How to Avoid Common Mistakes With Streamlined Disclosure Submissions
Are you being Misled About the Streamlined Filing Procedures?
Ever since the introduction of the “stand alone” streamlined procedures back in 2014, many clients have chosen the streamlined path instead of traditional voluntary disclosure.
We have handled more than 1000 streamlined offshore and voluntary discourse cases.
While the Streamlined Procedures may appear (relatively) straightforward, they are not.
There are always complex issues lurking beneath the surface, that attorneys who do not practice exclusively in this area miss — putting the client’s submission at risk.
Streamlined Program Cases are Complex
Since the requirements for the streamlined program are generally less onerous than traditional voluntary disclosure, it seems like every attorney with a few years of attorney experience and a handful of streamlined cases under their belt is suddenly an “expert.” Many of these attorneys have no prior attorney law firm experience, have never prepared tax returns with PFIC or related issues, and either just struck out on their own, or have non-legal experience they are trying to substitute for lack of litigation, trial and tax law experience.
A Recent Case of Seriously Bad Streamlined Offshore Lawyering
The origin of this post was the result of a recent case referral.
We were referred a case from an individual who first used a small law firm that sent the client to a pre-selected, outside CPA.
The attorney claims to specialize, but lists other areas of non-international tax law practice on their website. The Attorney only recently opened their own law practice, and did not attend the CPA meetings and the client inadvertently communicated legal information during a “casual conversation” to the CPA.
The client is now being audited — and is at serious risk.
Common Streamlined Offshore Cases Golding & Golding has been Retained to Fix
Since we are called upon to resolve many of these cases — we want to try to help nip this in the bud.
We inherit these types of cases all the time:
Here are five (5) common mistakes we see happen to good people like you:
Using an Attorney who Hires an Outside Accountant to Prepare your Tax Returns
Inexperienced attorneys will farm your tax returns out to an accountant, under a “Kovel Agreement.”
Kovel is rarely used by experienced counsel in streamlined offshore cases. In nearly all cases, experienced counsel will be dually-licensed as an Attorney/EA or Attorney/CPA, with many year of attorney experience and tax return preparation. At Golding & Golding, our team has prepared thousands of tax returns, and are often asked to counsel small and large CPA firms on tax issues involving PFIC, Foreign Trusts, Accounts, Assets, and Foreign Pensions.
The matter will be handled entirely in house by the lead attorney and his or her team. This does not extend the attorney-client privilege to tax return preparation; rather, it serves to protect the attorney-client privilege.
*Kovel Agreements in Streamlined Cases are reserved for extremely rare cases, involving multi-jurisdictional, foreign accounting issues with tens of millions of dollars and complex foreign/U.S. reconciliation issues.
Devaluing the Importance of Advanced Tax & Law Credentials
Experienced attorneys in Offshore Disclosure will generally have three (3) main qualifications (in addition to many years of experience as a practicing attorney):
- Board Certified Tax Law Specialist (45 tax law continuing education units every reporting period)
- Master’s of Tax Law (LL.M.)
- Dually-licensed as an Attorney/EA or Attorney/CPA (EA’s have a 72-unit continuing tax education requirement each cycle)
These credentials are considered “pre-requisites” for the effective practice of offshore disclosure law.
Using Words such as “Criminal” or “Jail” during the Consultation
This is a form of fear-mongering. Making a streamlined disclosure has no direct criminal aspect to it. Even a traditional Voluntary Disclosure (VDP) is civil in nature. If a person was criminally investigated by the IRS, they would retain a criminal attorney — but this is rare.
To date we have never had (nor do we know of any other experienced offshore disclosure lawyers who have had) a client criminally investigated in the midst of an offshore disclosure.
Handling Your Cases in an Assembly-Line Fashion
Some attorneys will quote you a specific amount of time to handle your case. This is an absurd way to practice streamlined offshore disclosure law, especially since many of the complex issues are hidden deep within the analysis.
If an attorney quotes you 5-10 hours to complete a streamlined filing submission – it is destined to fail — whether now or in the future if it is audited at a later date. And, since most cases fall under the 6-year statute, the statute of limitations has not even expired for even the earliest of stand-alone streamlined cases.
*The stand-alone Streamlined Procedures were not introduced until mid-2014.
**If the IRS believes there is civil fraud, there is no statute of limitations.
Embellishing Prior IRS Experience and/or Streamlined and Offshore Disclosure
It is important that you hire a firm that specializes exclusively in this area of law, and has handled several hundred submissions. That way, the attorney teams knows what to look for, and how to best approach your case. When an attorney does not have this experience, they will embellish their streamlined disclosure experience — putting you at risk.
For example, they may claim to have worked at the IRS, only to find that they did not work at the IRS as an attorney. And, if they did work at the IRS as an attorney, it was not in the offshore disclosure department.
You can learn more about the different roles IRS personnel play in your case.
Understand that there is a lot of bad information out there. By making a streamline submission you are certifying information under penalty of perjury to the IRS.
It is not something to be taken lightly, and not something to trust to an inexperienced attorney.
How to Hire Experienced Streamlined Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Dually Licensed as an EA (Enrolled Agent) or CPA
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in Streamlined Filing Procedures. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.