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Tax Notes Quotes Zhanna Ziering: News Analysis: Did You Really Mean to Hide Those Foreign Accounts?

July 11, 2016, Tax Notes

Zhanna A. Ziering comments on the definition of non-willfulness used by the IRS in the Streamlined Filing Compliance Procedures and requesting transitional penalty relief in the Offshore Voluntary Disclosure Program.  Ms. Ziering's comments are part of an article covering a panel discussion on June 24th at the NYU School of Professional Studies Tax Controversy Forum in New York, which discussed individuals who lied about whether they really belonged in the IRS's streamlined filing compliance procedures.  For the complete article, please visit Tax Notes's website (subscription required).

Excerpt taken from the article "News Analysis: Did You Really Mean to Hide Those Foreign Accounts? Part 3" by Lee A. Sheppard for Tax Notes.

"Even with the clarification, drawing a line between willful and non-willful conduct, especially if the conduct is negligent, usually requires an informed judgment call," Zhanna A. Ziering of Caplin & Drysdale Chtd. told Tax Notes. "Negligence is included in the streamlined definition of non-willful conduct. Yet, at times, it is difficult to identify where on the spectrum the conduct stops being negligent and becomes willful."

. . .

"Requesting transitional penalty relief has been a frustrating experience for both taxpayers and practitioners," said Ziering. "While the IRS continues to deny it, our collective experience strongly suggests that the IRS does have bright-line rules about what type of fact pattern does or does not warrant transitional relief. Presence of certain facts practically can be a deal-breaker irrespective of how innocuous the rest of the facts are."

. . .

Skarlatos noted that the burden of proof is on the IRS, not the taxpayer. Moreover, there are inadequate review procedures for cases when an agent or manager is difficult or just misunderstands the applicable standards. "If they make the wrong decision, there is not much a taxpayer can do other than opt out," said Skarlatos. An opt-out means a full audit with no credit for having come clean in the first instance.

Ziering concurred. "The problem with transitional, unlike streamlined, is that the taxpayers seeking relief are being asked to prove a negative," she said. "Although the IRS has not confirmed this, the feeling is that the agents working transitional relief cases start with the presumption of willfulness and view all the unfavorable (or neutral) facts in the light most detrimental to the taxpayers. And then the taxpayers must essentially rebut that presumption by offering alternative and 'IRS-acceptable' explanations of the facts."

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