Would you take the case?

[RightOn]

Facts:

(1) Taxpayer has had an oversea account for a long time.

(2) He has never reported any interest income.

(3) The interest income is not that much though. It's about $500 a year. And the tax would be less than $100 each year.

(4) He has never answered yes or no to the foreign account question because there was no Schedule B in his tax returns.

(5) He wants to come out clean now. So he wants to amend the last 6 years tax returns to report the interest income and pay the tax. And he also wants to file the last 6 years of TD 90-22.1 now.

My question: Should a tax professional take on such a case or we should refer him to a lawyer?

[taxea]

He doesn't need a tax attorney unless, and until, the IRS threatens criminal charges or does an audit you don't want to handle. Be sure he understands that refunds over 3 years back will not be available to him. Amend the returns from the oldest forward so everything will flow properly. Send each return in a separate envelope then call the IRS in 8 to 12 weeks to determine whether it has hit their system. If there is any liability it should be paid with each return, if there are late pay penalties and interest due, before you mail the returns for filing call PPL and discuss a waiver of the penalties and interest on late filing using the reasoning that the TP is coming clean on his own and that, alone, should have signifigant weight in their consideration. Had he not decided to "come clean" they would have had to do a great deal of work to determine he possibly defrauded on his taxes.

[joanmcq]

I disagree. If you are doing what is called a 'quiet' disclosure, the last thing you want to do is flag the returns about penalties on $100 of income. The big penalties aren't for income left off the tax return, they are the penalties for not filing the FBAR. If the tax was less than $1500 left off, amend the last 6 year's returns, and file 6 year's back FBARs. You pay the tax, pay any penalties and interest on the tax, STFU and he thanks whatever god he believes in that they arent' assessing penalties of 50% of the account balance for every year the account was open. And yes, that can easily be more penalties than there is money in the account.

[taxea]

This was posted on Tax Almanac. Poster has been lead to the FBAR info which is why I suggested he speak with the IRS before filing any of the returns.