?
- Overview of an administrative criminal investigation
- What is the process of an FBAR referral?
- Statute of Limitations raised during a FBAR audit?
- Precautions to be taken in the pre-audit phase
- Recent international tax and reporting prosecutions
- Foreign account, entity and investment prosecution
- Who collects restitution and penalties?
- International tax investigations are an IRS high priority
