The Long Shot in IRS Summons Avoidance -- the Bad Faith Claim (7/11/11)

The IRM requires that IRS revenue agents discontinue or suspend their audit after receiving firm indications of fraud. Proceeding beyond that point create the risk that the taxpayer will be mislead as to the nature of the investigation (civil or criminal) and result in the taxpayer not being aware that he or she should consider asserting his or her constitutional rights. See generally IRM 25.1.2.  Thus, where the continued audit by the agent results in obtaining incriminating statements from the taxpayer, the taxpayer will cry foul in any resulting criminal prosecution in which the Government attempts to use those confessions. Those taxpayer claims are usually, but not always, unsuccessful unless the taxpayer can show that the agent's continued efforts were based upon some bad faith by affirmative misrepresentation as to the nature of the continued investigation.

The high water mark in terms of sanctions for such affirmative misrepresentations was United States v. Tweel, 550 F.2d 297 (5th Cir. 1977) where a tax indictment was dismissed because the civil agent’s actions misled the taxpayer as to the criminal nature of the investigation.  Since Tweel, the courts have applied the dismissal remedy -- more usually a suppression remedy which might result in dismissal -- sparingly (really almost never), requiring some express misrepresentation (rarely found) rather than just a joint civil and criminal use of the fruits of the audit.  See e.g., United States v. Rutherford, 555 F.3d 190 (6th Cir. 2009). 
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Do Amended Returns Submitted under OVDP 2009 and OVDI 2011 Really Have to be Complete and Accurate? (7/7/11)

The answer, as you might suspect, is yes.

FAQ 7 says (in part):

• Provide complete and accurate amended federal income tax returns (for individuals, Form 1040X, or original Form 1040 if delinquent) for all tax years covered by the voluntary disclosure, with applicable schedules detailing the amount and type of previously unreported income from the account or entity (e.g., Schedule B for interest and dividends, Schedule D for capital gains and losses, Schedule E for income from partnerships, S corporations, estates or trusts).

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Reports That the Swiss are Relaxing Tax Information Sharing Rules (7/6/11)

There are reports that the Swiss Government in moving / inching toward real exchange of information under its double tax treaties, which are (like the most U.S. tax treaties, based on the OECD Model Treaty). See Swiss Government Adopts OECD Standards On Bank Secrecy, Tax Offenses, Nasdaq (7/6/11) which reports in part as follows:

ZURICH -(Dow Jones)- The Swiss government Wednesday adopted standards on banking secrecy laid out by the Organization for Economic Cooperation and Development, or OECD, which will allow foreign authorities to pursue citizens suspected of using hidden Swiss accounts for tax evasion, and no longer only for outright tax fraud.  

MAIN FACTS:

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- In spring 2009, the Federal Council took the decision to adopt in future the international standards set out in Article 26 of the OECD Model Convention with respect to administrative assistance in tax matters. According to this, international administrative assistance should be possible not only in the case of tax fraud but also in the case of tax evasion and for tax assessment. The implementation of this decision requires appropriate wording in the double taxation agreements, or DTAs, with other countries. Up to now, over thirty DTAs have been adapted or renegotiated. Execution of administrative assistance must ensue under national law. To this end, the Tax Administrative Assistance Act is to be introduced.

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