Irs and Colorado Announce New Voluntary Disclosure and Amnesty Policies

• Jurisdiction: United States,Federal,Colorado
• Citation: Vol. 32 No. 4 Pg. 90
• Pages: 90
• Publication year: 2003

32 Colo.Law. 90 Colorado Lawyer 2003.

2003, May, Pg. 90. IRS and Colorado Announce New Voluntary Disclosure and Amnesty Policies

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90

Vol. 32, No. 4, Pg. 90

The Colorado Lawyer
May 2003
Vol. 32, No. 5 [Page 90]

Specialty Law Columns
Tax Tips
IRS and Colorado Announce New "Voluntary Disclosure" and Amnesty Policies
by Joseph H. Thibodeau

Joseph H. Thibodeau, P.C., Denver

(With appreciation to Gelt, Paddison & Grassgreen, P.C for its research assistance)

IRS Voluntary Disclosure

On December 11, 2002, the Internal Revenue Service, once again, changed its general policy with respect to "voluntary disclosure" of past tax indiscretions (both of commission and omission) - this time for the better (see IR-2002-135). Henceforth, a successful "voluntary disclosure" and its principal benefit - declination of criminal prosecution - should be more readily and predictably available (liability for tax, interest, and possible civil penalty survives)

In a related development (IR-2003-5; Rev. Proc. 2003-11 2003-4 I.R.B. 311), on January 14, 2003, the Service invited "voluntary disclosure" (albeit through April 15, 2003 only) in the specific context of "offshore" payment (debit/credit) cards and/or " . . . other offshore financial arrangements [designed] to hide . . . income. . . ." In addition to affording "voluntary disclosure" relief with respect to potential criminal exposure, during its ninety-day life, this measure also eliminated exposure to the 75 percent civil fraud and certain "information" return (relative to offshore transactions) penalties.

In contrast, the new, generally applicable provision has no expiration date, nor have its core requirements changed. The disclosure must be: (1) "timely," (2) "truthful," and (3) "complete." It must include: (4) the taxpayer's cooperation in determining true and correct tax liability (subject to the preservation of all administrative and judicial rights and remedies of review); and (5) a good-faith arrangement for the payment of any tax liability ultimately determined to be due and owing. Finally, (6) the taxpayer's income must all be of a "legal source."

The provision effects a significant change as to "timeliness"; that is, it seeks to draw bright lines in disregarding certain constructive "triggering events" (e.g., divorce, business dispute, newspaper or other media report, and/or other motivating...