- 1 Common Streamlined Filing Compliance Mistakes to Avoid
- 2 Inexperienced Counsel, Outside CPAs, and Hidden Hourly-Fee
- 3 Overwriting the 14653 and 14654
- 4 Including Assets that are Exempt
- 5 Not Responding to Further IRS inquiries
- 6 Divulging Attorney-Client Privilege Information to an Outside CPA
- 7 Stay Aware
- 8 Golding & Golding: About Our International Tax Attorney Law Firm
Common Streamlined Filing Compliance Mistakes to Avoid
Update to our 2020 Article: The IRS (stand-alone) streamlined filing procedures are approaching their 9th year. The standalone procedures were developed in 2014 — and were originally part of OVDP (Offshore Voluntary Disclosure Program). Our firm (Golding & Golding) is one of the main tax and law firms worldwide that represents clients exclusively in streamlined filing/offshore disclosure and compliance matters – in over 80 countries. Unlike other more general practice tax law firms, our international tax law specialist team specializes exclusively in Offshore Disclosure and Compliance. We have counseled thousands of individuals on issues involving FBAR, FATCA, PFIC, and more. We have also inherited a significant number of clients who were misled by inexperienced counsel, CPAs, and other tax professionals. Here are five (5) preventable streamlined filing mistakes that we see all too often.
Inexperienced Counsel, Outside CPAs, and Hidden Hourly-Fee
There are only a handful of experienced streamlined attorneys who focus exclusively on this area of tax law. These Attorneys have a +20-years experience as lawyers, are Board-Certified Tax Specialists, have advanced degrees (LL.M.), and are dual-licensed. Experienced offshore disclosure attorneys charge flat-fee, to include both legal and tax representation in-house. Inexperienced lawyers charge you a lower up-front fee and refer you to an outside CPA for tax return preparation, chances are you are getting shafted and double-charged.
It is referred to as a “bait-and-switch” and we are aware of only a handful of less-experienced law firms that still do this —
Overwriting the 14653 and 14654
The streamlined certification forms are not dissertations, and taxpayers should not be drafting 10-page, single-spaced summaries. Whenever a streamlined certification is rejected, it is typically (but not always) because the submission is way too long — and includes information that begins to look more like reckless disregard or willful blindness (willfulness) than mere negligence or inadvertence (non-willful).
Including Assets that are Exempt
Not all foreign assets are included in the penalty computation in a Streamlined Domestic Offshore submission (Streamlined Foreign has no penalty). For example, individually owned rental property and RRSP are not subject to the SDOP penalty.
Not Responding to Further IRS inquiries
There is no closing letter with a streamlined case; the matter can stay open for several years. Sometimes the IRS will follow-up after the submission. If you retained a tax/legal firm that provided flat-fee for the full representation — then this should not be a problem. Other firms that charge hourly and use outside CPAs tend to forget about the matter after it’s been submitted — even though most submissions are subject to a six-year statute of limitations and the IRS will oftentimes follow-up on a variety of issues.
When the taxpayer client confronts the Attorney, the Attorney claims that either:
The CPA should have responded; or
Representation did not include post-submission follow-up (and now they want you to replenish the retainer).
Noncompliance can lead to an audit or even a rejection of the submission.
Divulging Attorney-Client Privilege Information to an Outside CPA
When a client talks to an attorney about legal matters, those legal matters are protected under the Attorney-Client Privilege. While there is no attorney-client privilege with a CPA, some firms intentionally mislead their clients into believing that a Kovel letter provides blanket Attorney-Client privilege protection, when it does not provide such protection. They accomplish this by referring parts of the case to an outside CPA for tax preparation (not for true Kovel protection) — and together the Attorney and CPA each charge their own set of hourly fees. Kovel can be rejected by courts. Even if it is accepted, it does not provide any protection for tax preparation matters. The client then ends up divulging privileged information to the CPA, while paying double fees.
The Streamlined Procedures can be a great way for a taxpayer to resolve prior-year noncompliance. When hiring a team for representation (unless the taxpayer is going to submit on their own), it is important that the taxpayer carefully vet out the attorney and their team carefully. We have several resources available on both this website and our main website — as well as a video library to assist you.
Golding & Golding: About Our International Tax Attorney Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS disclosure & compliance.
Contact our firm today for assistance.