Friday, December 16, 2011

IRS Audits of Quiet Filers Have Begun.


I recently attended an ABA conference where multiple representatives from the IRS including, Senior Litigation Counsel Kevin M. Downing, were speakers and they all reiterated that the IRS has a program in place to audit Quiet Filers, who chose not to make a voluntary disclosure but rather chose solely to amend their tax returns to include their previously unreported income from their foreign bank accounts.

Issues that were not answered include:

1.     What FBAR penalty will apply?

o   the civil penalty for willfully failing to file an FBAR, greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5).

o   the civil penalty for non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation. See 31 U.S.C. § 5321(a)(5)(B) or

o   the penalty of 25% (or more) of the total balance of the foreign account in conformity with OVCI #2?

2.     How will the IRS collect these FBAR penalties under title 31? (File in FDC to reduce them to an enforceable judgment?)

3.     Is the Quite Filer only subject to a 3 year statute limitations for income tax assessments, where the understatement of income is less and 25% of the taxpayers AGI?

4.     Does the fraud provision stop the Statute of Limitations from running?

We are sure there's are even more issues. Stay tuned as these issues and more get developed, during the various IRS audits of Quiet Filers, which has already begun.

1 comment:

  1. Thanks for the post!

    Was there any indication of there being some screening procedure to not audit cases where the unreported income is small (either in abosolute terms or as a % of AGI)?

    Thanks,
    HB

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