By admin of MillarLaw A Professional Corporation On Sunday, November 19, 2017

Since the beginning of the current Offshore Voluntary Disclosure Programs (OVDP) in 2009 tens of thousands of U.S. taxpayers have come forward to report previously undisclosed foreign financial accounts. The addition of the Delinquent filing Program and Streamline Procedures (the “Other Programs”) have added to those numbers and resulted in billions of dollars in tax, interest and penalties being collected. But all of these disclosures were predicated on the fact that the funds came from lawful sources, leaving potentially many taxpayers who want to come forward unable to do so. The following are limited examples or potentially numerous scenarios:

Assume the taxpayer’s is a dual national and the source of funds were from activities in his/her country of origin. The funds were deposited in a foreign financial institution that is on the Sanctions List of the Department of the Treasury’s Office of Foreign Asset Control (“OFAC”); or

Assume the taxpayer’s source of funds was from conduct non-violent criminal conduct such as like illegal internet gambling; or

Assume that the executor or administrator of an estate or trust discovers a foreign financial account(s) that hold what are believed to be from tainted sources.

Assume also that the taxpayer wants to report the funds for any number of reasons, like immediate needs or estate planning. How can the taxpayer come forward if by doing so he/she makes admissions that waive their Fifth Amendment Privilege against self-incrimination?

The OVDP is first and foremost a mass settlement offer. It applies to a specific class of taxpayers who qualify. The unfortunate taxpayer who is not eligible for the OVDP or either of the “Other Programs” does not get the benefits and protections of those mass programs but must instead make a specific case by case deal with the IRS Criminal Investigation. This is typically done through an “attorney proffer” which is a process where a lawyer puts forth an assumed set of facts that would form the basis of a “deal” to avoid prosecution and mitigate civil penalties. In some cases, like the first example the IRS will need consent from other agencies, like OFAC as well as DOJ Criminal Tax, but if there is a strong motivation on the part of the taxpayer the use of an “attorney proffer” may be the safest approach, compared to a “quiet disclosure”. A “quiet disclosure ” is a back door way of coming forward and if discovered is considered by the IRS as a further sign off “willfulness” and also constitutes a waiver of Fifth Amendment protections. “Quiet disclosures” are , therefore highly risky and in my opinion, to much like playing the lottery compared to using an “attorney proffer”.