Domestic Tax Amnesty (IRS Programs Can Reduce Fines & Penalties)
With so much talk in the news recently about Offshore and Foreign disclosure…Domestic Disclosure is starting to feel like the IRS’ middle child (no offense to all our middle children friends).
it is important to note that you can use the IRS Voluntary Disclosure Program (Internal Revenue Service Manual) to make a domestic (or joint domestic/foreign) disclosure as well — even if you have no unreported “Offshore” or “Foreign” Income.
Domestic Tax Amnesty
While the IRS has placed great emphasis on making an offshore disclosure, it is important to note that they are just as willing to penalize, investigate, indict and prosecute you for failing to report U.S. or Domestic income as well.
Updated Voluntary Disclosure Practice Guide & How to Submit to IRS
Golding & Golding specializes exclusively in voluntary disclosure.
While many of the cases we handle are foreign & international voluntary disclosure cases, many of our cases also combine both domestic and foreign cases — or are domestic based voluntary disclosure cases.
Domestic Tax Amnesty to the IRS is Now More Fluid
One of the benefits of the New Domestic Tax Amnesty & Voluntary Disclosure program is that the IRS has provided a bit more substance and structure to the domestic voluntary disclosure practice — as well as enhancing the instructions for Domestic and Foreign submissions.
In other words, if you have both unreported domestic income and unreported foreign income – you can complete the entire submission under one program.
*Yes, you could also submit a dual-submission back in the day as well — when OVDP was still active. But it was a bit awkward, even for the IRS agents — since the way they used to see it, was that foreign matters were submitted under OVDP, and Domestic Matters were submitted under the Traditional Voluntary Disclosure Program.
We are going to use this article to detail the “Domestic portion” of the voluntary disclosure program, as well as provide some examples — to give you a better idea of whether the program is right for you.
We will Break Domestic Voluntary Disclosure Down into 4 Parts
- Common Domestic Voluntary Disclosure Terms
- How to Submit to the Program
- Examples Domestic Voluntary Disclosure
- Finding Reputable and Experienced Counsel
Domestic Tax Amnesty (Terms)
Here are some common questions and phrases:
Domestic Tax Amnesty
Domestic Tax Amnesty is a general phrases that refer to all the different versions of voluntary disclosure programs that the Internal Revenue Service makes available.
The domestic voluntary disclosure program is one version of the program (there are also multiple international or foreign versions of the program). Unlike the foreign versions of the program, the domestic voluntary disclosure is generally one large program, that encompasses all different types of domestic income.
In other words, there are no sub-programs for the Domestic submission as there are for the Foreign Submissions (Streamlined Programs).
Domestic Tax Amnesty Attorney
A Domestic Voluntary Disclosure Program Attorney is an attorney specializes exclusively in IRS Domestic and International Voluntary Disclosure matters.
The top attorneys in the field have been in private practice for upwards of 20 years, along with earning the following Credentials:
- Board-Certified Tax Law Attorney Specialist Credential
- Master’s of Tax Law (LL.M.)
- Enrolled Agent or CPA Credential
- Experience in high-stakes litigation
Domestic Tax Amnesty Programs or Procedure Attorney
The phrase IRS Tax Amnesty Program or Procedure Attorney is a more generalized way to describe domestic and foreign voluntary disclosure. These attorneys specialize exclusively in IRS Tax Amnesty (IRS Domestic and International Voluntary Disclosure matters).
What Types of U.S. Tax issues are Covered?
All different types of taxes penalties can be submitted with domestic voluntary disclosure, including: Income Tax, Sales Tax, Estate Tax, Business Tax — and various other types of U.S. based tax issues.
What Does Domestic Voluntary Disclosure Mean?
When it involves the Internal Revenue Service (IRS), domestic voluntary disclosure refers to the voluntary disclosure or reporting of income associated with U.S. sourced income or money. This is different than foreign or international voluntary disclosure, which refers to foreign money.
IRS Criminal-Investigation Voluntary Disclosure Program
IRS Criminal Investigation Voluntary Disclosure Program is a long-winded way of referring to the domestic voluntary disclosure program.
It is not a criminal admission or submission. You are not acknowledging criminal liability or submitting a plea deal by entering the program.
The disclosure is intended to avoid any criminal prosecution.
IRS Voluntary Disclosure Memo
There are two primary IRS voluntary disclosure memos people refer to these days:
There is a now infamous memo from about 10 years ago which focuses on which standard of proof the IRS should use when enforcing certain penalties.
Most likely though, if someone is referring to the IRS Domestic Voluntary Disclosure Memo, they are referring to the new updated IRS voluntary disclosure procedures, which are contained in a 11.20.2018 memo.
Domestic Tax Amnesty IRS
As you can imagine, domestic voluntary disclosure can have many meanings and connotations, depending on the context.
Several states have their own domestic voluntary disclosure program as well, so when you see the phrase domestic voluntary disclosure and “IRS,” then you know it is referring to Internal Revenue Service’s voluntary disclosure program.
Domestic Tax Amnesty IRM
Domestic Voluntary Disclosure IRM refers to the Internal Revenue Manual, where you can find mountains of information involving all different types of IRS procedures.
There are various sections which detail domestic voluntary disclosure practices, but it is important to refer to the November 20, 2018 memo regarding the updates to the program (until it is further updated).
Domestic Tax Amnesty Form
The Domestic Voluntary Disclosure form, refers to form 14457.
This is a form that an applicant uses when the applicant wants to submit to either the domestic voluntary disclosure program or foreign program — by requesting preclearance.
In prior years, there was no specific domestic voluntary disclosure program pre-clearance letter available, but now it is available (3/19).
Domestic Tax Amnesty Penalty
The domestic voluntary disclosure penalty ranges, depending on each person’s facts and circumstances.
With that said, the general proposition is that the IRS will seek to enforce fraud related penalties for domestic voluntary disclosure income and other related penalties.
Meanwhile, other penalties that would otherwise seem automatic such as failure-to-file and failure-to-pay, may be abated.
Domestic Tax Amnesty Program
Domestic Voluntary Disclosure Program is just another way to refer to the traditional domestic voluntary disclosure program.
Domestic Tax Amnesty Practices
Domestic Voluntary Disclosure Practices is just another way to refer to the traditional domestic voluntary disclosure program.
When was Domestic Tax Amnesty Introduced?
The Domestic Voluntary Disclosure Program has been around in one form or another — for more than 50 years.
While other programs have come and gone, the Internal Revenue Service has always seemingly provided some sort of procedure for people who wanted to try to get into compliance, and get right with the Internal Revenue Service — before any sort of criminal action is initiated.
IRS of Release the New Domestic Tax Amnesty?
The memo detailing the updated domestic voluntary disclosure program procedures and practices was released on November 28, 2018.The memoranda was dated November 20, 2018.
How to Make a Domestic Tax Amnesty?
We will go into more detail below about how to initiate a Domestic Voluntary Disclosure but generally you submit a preclearance form letter, which is identified as IRS form 14457.
This form was not always used for preclearance, so it is important that when you make this submission you are using with the most recent version of the form. At the time of this article, the most recent Version of the form is March 2019.
How to Submit to Domestic Tax Amnesty
At Golding & Golding, we have handled more than 1000 Voluntary Disclosure Program submissions.
Each client is unique, and each client is different. With that said, a submission begins with a Preclearance Letter.
The Pre-Clearance letter is not overly detailed, but it will require you to submit some data to the Internal Revenue Service breaking down the source of income, the type of income, and other related issues.
After submission (and acceptance) the next phases will vary based on each person facts and circumstances.
We have prepared a separate article summarizing how to breakdown the preclearance form 14457.
Four (4) Examples Domestic Voluntary Disclosure
In Tax (and life) our team has found the best way to learn and digest highly complex information is through examples.
Therefore, we will provide you four (4) examples of common domestic voluntary and combined domestic and offshore voluntary disclosure submissions.
Domestic Tax Amnesty (Example 1)
Ralph runs a construction business. He earns significant income, but some of the subcontractors pay him in cash. When times were tough – or Ralph just wanted to go out and spend some money — Ralph did not report the income to the IRS.
In addition, Ralph failed to withhold employment tax on certain staff members who are employees instead of independent contractors.
Finally, Ralph also embellished his expenses.
Ralph may be a good candidate for the domestic voluntary disclosure program
Domestic Tax Amnesty (Example 2)
Victor is your typical entrepreneur.
Victor grinded it out in 80-to-100+ hour work weeks trying to build up a small Record label.
One of Victor’s musicians hit it big, and Victor took it upon himself to spend a lot of money, without reporting it.
As his record company grows, Victor still fails to fix any of the issues, while still skimming off the top.
Victor may be a good candidate for the domestic voluntary disclosure program
Domestic Tax Amnesty & Offshore Business Disclosure (Example 3)
Continuing from the previous example, one of Victor’s acts is located in Costa Rica. Victor is hanging out at a Costa Rican bar with some expats when Victor gets the idea of not reporting a majority of the income from his foreign musician.
Instead of repatriating to the U.S., he uses the money to purchase a few Costa Rican homes for rental properties — and opens a few Costa Rican bank accounts.
He works with a local attorney and thinks the money is safe since he does not have signature authority over the accounts — his business partner handles money in Costa Rica through a Sociedad Anonima.
Victor gets cold feet.
Victor may be a good candidate to submit for both domestic and foreign issues.
Domestic Tax Amnesty & Offshore Business Disclosure (Example 4)
Andre works as a consultant in United States.
He formed his own LLC, and became very successful. Unfortunately, Andre is a little too smart for his own good, and failed to pay income tax on some of the earnings.
He had U.S. and foreign clients divert some of the domestic and foreign income, which he used to purchase rental properties overseas, to accounts overseas.
He did not report the income, and claimed deduction for fringe benefits that he knew he should have included as income.
Andre intentionally underreported his US earnings, and then shifted them into a couple of Swiss banking “numbered accounts,” thinking he could keep the money hidden.
Unfortunately, Andre got wind that there might be a whistleblower at one of his client’s companies.
Moreover, it turns out that the foreign bank edited to a deferred prosecution agreement the United States.
Victor may be a good candidate to submit for both domestic and foreign issues.
Beware — People Can be Whomever They Want to be Online
This is why credentials and certifications are so important.
Anyone can just paste the Domestic Voluntary Disclosure content on their website directly from the IRS website without much explanation, and call themselves a specialist or expert — but that means nothing.
And that is the problem.
In recent years, we have had many clients come to us after being horribly represented by inexperienced tax counsel. While we are sure it is a problem in many fields, it seems to run rampant in IRS voluntary disclosure.
They are usually a small firm that practices in multiple different areas of general tax law (general audits, collections, offers-in-compromise, etc.). They are not board certified tax law specialist attorneys, and do not have any advanced tax credentials.
They manipulate past legal experiences, such as working for the IRS — but then it turns out they never worked as an attorney for the IRS, or even in the offshore disclosure department.
The IRS has nearly 100,000 employees, and just being one of them does not make an attorney qualified to be an effective and experienced offshore voluntary disclosure tax attorney specialist.
IRS Disclosures are complex enough for experienced practitioners who focus exclusively in the area of law, never mind relative newcomers who are trying to handle more than just offshore voluntary disclosure as part of their everyday tax practice.
We know, because those cases usually end up on our door-step. Examples of recent cases we had to takeover from less experienced Attorneys can be found by Clicking Here (Case 1) and Clicking Here (Case 2).
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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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.