IRS Revamps Voluntary Disclosure Rules

by Leroy Baker, Tax-News.com, New York

07 January 2003

The Los Angeles Times reported on Sunday that the Internal Revenue Service has recently revamped its voluntary disclosure procedures in order to encourage more taxpayers to come forward and admit that they have evaded taxes.

According to the report:

'In three pages of guidance, the IRS said it would not automatically guarantee immunity from prosecution or penalties, but the agency probably would not recommend prosecution when taxpayers come forward with truthful, timely and complete information about transgressions. Taxpayers also must be willing to pay any tax, interest and penalties 'determined by the IRS to be applicable'.'

In the new guidelines, the tax agency stated that it would not consider requests from lawyers wishing to keep their clients anonymous to fall under the category of voluntary disclosure, and that taxpayers already under investigation should not expect leniency.

The news has been widely welcomed by US tax professionals, who view it as especially significant given the IRS's otherwise tough stance on corporate and individual tax evasion. Speaking to the LA Times, Beverly Hills tax partner, Elliot Kajan observed:

'This is very good. It shows me they are willing to talk about waiving penalties. I'd say this is as close to an amnesty program as they're going to get.'

Outlining the motivation behind the policy change, Bob Wenzel, Acting IRS Commissioner explained that:

'Sound tax administration, including the possible use of criminal prosecution, requires as much clarity as possible. We want taxpayers, as well as their tax advisers, to better understand the steps they can take and the circumstances in which they can get back into compliance with the tax laws.'

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