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October 21, 2009 - Phil Hodgen

Amnesty penalty deal no longer available – confirmed

In discussions with two separate people at the IRS yesterday I confirmed that that if you come forward now with a voluntary disclosure of your foreign financial account you face the Same Old Mess that you did prior to the amnesty.

Translation: the “20% of your highest balance” amnesty deal as your major penalty will no longer be offered to you. You will face (at the least):

  • Pay your back taxes on the unreported income;
  • Pay interest on your back taxes;
  • Pay some sort of penalty for failure to report the income, or for paying the tax late, or both, or maybe even worse than that;
  • Pay interest on the penalty that is bolted on top of the tax bill; and
  • Face the penalty for failure to file Form TD F 90-22.1.

In short, we are back to the same old processes we faced before the Voluntary Disclosure Program. But with a bonus! Now the IRS has promised to be harsher in assessing penalties.

This should do wonders for the IRS in its attempt to encourage voluntary compliance. Not.

In fairness, both of the people I spoke to were in Criminal Investigations. They have nothing to do with the penalty-assessment side of the equation. And they disavowed any knowledge of IRS behavior outside their bailiwick.

Perhaps we will see a Voice of Reason (hello, T!) emerge from the IRS — particularly on the FBAR enforcement side) — as they contemplate the application of the inexorable and unavoidable Law of Unintended Consequences. I hope so.

Voluntary Disclosure