Lauren Sanders and Arden Dale of the Wall Street Journal report that the IRS has been accused by a group of criminal tax lawyers of doing a bait and switch on taxpayers who voluntarily disclosed their offshore tax accounts:
An influential group of criminal tax lawyers is sharply criticizing the Internal Revenue Service for its decision to prosecute some people who came forward to confess that they had used foreign bank accounts to evade taxes, saying it goes against longstanding practice of encouraging taxpayers to come forward to report their tax violations.
In 2008 and early 2009, shortly before the agency announced a special six-month limited amnesty program, some taxpayers with undeclared accounts from Swiss bank UBS confessed to the IRS that they had avoided taxes.
A letter dated March 30 and signed by 32 lawyers, many of them former high-ranking tax officials now in private practice, said the IRS actions “smack of trickery.” They said that because the taxpayers had turned themselves in, they shouldn’t be prosecuted. The letter said heavy-handed treatment of some account holders could cause taxpayer confessions to “grind to a halt.”
I have written about the IRS’s use of the bait and switch tactic in connection with Offers in Compromise, but this is the first I have heard of its use in connection with the voluntary disclosure program.
If taxpayers believe the IRS will go back on its word, the ability of the IRS to conduct successful amnesty programs in the future will be greatly diminished.
Taxpayers who have voluntarily come forward and reported their prior tax violations and have made arrangements to pay back taxes, interest and penalties should not be criminally prosecuted.
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