How Federal Tax Amnesty Programs work


There's a range of amnesty programs that fit a variety of situations. The best amnesty program for you depends on:


  1. A little bit of what caused your tax problem and
  2. A little bit of what your state of mind was when the infraction took place.


There are generally two main issues that people have with the IRS; either criminal charges — like tax evasion — or being stuck under a tax bill they can't seem to escape. Federal amnesty programs can help both of these situations.



OK. Deep breath — do you think you might be at risk for criminal prosecution?


About every six hours of every day of every week, someone is indicted for some type of IRS tax crime. For cases like these, the earlier we can get to work for our client, the better the result is going to be — every time.  Now for those who did get to us quick as soon as they sensed something was "off," they laugh and think about the bullet they dodged.


But for others who took a bit longer to call us the results are mixed. While every case can be made better, sometimes better only means a shorter prison sentence. Yet, don't let that scare you! Most people with low-risk we speak with are convinced of the worst case, yet are NOT in that bad of shape. We also find the opposite: that those with really HUGE exposure don't think they are in any danger! 


The problem is that as a taxpayer you are in the worst position to understand truly where you stand. And this is why having someone on your side who understands all the ins-and-outs of the IRS and the federal criminal justice system is invaluable.


Get these monster worries out of your head.  Seriously, if you have criminal concerns, just stop what you are doing and contact us now.  This is really important. We can help you.  The attorney-client privilege applies to all communications to and from us. We've helped US taxpayers from around the world out of very tough spots.


Not at risk of criminal prosecution? Then read on!


The first step is making sure you are in current compliance with the law.


The IRS is all about compliance, compliance, compliance! But what exactly does that mean? It boils down to:


"Tax compliance means making tax payments and producing and submitting information to the tax authorities on time and in the required formats."


Many tax prosecutions could have been avoided or stopped dead in their tracks if taxpayers hadn't gotten stuck in a spiral of perpetuated noncompliance. The IRS and Department of Justice are hellbent on prosecuting cases where a taxpayer is continuing to "flip them the bird", so the best advice I can give you is to comply if you want to get into a federal tax amnesty program.


Choosing your Federal Tax Amnesty Program


Finding the right program for you depends on your specific noncompliance, what your state of mind was, and what your risk profile looks like. Let's examine some common fact patterns. 


Federal Amnesty for those with tax evasion exposure

Tax evasion requires a motive exceeding either negligence or failure to comply due to overwhelming life events. Seeing as most people engaged in noncompliance weren't actively trying to defraud the US Treasury, it makes sense that not everyone needs an amnesty program for tax evasion. But, because it is such a serious situation, it's necessary to mention certain tax evasion programs. We'll get the worst possibilities out of the way first.


  • Domestic Tax Evasion Amnesty: Let's suppose you engaged in willful tax evasion — meaning you intentionally left income off your previously filed tax returns — for a rather sizable amount. Not only that, but you have no justification for your actions, not even plausible deniability. If this is the case, it's likely to be in your best interests to consider the domestic voluntary disclosure program. This program allows taxpayers to come clean with the IRS through amending the past six years of tax returns and being assessed a penalty based upon the taxes owed. It's worth noting that the IRS doesn't require full payment, only that you make your best efforts to pay your outstanding tax bill.
  • Offshore Tax Evasion Amnesty: For this program, we'll imagine that you engaged in intentional tax evasion, but we'll assume it wasn't that large of an amount. In this case, you may consider entering into the Standard IRS Offshore Voluntary Disclosure Program (OVDP), which means that you'll have to amend the last eight years of tax returns. 


The treatment for international tax noncompliance is MUCH more punitive than for domestic tax noncompliance. In fact, many people enter into the full OVDP not necessarily because they have tax evasion exposure, but because they're at risk of harsh civil FBAR penalties.

  • Offshore and Domestic Tax Evasion Amnesty: In this case, you would go through the OVDP, requiring an eight-year look-back for your unreported domestic income.


Federal Tax Amnesty Programs for those with little tax evasion exposure

Most people having IRS problems aren't necessarily engaging in criminal activity. Yet, they aren't falling in line with that compliance thing the IRS desperately wants. For these individuals, the IRS has a few less serious and less costly amnesty options.


  • Unfiled Domestic Income: Visit this article for information regarding unfiled tax return forgiveness programs.
  • Understated Domestic Income: It may be in your best interest to simply file amended returns that include previously undisclosed income. The typical look-back period is six-years, but sometimes three years is acceptable.
  • International Unfiled Returns or Understated Income Amnesty: For those who were non-willful in reporting their overseas income, there are Streamlined Offshore Voluntary Disclosure Programs available.
  • Back Tax Debts: Owing money to the IRS for returns you filed is not a crime. Not filing is a crime. There are options for payment plans. 


Getting the right legal advice can be critical


It would be really nice if we lived in a world where taxes were simple and any incurred penalties weren't so devastating. Unfortunately, that's just not the case. Tax problems are incredibly serious, so taking the time to seek out proper representation and garner real legal advice before entering into a federal tax amnesty program is critical. It's your future, and it should be everything you want it to be.