Streamlined Disclosure Audit & Risk of Triggering an IRS Examination

Streamlined Disclosure Audit & Risk of Triggering an IRS Examination

Streamlined Disclosure Audit

Streamlined Disclosure Audit: The Streamlined Procedures are a great program for non-willful taxpayers who meet the requirements for submission.

Still, the Streamlined program is not bullet-proof. The number of IRS Streamlined Disclosure audits has gone up significantly over the past few years. 

With several inexperienced tax law firms slapping together their submissions and misusing Kovel — the risk of audit has gone up significantly. 

We have had several Taxpayers approach us who were audited by the IRS for their Streamlined submission, and many of these submissions could have significantly reduced their risk of audit.

There has also been an increase in attorney “hourly fee scams” involving streamlined audits and examinations that should have been covered under a flat-fee model at the outset of representation.

Rejection vs. Audit

If your Streamlined Procedures submission is “rejected,” then that is different than if the submission is audited.

If it was rejected, it usually means the submission did not establish the elements required to qualify as non-willful, or you may have already been on the IRS radar.

A Few Reasons Why Your Streamlined May be Audited

There are many reasons why your Streamlined Disclosure may be audited. Sometimes it is bad luck, and sometimes it is more than that.

Was Your CPA’s Practice Audited?

CPA firms get audited by the IRS. When the OPR (Office of Professional Responsibility) audits CPA and other Accountant firms, is to asses overall compliance.

Sometimes, it is because the IRS believes the CPA firm may not be operating appropriately.

Are You More “Willful” than “Non-Willful”

Willfulness does not mean intent.

There can be “lower” forms of willfulness, which do not require willful or intent — these additional willful standard are referred to as:

If you have any concern of willful vs. non-willful, It is crucial that you consult with an experienced Streamlined and Offshore Disclosure Lawyer before making any submission.

6-Year Statute SOL

The IRC (Internal Revenue Code) has an extended statute of limitations for certain foreign income matters.

Substantial omission of items

Except as otherwise provided in subsection (c)—

(1) Income taxes: In the case of any tax imposed by subtitle A—

(A)General rule: If the taxpayer omits from gross income an amount properly includible therein and—

  • such amount is in excess of 25 percent of the amount of gross income stated in the return, or
  • (ii)such amount—

(I) is attributable to one or more assets with respect to which information is required to be reported under section 6038D (or would be so required if such section were applied without regard to the dollar threshold specified in subsection (a) thereof and without regard to any exceptions provided pursuant to subsection (h)(1) thereof), and

(II) is in excess of $5,000,

the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.

Civil Tax Fraud 

There are 2 main instances in which the IRS statute of limitations may have no limitation:

False Return

In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.

Willful Attempt to Evade Tax

In case of a willful attempt in any manner to defeat or evade tax imposed by this title (other than tax imposed by subtitle A or B), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

*Non-filed tax returns are not subject to the 3-or 6-year statute of limitations.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

Contact our firm today for assistance with getting compliant.