Scott Michel Talks to Law360 on IRS Replacing Offshore Voluntary Disclosure Program

With the IRS Offshore Voluntary Disclosure Program coming to a close in September, willful violators who do not use the program could face penalties of at least $100,000 or up to half of their foreign accounts for certain misconduct, but it is possible the agency may create a replacement program in the future.

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Scott D. Michel, a member at Caplin & Drysdale, Chtd., said that despite the closure of the program, it was still crucial that a tax administration system exists to allow taxpayers some sort of mechanism to come into compliance with U.S. law.

“This is a time for the IRS to consider and adopt a standard procedure for voluntary disclosures that balances a workable mechanism to encourage noncompliant taxpayers to come forward with a system that does not result in a disproportionate allocation of resources in auditing every submission,” he said. “A combination of simple steps, appropriate spot-checking and various levels of IRS follow-up would promote effective and efficient tax administration.”

He told Law360 that many practitioners hoped the IRS would make a set of rules and procedures so willful violators could still make a voluntary disclosure.

Tax administration will be greatly served if the IRS can create a clear, reasonable and efficient new procedure that properly explains penalty regimes that are attractive enough to encourage participation without compromising enforcement, Michel said, and it should also include sanctions for proper, incomplete or inaccurate filings.

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Excerpt taken from the article “IRS Could Replace Offshore Voluntary Disclosure Program” by Amy Lee Rosen for Law360.