Non-Willfulness vs. Willfulness | Streamlined Domestic Offshore Procedures Attorney Minnesota

Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I’m an international tax attorney and owner of Sherayzen Law Office, Ltd.

Today, I’m continuing my series of vlogs from St. Paul, Minnesota. This vlog is devoted to Offshore Voluntary Disclosures.

In the previous vlog, I discussed the issue of the SDOP eligibility and I mentioned that one of the main factors is non-willfulness. In fact, this is the key, the heart of the Streamlined disclosure whether it’s domestic or foreign, in fact. It’s the issue of non-willfulness. You can only participate in the Streamlined Domestic Offshore Procedures if you can establish non-willfulness. If you cannot, you should not be participating in this program and even less so, signing up for form 14654 under the penalty of perjury, you believe you were non-willful, if you believe you were not. That’s very important.

What is non-willfulness? The short answer is that this is an opposite of willfulness – not a very instructive answer if you don’t know what non-willfulness is. Let’s discuss what willfulness is first. Willfulness is an intentional or a reckless disregard of a known duty.

For example, if you know that you need to file an FBAR and you intentionally choose not to file it, the IRS may have the argument for willfulness. If you close your eyes and ears and say, ‘I don’t want to hear anything, I don’t want to see anything, that’s it, I want to be in complete ignorance’. This is called willful blindness. Willful blindness is a form of recklessness and recklessness is a form of willfulness.

Outside of the voluntary disclosure, the IRS has the ‘burden of proof’ to establish willfulness. In the voluntary disclosure, you have the ‘burden of proof’ to establish non-willfulness.

What does it mean? It means potentially that say you participate in a voluntary disclosure program, in the Streamlined Domestic Offshore Procedures and this SDOP submission is later audited and the IRS disagrees that you’ve established the case for non-willfulness, this does not automatically mean that you were willful because once they kick you out of the program, this means that the IRS will have the ‘burden of proof‘ to establish willfulness. This is a fine distinction. Sometimes it doesn’t matter; sometimes it may make a huge difference to the entire case.

Willfulness is the opposite of non-willfulness and non-willfulness is not willfulness, seems very logical and simple but as I had just said, you have to establish non-willfulness. How do you do that? You do that based on the number of factors and arguments.

For example, you take a look at the history of your client. For example, if the client finished law school, is an international tax attorney and does not file an FBAR, while the issue of non-willfulness is going to be really difficult to establish if he did it intentionally. Similiarly, if it is a CPA, same story, it’s going to be much harder for the CPA to establish non-willfulness than it would be, for say a carpenter.

This is an example of one factor; there are a lot of them. The factors include education, work history, financial means (meaning financial means to secure professional help), the time that it took you to realize that you were non-compliant, that is the length of your non-compliance and many, many other factors.

The job of establishing non-willfulness is for an international tax attorney to do. I would strongly recommend that it would be an attorney who would draft your non-willfulness statement that you will submit as part of your SDOP package to the IRS because otherwise, you may unintentionally open a can of worms that could lead to a fishing expedition by the IRS if they think you do not have a solid case for non-willfulness simply because of the way you presented the facts of your case, not necessarily because you were willful but because you created a doubt in the mind of the IRS that you were non-willful. They will start thinking that maybe they should audit your case. Even if you end up in this situation, proving that you were non-willful, you will have by your incorrect non-willfulness statement, raised the chance of a follow-up audit.

If you would like to learn more about non-willfulness and whether your international tax compliance was non-willful, you can call me at (952) 500-8159 or you can email me at [email protected]

Thank you for watching, until the next time.