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New Comments on the IRS Voluntary Disclosure Program
We are members of the American Bar Association Section of Taxation, which on September 28, 2021 submitted comments to the IRS on the IRS Voluntary Disclosure Program (“VDP”), the Streamlined Domestic Offshore Program (“SDOP”), and the Streamlined Foreign Offshore Program (“SFOP”).
In the past we co-authored the ABA comments, this year we did not but the comments are very constructive. It is hoped that the IRS carefully considers and adopts many of the comments. We have pasted below the summary introduction of the comments.
Unfortunately, the comments do not address Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, and Form 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedure. These forms are used commonly and have several problems including:
– clear method to back out compliant tax-paid financial assets from the penalty calculation.
– clear method to amend the forms in case of error. For example, previously reported and correct amount columns.
- INTRODUCTION AND BACKGROUND
- The following comments are submitted in response to the request for comments made by the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “Service”) in the Federal Register dated July 7, 2021,1 as corrected and amended on July 26, 2021 (the “Amended Notice”).2 The Amended Notice requests comments on IRS Forms 14457, Voluntary Disclosure Practice Preclearance Request and Application, 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, and 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedure.
- The Amended Notice invites comments relating to the forms on: (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
- Form 14457 relates to the Service’s Voluntary Disclosure Practice (“VDP”). The VDP is a longstanding practice of IRS Criminal Investigation (“CI”) that takes timely, accurate, and complete voluntary disclosures under consideration when determining whether to recommend criminal prosecution. Forms 14653 and 14654 relate to the Service’s Streamlined Filing Compliance Procedures (“SFCP”). The SFCP, which were first offered on September 1, 2012, provide taxpayers who failed to report foreign income, assets, accounts, or investments, or pay all tax due in respect of those assets, but certify that the failure did not result from willful conduct, with a streamlined procedure for filing amended or delinquent returns, and terms for resolving their tax and penalty obligations. The SFCP comprise the Streamlined Domestic Offshore Procedures (for non-foreign residents) and the Streamlined Foreign Offshore Procedures (for foreign residents), as well as the Delinquent International Information Return Submission Procedures (“DIIRSP”). The Amended Notice observes that the VDP and the SFCP offer “two very different compliance paths to two very different populations of taxpayers.”
- Individuals in the Section also received verbal requests from the Service for comments on employment tax issues under the VDP. We would like to thank the Service for the opportunity to comment on Forms 14457, 14653, and 14654, and the VDP and SFCP to which they relate. The VDP and the SFCP have been remarkably successful, both for the taxpayers participating and the Government. However, as explained below, we think they could be improved in various respects to make the information-gathering process less onerous for taxpayers and the Service, to ensure they are applied fairly and equitably, and encourage eligible taxpayers to participate in them.
- These Comments address primarily the updated VDP and Form 14457, which the Service revised in April 2020. They address issues specific to the VDP for employment taxes in a separate section. They also address the interaction between the VDP and SFCP. Our recommendations are set forth in the body of the Comments.
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