The 2019 Offshore Voluntary Disclosure Program

by John Anthony Castro, J.D., LL.M.

Introduction

On November 20, 2018, the Deputy Commissioner for Services and Enforcement, Kirsten B. Wielobob, announced, via a memorandum to all division commissioners, new rules for Voluntary Disclosure Practices under the Internal Revenue Manual (IRM) Section 9.5.11.9.[1]

You can read the Memorandum and attached IRM provisions by clicking here.

Please note that CPAs are not permitted under the IRM to represent taxpayers through this process. IRM 9.5.11.9(5) specifically requires attorneys. If a CPA is found to have violated this rule, the CPA can and will face criminal prosecution as well as civil charges for engaging in the Unauthorized Practice of Law. We will not sugarcoat this like some conferences and seminars have. CPAs are specifically prohibited and will be reported for prosecution under state and federal law. The reason is that there is no attorney-client privilege, so you're putting the client at risk.

Background

The IRM provides no substantive or procedural rights.[2] Therefore, if you are uncertain about specific facts, circumstances, or scenarios affecting your eligibility, we can jointly call and anonymously speak with a special agent before pursuing pre-clearance.[3] There is no guarantee against prosecution; however, as long as you meet the conditions below, IRS policy is to recommend non-prosecution.[4]

Attorney Pre-Clearance

We must first determine whether you were Non-Willful in Failing to Comply. If you were not willful, please contact our firm for a free consultation regarding the Streamlined Filing Compliance Procedures.

If you determine, however, that you were likely willful and wish to engage our firm for a Voluntary Disclosure, you must be able to truthfully answer “no” to all of the following questions:

1. Are you currently the subject of any criminal investigation or civil examination by any governmental agency anywhere in the world?[5]

2. Has the IRS notified you of any intent to commence an examination or investigation?[6]

3. Is the source of any of your income from illegal sources?[7]

4. Do you have any reason to believe that the IRS has obtained information or evidence from any source in the world concerning your tax liability or noncompliance, including, but not limited to, the media, an informant, the National Crime Information Center Database, or the Integrated Data Retrieval System?[8]

If you can truthfully answer “no” to all of the questions above, our firm can engage you to initiate the Voluntary Disclosure.

It is important to note that, if an employee of any related entity from which you received omitted income has provided information to the IRS, you are disqualified from the IRM Voluntary Disclosure even if you had no knowledge of the contact.[9] Our firm (and only our firm) has the ability to verify whether such information has been provided to the IRS.

Timeliness

A disclosure is timely if it’s before the IRS has (1) expressed any intent to initiate or actually initiated any sort of examination or investigation either specifically regarding you or directly related to your liability, (2) received information from any source alerting the IRS to noncompliance, or (3) lawfully acquired any evidence directly related to a specific liability.[10]

Official Pre-Clearance

You must complete Form 14457 with all information required for that year as well as six years of original or amended federal income tax returns and all information filings with a post-dated check for 7 days in advance for all tax, penalties, and interest along with the cover letter from an attorney that identifies you as the taxpayer, provides a narrative for the non-compliance with specific facts and circumstances, contains a schedule of assets, entities, income, related parties, names any professionals or advisors that facilitated the noncompliance, and a verification of the attorney pre-clearance questions.[11]

Official Submission of Voluntary Disclosure

Thereafter, we will submit the Voluntary Disclosure request for official pre-clearance from Criminal Investigation (CI) by either faxing the packet to 267-466-1115 or mailing it to the following address to:

IRS Criminal Investigation
Attn: Voluntary Disclosure Coordinator
2970 Market Street
1-D04-100
Philadelphia, PA 19104

Total Compliance and Cooperation

You must be entirely truthful and thorough with a willingness to fully cooperate in good faith without any reservations, and you must make arrangements to settle all tax, interest, and penalties in-full without any pre-planning to limit your financial liability.[12]

Penalties will be dealt with regularly, so taxpayers should fully consider the Reasonable Cause Exceptions.

Confirmation or Revocation

If you provide materially false information or do not fully cooperate, your protections will be revoked.[13] The IRS will notify you in writing.[14] If, however, you fully cooperate in good-faith and provide all information, your submission will be forwarded to the IRS for processing, which means it’s been accepted.[15]

Closing

Contact our firm to schedule a free consultation. You need a team of diligent attorneys representing you so you can sleep peacefully again at night knowing you’re 100% back into compliance with the U.S. tax system. We understand the stress you’re under. Trust us, we will get you qualified and back into compliance so you can get back to enjoying life again.

Schedule a free consultation.


About the Author

John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., the author of International Taxation in Plain English, an esteemed graduate of Georgetown University Law Center in Washington DC where he earned a Master of Laws in Taxation with Certification in International Taxation, an OPM Fellow at Harvard Business School, and an internationally recognized tax attorney widely renowned for his legal research and development of creative solution to complex legal problems as well as his fierce advocacy for clients with offices in New York, Los Angeles, Washington DC, Miami, and Dallas.

To provide feedback on this article or suggest an idea for a future article, please contact Tiffany Michelle Hunt, J.D., LL.M., Director of Tax Planning at Castro & Co., at T.Hunt@CastroAndCo.com.


[1] See Memorandum from Kirsten B. Wielobob, Deputy Commissioner for Services and Enforcement, Internal Revenue Service (Nov. 20, 2018) (on file with the U.S. Department of the Treasury) (https://www.irs.gov/pub/spder/lbi-09-1118-014.pdf).

[2] IRM § 9.5.11.9(1); also see Estate of Duncan v. C.I.R., 890 F.3d 192 (5th Cir. 2018); In re Lewis, 557 B.R. 233 (M.D. Ala. 2016).

[3] IRM § 9.5.11.9(2).

[4] IRM § 9.5.11.9(7).

[5] IRM § 9.5.11.5(1)(a), (c).

[6] IRM § 9.5.11.5(1)(b).

[7] IRM § 9.5.11.5(1)(d).

[8] IRM §§ 9.5.11.5(1)(e), 9.5.11.9.7(3)(a)-(d).

[9] IRM § 9.5.11.9(7)(e).

[10] IRM § 9.5.11.9(4)(a)-(d).

[11] See Memorandum from Kirsten B. Wielobob, Deputy Commissioner for Services and Enforcement, Internal Revenue Service (Nov. 20, 2018) (on file with the U.S. Department of the Treasury) (https://www.irs.gov/pub/spder/lbi-09-1118-014.pdf).

[12] IRM § 9.5.11.9(3)(a)-(b).

[13] IRM § 9.5.11.4(8).

[14] IRM § 9.5.11.9.9(1).

[15] IRM § 9.5.11.7(6).

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