Tax crimes afficionados know that restitution is not available for a Title 26 tax crime of conviction but is available if the crime of conviction, although related to tax, is under Title 18 (often the Klein conspiracy or even a conspiracy to commit a tax offense). The exceptions for Title 26 crimes of conviction permit restitution: (i) if the defendant agrees to restitution in a plea agreement; or (ii) if the court imposes restitution as a condition of some benefit given the defendant (e.g., probation). Even when permitted, restitution has been just an order of the court which is not self-executing and requires some collection efforts by the Government unless the defendant pays voluntarily which most defendants will pay before sentencing if they can in order to get the extra juice in for the judge's sentencing discretion.
Tax crimes afficionados also know that the reason restitution is not generally available for tax crimes under Title 26 is that the IRS has elaborate civil mechanisms to collect taxes, which is after all (at least in the criminal amount) the basis for restitution in criminal tax cases (whether under Title 26 or Title 18). From a civil perspective, most taxes involved in tax crimes are subject to the notice of deficiency requirement, permitting a taxpayer to contest in the Tax Court before the IRS actually assesses the tax and can deploy its collection mechanisms. Since the notice of deficiency is generally issued after the criminal tax case is finally closed, the notice of deficiency and Tax Court procedures with the prohibition on assessment often meant that the taxes reflected in the order of restitution were not assessed for years and the collection mechanisms in the Code were postponed for years.
Congress recently enacted a statute to make collection restitution for unpaid tax more efficient. Section 3(a) of P.L. 111-237, effective for restitution orders entered after August 16, 2010, amends Title 26 as follows (§ references are to Title 26 as amended):
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Friday, February 11, 2011
Tuesday, February 8, 2011
IRS Announces Second Special Voluntary Dislcosure Initiative for Offshore Accounts
The IRS announced today a special voluntary disclosure program. For now, I will just link to the announcement here. and provide only the bullet points I see with no (or very limited) editorial comment:
1. The deal is available through 8/31/11. (Note, however, taxpayers must "file" the required amended income tax returns discussed in paragraph 3 below by 8/31/11, so last minute decisions to join the program apparently will not work, particularly in light of the lead time required to obtain documents from foreign banks.)
2. The in lieu of FBAR penalty is 25% of the highest aggregate balance in the foreign account(s) from 2003 to 2010. Some taxpayers will be eligible for lower penalties.
3. Taxpayers must amend all affected income tax returns during the years 2003 - 2011 and pay the resulting taxes, pay either a 20% accuracy related penalty in the case of filed returns or the up to 25% failure to file penalty in the case of unfiled returns, and pay interest on both. These returns must be filed by 8/31/11. Some taxpayers will be eligible for lower penalties.
4. A 12.5% penalty rate will apply if the aggregate balance did not exceed $75,000 in any of the years from 2003-2010. Presumably this lower rate will be both for the in lieu of FBAR penalty and the income tax penalty. There is also mention of a 5% rate in "limited situations."
Additional Information from IRS:
IRS / Shulman Announcement of OVDI Program
2011 OVDI Frequently Asked Questions (pdf)
2011 OVDI Frequently Asked Questions (link to IRS site)
How to Make a Voluntary Disclosure
Voluntary Disclosure Contacts
As Corrected 2/9/11
1. The deal is available through 8/31/11. (Note, however, taxpayers must "file" the required amended income tax returns discussed in paragraph 3 below by 8/31/11, so last minute decisions to join the program apparently will not work, particularly in light of the lead time required to obtain documents from foreign banks.)
2. The in lieu of FBAR penalty is 25% of the highest aggregate balance in the foreign account(s) from 2003 to 2010. Some taxpayers will be eligible for lower penalties.
3. Taxpayers must amend all affected income tax returns during the years 2003 - 2011 and pay the resulting taxes, pay either a 20% accuracy related penalty in the case of filed returns or the up to 25% failure to file penalty in the case of unfiled returns, and pay interest on both. These returns must be filed by 8/31/11. Some taxpayers will be eligible for lower penalties.
4. A 12.5% penalty rate will apply if the aggregate balance did not exceed $75,000 in any of the years from 2003-2010. Presumably this lower rate will be both for the in lieu of FBAR penalty and the income tax penalty. There is also mention of a 5% rate in "limited situations."
Additional Information from IRS:
IRS / Shulman Announcement of OVDI Program
2011 OVDI Frequently Asked Questions (pdf)
2011 OVDI Frequently Asked Questions (link to IRS site)
How to Make a Voluntary Disclosure
Voluntary Disclosure Contacts
As Corrected 2/9/11
Can I Just Pay and Make the Investigation / Prosecution Go Away?
Criminal tax practitioners often are asked early in the representation (and often more than once) whether, if the client under investigation or being prosecuted, simply pays the tax involved -- even with interest and penalties -- will the problem simply go away. The answer that I give to this is no. (Actually, depending upon the facts and if it is early on in the investigation, the answer may be more nuanced than an outright unequivocal no, as I note later in the blog) As I have sometimes explained after giving the answer no, the investigating agent or prosecutor really does not care whether the taxes are ever paid; he or she wants a conviction.
In United States v. Quinn (D. Kansas 2/3/11), the defendant tried to make the case go away by paying the tax. The defendant was prosecuted under § 7202 Willful failure to collect or pay over tax, the criminal analog to the civil trust fund recovery penalty, § 6672. Failure to collect and pay over tax, or attempt to evade or defeat tax (sometimes called the responsible person penalty). After being indicted, the defendant paid the amount for which she was charged and moved to dismiss. The district court denied the motion to dismiss.
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In United States v. Quinn (D. Kansas 2/3/11), the defendant tried to make the case go away by paying the tax. The defendant was prosecuted under § 7202 Willful failure to collect or pay over tax, the criminal analog to the civil trust fund recovery penalty, § 6672. Failure to collect and pay over tax, or attempt to evade or defeat tax (sometimes called the responsible person penalty). After being indicted, the defendant paid the amount for which she was charged and moved to dismiss. The district court denied the motion to dismiss.
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