IRS Criminal Investigation Domestic Income Disclosure
Contents
IRS Criminal Investigation Domestic Income Disclosure Practice
How to Report US Income & Avoid Criminal Fines: The domestic disclosure a form of tax amnesty. The IRS recently updated the traditional voluntary disclosure program. The U.S. government has taken an aggressive strategy towards enforcing tax fraud and evasion. If a person is investigation and indicted for tax evasion, it can lead to civil and criminal penalties. While the domestic program is not as common as it’s international counterpart, there are many examples of when making a domestic voluntary disclosure is a preferred strategy. Let’s review the basics of the IRS Criminal Investigation Domestic Income Disclosure.
*If you are seeking to report foreign accounts, assets and income, we have a separate page dedicated to international reporting.
Summary of the IRS Domestic Disclosure Program
We will summarize the updates Domestic Voluntary Disclosure (IRS). The Internal Revenue Service recently announced how Taxpayers can make a Domestic Voluntary Disclosure, and get into the “good graces” of the Internal Revenue Service. By entering the new IRS Tax Amnesty program, Taxpayers with undisclosed U.S. Income can avoid criminal tax investigations for tax crimes such as Tax Evasion and Tax Fraud of Sales Tax, Employment Tax, Income Tax and more.
A Better Alternative than a Criminal Tax Investigation
The Domestic Voluntary Disclosure (IRS) is a great option for certain taxpayers. With all the attention that is being devoted to foreign and international tax related evasion and foreign tax compliance, the domestic portion of the voluntary disclosure program sometimes gets overlooked — sort of, kind of like the middle child.
And we know how awesome middle children are, right? Calm, cool, and even-keeled.
We have summarized the basics of entering the updated and revised new disclosure program to safely get into compliance.
How To Make a Domestic Voluntary Disclosure?
In order to make a domestic voluntary disclosure under the new rules, an applicant submits a Form 14457 – Preclearance. The Form 14457 has been updated and revamped from the prior version of the form, which was used after an applicant submitted a preclearance (presuming they submitted a preclearance letter). Golding & Golding has summarized the new IRS Form 14457.
Voluntary Disclosure Tax Evasion
One of the main benefits of entering the Domestic Voluntary Disclosure program with the IRS is to avoid criminal tax investigations. Voluntary Disclosure Tax Evasion avoidance is a key part of the program, and it is very rare for a person to be investigated for tax evasion if they make a full voluntary disclosure.
IRS Tax Amnesty
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.
How to Report Unreported Income to the IRS
When you have unreported U.S. Income, one of your options is Domestic Voluntary Disclosure
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).
IRS Gov Voluntary Disclosure (Update)
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.
Domestic Voluntary Disclosure 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.
IRS Domestic Voluntary Disclosure & Tax Amnesty (4-Parts)
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 Voluntary Disclosure 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).
Additional Questions about Disclosure
Here are some common questions and phrases:
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 Procedures
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 Voluntary Disclosure 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 Voluntary Disclosure 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 Voluntary Disclosure Procedures
Domestic Voluntary Disclosure Program is just another way to refer to the traditional domestic voluntary disclosure program.
Domestic Voluntary Disclosure Practices
Domestic Voluntary Disclosure Practices is just another way to refer to the traditional domestic voluntary disclosure program.
When was the Domestic Program 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 Voluntary Disclosure Procedures
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 Voluntary Disclosure?
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 Voluntary Disclosure
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 Voluntary Disclosure (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 Voluntary Disclosure (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 & International 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 & International 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.
Golding & Golding: About our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm for assistance.