I have been in contact with an Indian Immigrant living on U.S. shores who has had the unfortunate experience of joining the OVDP to correct past form filing errors. I have been asked to solicit help from any Tax Practitioner or OVDP graduate. She is looking for examples from previous OVDP victims where funds have been excluded from the penalty base. This is to help bolster her argument that the OVDP penalty does not fit the benign failure.
She is facing a ‘Kicked Out’ or ‘Opt Out’ situation. As you might guess, in typical IRS fashion, her examiner is painting the most hyperbolic and draconian example of penalties which ‘can’ occur outside the OVDP apparently without regard to IRM mitigation guidelines. I think the goal is to provide an ‘incentive’ for her to just pay up and stay in the program. “Been there, and felt that”, so I have a lot of empathy for this ladies dilemma! Fear is a powerful weapon, and the IRS uses it well.
Here is the question:
Exclusion of pass through funds: Have you had temporary funds that were parked in a foreign bank account only for a day or two and did not earn a single dollar of interest excluded from the OVDP penalty base? These funds are after tax US funds wired from a US bank and were used to purchase an asset that did not earn any income. If yes, can you please let us know as we are having such funds included in the penalty base imposing a severe penalty?
She has heard that this has happened, but needs help finding tangible examples. Her TAS advocate has urgently asked her to help with the research to get names of people who have had temporary funds excluded from the OVDI penalty base. In her case, most of the penalty is imposed on funds that were parked in a foreign bank account (back home) for a day or two that did not earn any interest.
If anyone can assist with her questions, she has a more detailed write up, but does not want to lose readers here. You can post a reply in comments anonymously, or if you approve, I can provide her your email contact details if you can help. Additionally you can contact her via Jack Townsend blog post on the same subject. I am trying to help her get as wide as exposure as possible. Any assistance will be greatly appreciated.