Tax Notes Quotes Mark Matthews on the State of Voluntary Disclosures

Mark E. Matthews speaks with Tax Notes on why the IRS's offshore voluntary disclosure programs aren't as attractive as they seem and how the Curran sentencing hearing shows the dangers of participating.  For the full article, please go to Tax Notes' website.

Excerpt taken from the article "The State of Voluntary Disclosures," by Marie Sapirie for Tax Notes

"On an international level, the government is still reaping significant gains and is making headway," said Mark E. Matthews of Caplin & Drysdale. The John Doe summons on FirstCaribbean International Bank and recent letters to account holders at Bank Leumi le-Israel BM are further evidence that the U.S. government is pressing into jurisdictions beyond Switzerland, he said. (Related coverage: p. 611. Prior coverage: Tax Notes, Jan. 21, 2013, p. 288 2013 TNT 9-5: News Stories.)

Despite its successes, there are still problems with the voluntary disclosure program. "As much as the IRS has tried to make the voluntary disclosure program attractive, it still remains needlessly bureaucratic," said Matthews. Among the large percentage of clients for whom it holds no appeal are those who have no criminal exposure and lacked information about the FBAR, he said. Many of those taxpayers are deciding to file amended returns or to start filing truthful returns, Matthews said.

U.S. citizens living abroad also could account for the increase in FBAR filings. "In my experience, the vast majority of FBARs are filed by U.S.-based entities or people," said Matthews. There are 6.8 million U.S. citizens living abroad, according to State Department estimates, and 618,134 FBARs were filed in 2011. (See http://travel.state.gov/pdf/ca_fact_sheet.pdf.) Matthews suggested that the number of potential unfiled FBARs could be off because U.S. citizens living abroad may have accounts with more than $10,000 in them. There is still a huge FBAR compliance problem, but the problem itself isn't criminal, Matthews said.