Scott Michel Talks About the State of Offshore Enforcement

5 Things That Keep Tax Attorneys Up At Night

With several significant tax changes looming on the horizon, along with the government's continued crackdown on offshore tax avoidance and the possibility of future rate increases, tax practitioners may require powerful sleep aids to get a good night's rest.

Here, tax attorneys share their greatest fears and worries that keep them up at night.

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Foreign Bank Account Reports

Scott Michel, a member of Caplin & Drysdale Chtd., lies in bed at night thinking about the Report of Foreign Bank and Financial Accounts and foreign reporting requirements because even though they have been around for a long time — since around 2008 — tax authorities continue to devote significant resources to obtaining outsize penalties for reporting violations, even if little tax is involved.

"In doing so, they are pushing the edges of fairness — arguing, for example, that taxpayers are not entitled to rely on the advice of tax professionals; that 'willfulness' doesn’t mean willfulness as that term has been traditionally understood but something less; that individuals with little nexus to the U.S. should be punished as if they were experts on the U.S. tax system; or that a taxpayer’s signature on a return means that he or she should be deemed to know and understand every line of every form and schedule in 30 pages or more of tax filings," Michel said.

The U.S. has won this foreign reporting battle because almost every country in the world has signed on to the Foreign Account Tax Compliance Act,  which entails vigorous information sharing with foreign governments and mandates that all non-U.S. financial institutions disclose U.S. customers to the Internal Revenue Service, Michel said. 

"One can only wonder how much of the tax gap could be reduced if the same audit, appeals and litigation resources now devoted to pounding the rubble of the foreign reporting cases were instead aimed at traditional forms of domestic tax noncompliance and evasion," Michel said.

Read more at Law360.