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A group of prominent criminal tax attorneys has sent a letter to the IRS criticizing it for potentially bringing criminal charges against individuals who voluntarily disclosed offshore bank accounts and other assets as part of the IRS’s voluntary disclosure program (VDP).

The voluntary disclosure program is designed to allow taxpayers to disclose offshore assets to ensure they are compliant with tax laws and to resolve any outstanding tax liabilities they may have. The incentive for people to participate is the understanding that they will not be criminally prosecuted for tax evasion if they fully comply with the program.

The letter from the group of attorneys raises concerns that the IRS may engage in the prosecution of some taxpayers who have not fully complied with the program or who have not made their disclosures in a timely manner.

At this time, nearly 15,000 taxpayers may have taken advantage of this program; however, if there appears to be the potential for prosecution, the numbers of people coming forward is sure to decrease dramatically. While the IRS program in no way promises individuals immunity from prosecution, many taxpayers who came forward in good faith will feel as though they’ve been tricked into providing information about their offshore bank accounts and other assets.

The lawyers also cautioned that the future viability of the program may be affected by prosecutions. Many individuals are distrustful of government, especially the IRS, and will be highly skeptical of participating in such a program without encouragement from their lawyers. However, attorneys are less likely to encourage their clients to come forward if they can’t rely on the government to forego prosecution for those who come forward in good faith.

Even if the IRS makes it known that there are specific reasons that one person may be prosecuted after coming forward, the simple fact that a prosecution has taken place may create a chilling effect that prevents others from coming forward at all. The lawyers also cautioned that moving forward with any prosecutions in these cases would likely make the program ineffective for the purposes of locating offshore assets.

Related Resources:

  • Daily Tax Report, Tax Attorneys Criticize Potential Prosecutions for Some Who Disclosed Offshore Assets