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For Taxpayers and Practitioners Who Cannot Make the 12/8/11 OVDI Deadline

Most readers of this blog know that there is a 12/8/11 deadline for submissions of the OVDI 2011 package if an extension was requested.  The question is what to do if you can’t submit a complete package by that date?  There seems to be a lot of concern among taxpayers and practitioners that taxpayers might be kicked out of OVDI 2011 if the package is not submitted in substantially complete form.  (Whether being kicked out is such a bad thing is something concerned taxpayers should discuss with their practitioners; that is a fact intensive inquiry that I can’t address here, other than to identify the issue.)

The purpose of today’s blog entry is to offer to readers of this blog only some anecdotal indications of what to do if a reasonably complete package cannot be posted by tomorrow.  Readers must understand that these are only anecdotal indications of what to do and in no way binds the IRS.

First, and probably the most direct way to get some indication from the IRS is to call the OVDI Hotline or some other person associated with the process.  At the recommendation of a fellow practitioner, I yesterday called Carl Barkow, OVDI Supervisor in Austin (512) 460-8953.  Basically, he said that, in the event that despite due diligence, the taxpayer is unable to submit a reasonably complete package, the taxpayer should  submit whatever he or she could submit, along with a cover letter explaining why the package is not reasonably complete and then submit the other items no later than 12/31/11.  I gave him my name, but I don’t think he recorded it, and he did say that he was getting a number of calls on this and was giving this advice / suggestion.  So, I think this advice was intended to be generic and not specific to me or my client.

Second, I understand that some taxpayers and practitioners are doing essentially the same thing without a predicate call to the OVDI Hotline or the Austin office.  Perhaps they have heard that this advice is what the IRS gives routinely, so that there is no need to call.

So, it looks like there is a way to get an additional 23 days.  The problem some will encounter is getting things done during this particular 23 days of the year when there are substantial demands on their time, including both work and holidays.  From my perspective, then, that is really not a 23 day extension but something considerably less than that.  And, if documents need to be gathered from some foreign financial institutions who, for any reason, do not respond promptly, it may just not happen by 12/31/11.

Reading between the lines (this is my read and certainly not binding on anybody), I think if I were to get to 12/30 or 12/31/11 with out incomplete information and I have a reasonable story to tell about diligence on the practitioner’s and/or  taxpayer’s part, I would send in what I could with a cover letter expressing great angst and committing to move promptly to fix the deficiencies.

The truth is that it will likely take the IRS months to turn to the 12/8/11 and later submissions, so that supplementing before that happens will likely not result in being kicked out of the program (only my speculation).  And, the IRS should really appreciate this process because it is getting low hanging  fruit with the IRS limiting the resources it must devote to picking that low hanging fruit.

But, keep in mind most of this is speculation based on anecdotal evidence as indicated.  The better part of wisdom would be to crash and submit a reasonably complete package by 12/8/11 and then supplementing as necessary and as soon as possible.  (There is a fuzzy dividing line between what is a reasonably complete package that might require some  supplementing and one that is not reasonably complete that requires major supplementing; I can’t locate that line in words but think I know it when I see it in a particular set of facts.)