Tax Law Center Blog

The IRS has published new IRS internal procedure guidance with IRM changes dated 8/13/14.  The guidance is numbered WI-21-0814-1244 and titled “Streamline Filing Compliance Procedures for Accounts Management International IMF”.  The guidance is here.

The general legal rule is that IRM provisions are for the IRS’s internal guidance and confer no rights on the taxpayer.

There are a few interesting observations:

–       The IRS must determine if the certification is complete — a table checklist is provided in paragraph 7. One item they specifically check for is an open examination. (See par. 8, table).

–       “To complete adjustments on Form 1040X filed under the SDO:  

6. After making the assessment, refer any case with 5 or more foreign information returns (Forms 3520, 3520-A, 5471, 5472, 8938, 926, or 8621) by e-mailing the CIS ID number to “*LB&I OVDP Compliance” with an explanation that the case is being forwarded due to 5 or more foreign information returns. Enter CIS notes indicating the case was referred to *LB&I OVDP Compliance “5 or more foreign income statements”  

NOTE: The total of 5 forms is a combination of all years filed. For example submissions containing 3 Forms 5471 for 2011 and 3 Forms 5471 for 2012 would be referred since the total is 6. Submissions with a combination totaling less than 5 would not be referred.”

–       The above appears to sidetrack filings with 5 or more foreign information returns (Forms 3520, 3520-A, 5471, 5472, 8938, 926, or 8621). Therefore, taxpayers in such situation should be careful of the increased scrutiny.

Persuasive advocacy is required to affirmatively and persuasively demonstrate credible legal grounds for non-willfulness. Do not disclose too much and beware of badges (evidence) of willfulness, blind willfulness, concealment, etc.  For more information see new IRM published. It is very likely that the IRS will carefully monitor taxpayer filings with large accounts making fraudulent claims in the streamlined program and seek to punish them severely to send a warning.  We have already started receiving follow up inquires from the IRS for some of our streamlined program filers.

The streamlined program offers a good option for many taxpayers with undeclared accounts. Our firm presented an informational webinar on the Streamlined Filing Compliance Procedures. Materials from the webinar can be downloaded here: Game Changer Streamline.