Current matters: IRS audits; foreign and domestic info reporting relief.

• Author: Josephs, Stuart R.
• Position: FedTax

CalCPA members recently expressed concern that their Powers of Attorney are ignored by some IRS agents who attempt to deal directly with clients. This concern was submitted to the IRS May 6 for possible consideration at the Nov. 16 liaison meeting between the IRS and the CalCPA Committee on Taxation indicating that such behavior may violate IRC Sec. 7521(e) and Procedural Regs. Sec. 601.506(b).

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The committee is interested in hearing the experiences of California CPA readers to possibly share with the IRS at the liaison meeting. Send your comments by July 15 to sheri.woodward@calcpa.org or fax to: 916) 441 -5354.

Automatic Penalty Relief if Certain Delinquent Foreign Information is Filed by Aug. 31, 2011

The IRS announced a new Offshore Voluntary Disclosure Initiative Feb. 8 (2011 OVDI) and issued additional guidance, including a list of frequently asked questions.

FAQ No. 17 concludes (emphasis supplied): "For taxpayers who reported and paid tax on all their income for prior years but did not file FBARs. you should file the delinquent FBAR reports according to the instructions fsend to Department of Treasury Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. The IRS will not impose a penalty for failure to file the delinquent FBARs if there are no underreported tax liabilities and the FBARs are filed by Aug. 3L 201L However; FBARs for 2010 are due mi June 30, 2011 ..."

FAQNo. 18 reads (emphasis supplied): "Question 17 slates that a taxpayer who only Tailed to file an FBAR should not use this process [the 201 1 OVDI]. What about a taxpayer who only has delinquent Form 5471s or Form 3520s but no tax due? Does that taxpayer (all outside this voluntary disclosure process?

"A taxpayer who has failed to file tax information returns, such as Form 547 I for controlled foreign corporations (CFCs) or Form 3520 for foreign trusts bin who has reported and paid tax on all their taxable income with respect to all transactions related to the CFC or foreign trust, should file delinquent information returns with the appropriate service center according to the instructions for the form and attach a statement explaining why the information returns are filed late. (The Form 5471 should be submitted with an amended return showing no change to income or tax liability)

"The IRS will not impose a penalty for the failure to file the information returns if there are no underreported...