U. S. Government Accountability Office
San Francisco, CA 94105
Re:Extended Statute of Limitations for Offshore Cases
The National Society of Tax Professionals appreciates the opportunity to comment, sharing the experience and opinions of our members who as part of the Tax Professional Community have not only their experience to share but their intuitive analysis of the issue as well.
Upon receiving a copy of your email request, NSTP received immediate response from our members. They overwhelmingly conveyed their concern for the numerous issues involved in offshore transactions and acknowledged the difficulties of being able to complete an IRS examination within the 3 year statute of limitations.
Addressing each of your questions:
1)What are your views (pro and/or con) on extending the Statute of Limitations for offshore cases?
While several members responded positively to the extension of the Statute of Limitations for offshore cases, overwhelming the membership is opposed to the extension.
Positive comments included…….
IRS already has an extension process for taxpayers who are out of the country. They should utilize this provision for taxpayers with offshore interests.
Yes, extend the statute for taxpayers who participate in offshore interests.They ask for it. IRS should be given the tools to collect what is due.
Due to the complexity of these returns, those with offshore interests should be extended.
IRS needs this tool.
Currently if the offshore information is not provided by the taxpayer they simply wait out the expiration of the statute.
The IRS needs more time to complete an audit of this nature, ascertaining more basis for review.
Negative comments included…….
If an extension of the statute is granted it will be easier for the IRS to request extensions on other returns until the statute of limitations is a joke.
It will create an additional burden on taxpayers.
It will make taxpayer representation more difficult.
The older records get the more difficult it is to recreate the scenario of the transaction and it is unfair to the taxpayer.
It only puts off what the IRS should have done. Extensions will allow a further aging of issues and workpapers adding to the complexity for the taxpayer.
To extend the statute of examine for taxpayers with offshore accounts would affect honest taxpayers such as my clients employed by the State Department, educators overseas and U.N. employees. This would be unfair.
I would be fearful of an indiscriminate use of any such provision extending the statute by IRS would or could be used against any taxpayer.
IRS already has all the tools necessary to cover the issue.
This would open itself up for abuse by IRS.
If the issue is non-reporting by a Foreign Trust, the fraud statute would call for an automatic extension already.
The IRS already has the ultimate power, to disallow any item and issue a 90 day letter.
2.)What should be the scope of an extension (all taxpayers involved with an offshore account and/or entity; case-by-case; probable cause)?
Any taxpayer with offshore accounts should be subject to the extension.
The audit must be commenced prior to the expiration of the original 3 year statute.
3.)What is a reasonable extension period?
2 to 3 years.
6 years as with the 25% underreporting of income.
4)What, if any, taxpayer safeguards should accompany any extension?
Errors by the taxpayer should be a civil matter only.
No “fishing expeditions” by IRS, but only with probable cause. Example: if an account or activity is identified and the taxpayer has not reported any information on their return in regards to this account or activity and only for offshore.
The extension would not apply simply because the taxpayer had an offshore account but that the IRS had reason to suspect fraud and had other evidence.
5)Does the NSTP have any studies on the Statute of Limitations?
No such study has been conducted.
The NSTP membership consists of members from the Tax Professional Community made up of Certified Public Accountants, Enrolled Agents, Attorneys, Certified Financial Planners and Tax Professionals from across the country. They have small, medium and large practices, each serving taxpayers in meeting their obligations by complying with the tax laws. Their experiences are varied and are dependent upon their clientele, location and type of practice.
NSTP is a professional organization in service to the tax profession.
As an organization, NSTP makes the following recommendation:
Recognizing the importance of offshore transactions to voluntary compliance and the magnitude of the issue to the “tax gap”, IRS should immediately train a cadre of Revenue Agents with the knowledge to examine offshore transactions (Offshore Team) with the intensity and dedication equal to the task. Additionally, IRS computers should be programmed to recognize signs of potential offshore activity and flag such accounts for examination.
Once the examination commences, the Revenue Agent assigned to the examination should make an “early referral” to the Offshore Team. Thereby the examination of the tax return could continue on while the Offshore Team, specialized to handle such issues, would isolate and examine the offshore issue.
This process has already been implemented at IRS in exam on such issues as payroll and highly technical issues for which the Revenue Agent handling the exam does not have the expertise required. It allows the exam to continue while the specific issue is handled by another group.
The issue is specifically trained IRS to focus on the offshore issues with the tools provided by technology.
Extensions of statutes no longer become the issue. The issue is addressed with training, technology and dedication of the issue.
Congress should see the value in additional funding necessary based upon the tax dollars involved in offshore cases.
Again, the National Society of Tax Professionals appreciates this opportunity to offer the wide-range of our members experience and their thoughtful observations.
Beanna J. Whitlock EA CSA
NSTP Executive Director