If you are divorced, or you advise clients who are divorced, this is important. The Pennsylvania Supreme Court has ruled that the federal Employee Retirement Income Security Act (ERISA) takes precedence over the Pennsylvania statute that removes divorced spouses as beneficiaries. What this means is that unless your employer’s plan contains a provision to the contrary, if you are divorced and your ex-spouse is still named as beneficiary of your qualified plan; it is payable to the ex-spouse! That is without regard to Pennsylvania state law, without regard to any order from a Pennsylvania Court, and without regard to any provisions in a property settlement agreement or other contract. It’s really true.

It is very common for spouses to divorce but fail to update their estate plans, including beneficiary designations. This has not been a big problem because Pennsylvania law (20 Pa.C.S. § 6111.2) provides that if an ex-spouse is designated as a beneficiary on a life insurance policy, annuity contract, pension, profit-sharing plan or other contractual arrangement providing for payments to the spouse; any designation which was revocable at the time of death is ineffective, and the beneficiary designation is construed as if the ex-spouse had predeceased. If the designation or a separate contract (such as a property settlement agreement) provides that the designation is to remain in effect even after the divorce, then the designation remains effective. This statute produced the result that most people wanted: the ex-spouse is not the beneficiary. No more.

The legal issue is whether or not the federal law, ERISA, which provides that a qualified plan benefit is payable to the named beneficiary, is superior to, or "trumps" Pennsylvania state law that modifies the beneficiary based on circumstances, in this case, the divorce of the plan participant. The legal doctrine involved is called "federal preemption" and is based on the supremacy clause of the U.S. Constitution: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding." In other words, certain matters are of such a national, as opposed to local, character that federal laws preempt or take precedence over state laws. As such, a state may not pass a law inconsistent with the federal law.

In 2001, the United States Supreme Court in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), set the precedent that any state statutes having a "connection with" ERISA plans are superseded by ERISA. David Engelhoff divorced his wife and did not change his beneficiary designations on his qualified plans. Washington state law provided that on divorce, the beneficiary designation of his wife was revoked. However, his ex-wife successfully claimed the benefit asserting that since she was the named beneficiary and ERISA preempts state law she gets the benefit.

Closer to home, the Pennsylvania Supreme Court case decided an almost identical case on November 23, 2011, in re Estate of Sauers, York County, Supreme Court of Pennsylvania, Middle District (No. 78 MAP 2009). Paul and Jodie Sauers divorced in 2002, and Paul did not change the beneficiary on a $40,000 employee group life insurance plan subject to ERISA. Paul died in 2006. The Court held that the Pennsylvania statute which provides that Jodie, now an ex-spouse, does not receive the death benefit was preempted by ERISA – the benefit was payable to her, the ex-spouse. (The only question is why in the world didn’t the lower court follow Egelhoff.)

The Court explained that the state probate law at issue "gives a Pennsylvania court the power to enjoin a plan administrator from discharging his fiduciary duties in accord with federal law, while concomitantly subjecting the plan administrator to civil liability in federal court. …

"This Hobson’s choice, of being forced to choose between applying either state or federal law, at the potential peril of disregarding a state court order to evade federal liability, is exactly what the preemption provisions of [section]1144(a) of ERISA, as interpreted by the [U.S. Supreme Court], intended to avoid. Such potential not only ‘relates to,’ but also surely violates, the uniformity requirements and objectives of ERISA."

What to do? If you are divorced, make sure you have changed all of your beneficiary designations.

If you are a plan sponsor, consider amending your ERISA plan to include a provision that would automatically revoke a pre-divorce spousal beneficiary designation.

 

Does this apply to IRAs? Probably not, because IRAs are not governed by ERISA for most issues. To be safe, change IRA beneficiaries too.

 

If you are divorced, or you advise clients who are divorced, this is important. The Pennsylvania Supreme Court has ruled that the federal Employee Retirement Income Security Act (ERISA) takes precedence over the Pennsylvania statute that removes divorced spouses as beneficiaries. What this means is that unless your employer’s plan contains a provision to the contrary, if you are divorced and your ex-spouse is still named as beneficiary of your qualified plan; it is payable to the ex-spouse! That is without regard to Pennsylvania state law, without regard to any order from a Pennsylvania Court, and without regard to any provisions in a property settlement agreement or other contract. It’s really true.

It is very common for spouses to divorce but fail to update their estate plans, including beneficiary designations. This has not been a big problem because Pennsylvania law (20 Pa.C.S. § 6111.2) provides that if an ex-spouse is designated as a beneficiary on a life insurance policy, annuity contract, pension, profit-sharing plan or other contractual arrangement providing for payments to the spouse; any designation which was revocable at the time of death is ineffective, and the beneficiary designation is construed as if the ex-spouse had predeceased. If the designation or a separate contract (such as a property settlement agreement) provides that the designation is to remain in effect even after the divorce, then the designation remains effective. This statute produced the result that most people wanted: the ex-spouse is not the beneficiary. No more.

The legal issue is whether or not the federal law, ERISA, which provides that a qualified plan benefit is payable to the named beneficiary, is superior to, or "trumps" Pennsylvania state law that modifies the beneficiary based on circumstances, in this case, the divorce of the plan participant. The legal doctrine involved is called "federal preemption" and is based on the supremacy clause of the U.S. Constitution: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding." In other words, certain matters are of such a national, as opposed to local, character that federal laws preempt or take precedence over state laws. As such, a state may not pass a law inconsistent with the federal law.

In 2001, the United States Supreme Court in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), set the precedent that any state statutes having a "connection with" ERISA plans are superseded by ERISA. David Engelhoff divorced his wife and did not change his beneficiary designations on his qualified plans. Washington state law provided that on divorce, the beneficiary designation of his wife was revoked. However, his ex-wife successfully claimed the benefit asserting that since she was the named beneficiary and ERISA preempts state law she gets the benefit.

Closer to home, the Pennsylvania Supreme Court case decided an almost identical case on November 23, 2011,in re Estate of Sauers, York County, Supreme Court of Pennsylvania, Middle District (No. 78 MAP 2009). Paul and Jodie Sauers divorced in 2002, and Paul did not change the beneficiary on a $40,000 employee group life insurance plan subject to ERISA. Paul died in 2006. The Court held that the Pennsylvania statute which provides that Jodie, now an ex-spouse, does not receive the death benefit was preempted by ERISA – the benefit was payable to her, the ex-spouse. (The only question is why in the world didn’t the lower court follow Egelhoff.)

The Court explained that the state probate law at issue "gives a Pennsylvania court the power to enjoin a plan administrator from discharging his fiduciary duties in accord with federal law, while concomitantly subjecting the plan administrator to civil liability in federal court. …

"This Hobson’s choice, of being forced to choose between applying either state or federal law, at the potential peril of disregarding a state court order to evade federal liability, is exactly what the preemption provisions of [section]1144(a) of ERISA, as interpreted by the [U.S. Supreme Court], intended to avoid. Such potential not only ‘relates to,’ but also surely violates, the uniformity requirements and objectives of ERISA."

What to do? If you are divorced, make sure you have changed all of your beneficiary designations.

If you are a plan sponsor, consider amending your ERISA plan to include a provision that would automatically revoke a pre-divorce spousal beneficiary designation.

 

Does this apply to IRAs? Probably not, because IRAs are not governed by ERISA for most issues. To be safe, change IRA beneficiaries too.

A patent is an exclusive right granted by the government to an inventor for a limited period of time in exchange for public disclosure of the invention. A patent application must include one or more claims defining the invention which must be novel and non-obvious. The exclusive right that is given with the granting of a patent is the right to prevent others from making, using, selling, or distributing the patented invention without permission or a license.Error! Hyperlink reference not valid. In general, the right to exclusivity is granted for 20 years.

The policy behind the system of granting patents is to 1) encourage inventions; 2) provide for disclosure of the invention to the public; 3) provide an incentive to invest the time, energy, and money to experiment and then to produce and market the invention; and 4) to improve upon earlier patents.

 

Relatively new on the scene is the tax patent. A tax patent is a business method patent that discloses and claims a system or method for reducing or deferring taxes. They are also known as "tax planning patents", "tax strategy patents", and "tax shelter patents". In 1998, the Circuit Court of Appeals held in State St. Bank & Trust v. Signature Fin. Group that tax strategies were patentable. Since 1998, 160 patents on tax strategies have been granted. Patents have been granted on charitable giving techniques, real estate transactions, retirement planning and stock options among others.

 

The granting of tax patents has been a controversial subject. Opponents to tax patents say that they are "government-issued barbed wire" that prevents some taxpayers from getting equal treatment under the tax law. These would be the taxpayers who can’t use certain tax strategies because the strategies have been granted exclusively to the patent holders.

 

The American Institute of Certified Public Accountants (AICPA) has been very critical of tax patents. Their position is that no one should have a monopoly over any part of the tax code and all Americans should be free to use any legally permissible means to comply with the law. Taxpayers should not be required to pay royalties or be subject to litigation for patent infringement just for paying their taxes.

 

The AICPA says that tax patents 1) limit the ability of taxpayers to fully utilize interpretations of tax law intended by Congress; 2) cause some taxpayers to pay more tax than Congress intended and may cause other taxpayers to pay more tax than others similarly situated; 3) complicate the provision of tax advice by professionals; 4) hinder compliance by taxpayers; 5) mislead taxpayers into believing that a patented strategy is valid under the tax law; and 6) preclude tax professionals from challenging the validity of tax strategy patents.

 

The idea of patenting tax planning techniques has caused much consternation. At a meeting of the American Bar Association, an estate planning technique using a Grantor Retained Annuity Trust (GRAT) to hold stock options was discussed. Many of the attendees received letters subsequently stating that the method under discussion had been patented – the Stock Option Grantor Retained Annuity Trust patent (“SOGRAT”) – and that taxpayers who had set up such an entity would have to pay a royalty or face suits for patent infringement.

 

Many of the attendees thought the technique was obvious, and many had frequently set up GRATs with various assets including stock options. With the advent of tax patents, before recommending any strategy does the lawyer have to do due diligence and search to see if the strategy was patented so as not to inadvertently violate the patent and subject himself and his client to liability for patent infringement?

 

In September 2011, President Barack Obama signed legislation passed by the U.S. Congress that effectively prohibits the granting of tax patents in general. The Leahy-Smith America Invents Act stops the granting of patents on tax strategies. Under the new law any “strategy for reducing, avoiding, or deferring tax liability” is deemed to be “prior art” under patent law, and, therefore not patentable. Existing tax patents were not affected by the new law and remain intact. However, tax patents in pending applications were deemed prior art under the new law and nonpatentable..

 

Since there are still existing tax patents, tax advisors and practitioners should know what techniques have been patented so as not to violate any patents thereby subjecting their clients and themselves to liability.

 

The Act specifically does not stop the granting of patents to tax preparation software and other software, and explicitly excludes the patenting of any “method, apparatus, technology, computer program product, or system, that is used solely for preparing a tax or information return or other tax filing” or that is “used solely for financial management, to the extent that it is severable from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax advisor.”

We often see situations where one spouse dies and the surviving spouse changes his or her will to benefit different persons than were contemplated by the first spouse. A prime example would be a couple where the man had four children by his first marriage and five with his second wife. Husband and wife make wills leaving everything to each other and if there is no spouse surviving to the nine children in equal shares.

That is exactly what happened in the York County case of the Estate of Charlotte M. Bankert. But Mr. and Mrs. Bankert did something more, they signed an Irrevocable Will Agreement when they signed their wills. In it, they agreed not to change their wills without the consent of the other, and after the death of one spouse, the survivor agreed not to change his or her will at all. There was no specific language in the contract barring life-time transfers to anyone. Their lawyer pointed out that the survivor could circumvent the agreement by making gifts to some but not all of their children, but the husband insisted there be no discussion of gifts in the contract.

Then what happened? Mr. Bankert passed away. Some time after he died Mrs. Bankert started making gifts to her five children. A couple of months before she died, she made large transfers to her five children. When she passed, the estate was significantly diminished and the 1/9 shares to be distributed to the four stepchildren from Mr. Bankert’s first marriage were much smaller (about $800) than they would have been otherwise (about $25,000).

The four stepchildren who got reduced inheritances because of the gifts made by Mrs. Bankert to her own children objected, saying that the transfers during her life violated the Irrevocable Will Agreement. They said that it was clear from the documents that Mr. and Mrs. Bankert agreed to treat all nine children the same, and the transfers violated the agreement. The five children who got the life-time gifts from their mother said the contract was not breached because it did not specifically say that their mother could not make life-time transfers to them.

Here we have the intersection of the two worlds: wills and contracts. What happens when two people make a contract not to revoke a will that has prescribed distributions, and the survivor makes lifetime gifts not in keeping with the will intent?

In general, the law of wills is based on the premise that a testator can always change his or her mind and make a codicil or an entire new will at any time. The will doesn’t become irrevocable until the testator dies.

The laws of contracts is based on the premise that an agreement between two parties intended to create a legal obligation is binding. It can be enforced in court. There are penalties for breach of contract, both standard and any that are written into the contract. A party injured by a breach of contract has the right receive damages.

The Bankert case in York County is a case of first impression we learned about in a blog post by Attorney Paul Minnich, attorney for the five children. See www.palitigationblog.com Nov, 9, 2011.

The court held that the objecting four stepchildren were entitled to a hearing on the facts to determine whether or not the agreement was breached. The court said that in order to prevail in the absence of a specific restriction on lifetime transfers in the contract , the stepchildren would have to prove (1) that the transfer were made to "evade performance"of the contract, (2) violated the deceased spouse’s contract rights (3) the gifts were (a) unreasonable in amount or represented a significant part of the surviving spouse’s estate, or substantial gifts made to only some of the surviving spouse’s beneficiaries and (b) were received without cost or consideration, and (c) received by beneficiaries who knew the terms of the will agreement.

For those not keeping score, that adds up to five requirements, the third one being an either/or requirement. The first two require proof of state of mind (evasion and fraud), tough nuts to crack. The last one requires proof that the favored children knew the terms of the will contract, another difficult task.

The action went from Orphans’ Court to Civil Court back to Orphans’ Court where the Judge was asked to make a declaratory judgment and adopt the standards listed above as a standard in Pennsylvania.

Enough ambiguity about intent regarding gifts in the contract existed to justify the judge’s hearing testimony from the lawyer who wrote the wills and the contract. She testified that she explained that the surviving spouse could make lifetime gifts to just some of the beneficiaries, thus defeating the intent to treat all children alike. Mr. Bankert refused to write any restrictions on gifts into the contract.

On appeal, the five children prevailed. The Court held "that Mrs. Bankert had an unqualified right to dispose of her property through inter vivos gifts because it did not evade performance, and it was the intent of the parties not to limit such actions. The lack of any express provisions in the Agreement that clearly and unambiguously manifest an intent to limit the surviving spouse’s right to freely transfer the property during her lifetime, along with the testimony that clearly shows it was the intent of Mr. Bankert to exclude such a provision in the Agreement, the Court must find that Mrs. Bankert was not acting in fraud, against the Agreement, or against the wishes of Mr. Bankert."

How to avoid this mess? Listen to the lawyer when a gift clause is recommended, or forget a contract and put the assets in trust and have the trustee (a neutral party, not the wife or the children) distribute the assets during the surviving spouse’s lifetime and at the death of the surviving spouse. Of course a trustee needs to be paid, but you can pay now, or….

 

 

The estate of deceased multimillionaire Frank Blumeyer of Naples, Florida, is embroiled in controversy.

The 92-year old Blumeyer’s $10 million estate is being fought over by his children and, his neighbor, a disbarred lawyer.  Aisling Swift, writing for Naplesnew.com says:  "The tangled web of litigation and love is like a made-for-TV movie. There’s a suspended lawyer who has been in trouble with courts and state bar associations; a now-defunct escort service the lawyer operated with his current wife before his prior wife died of cancer; naked photos of his current wife found on Blumeyer’s computer; and allegations of elder financial fraud."

And if that is not enough, the deceased Blumeyer’s son Arthur, who is serving 22 years in federal prison for money laundering, is trying to remove his brothers as estate representatives.

Hat tip to Gerry W. Beyer at Wills, Trusts & Estates Prof Blog

 

 

 

 

In a suit filed against Philadelphia law fimr Duane Morris LLP and two of their estate attorneys, Stanley M. Joffee, Esq. amd Stanley A. Barg, Esq.,  plaintiffs claim  they suffered "substantial losses" after the lawyers allegedly ignored their requests for conservative investment strategies and their money was invested in a Madoff feeder fund instead.  Plaintiffs are real estate developer Daniel Keating III and his wife Sarah.  

The complaint makes interesting reading:  Click Here.

Claire Zillman writes for The AmLaw Daily:

"The Keatings complaint alleges that Joffe suggested Notz Stucki & Cie as one of two managers for a trust established in 2008. According to the complaint, the Keatings thought that Notz would be instructed to allocate the assets into conservative investments, but nearly half of the sum was invested in risky equity and hedge fund investments, including feeder funds of Bernard L. Madoff Investment Securities, which they discovered in December 2008."

Here is my question:  Why are these lawyers giving investment advice? 

Hat Tip to the Trust Advisor Blog.

On June 8, 2011 the Internal Revenue Service announced the names of 275,000 non-profit organizations that lost their tax-exempt status because they did not file legally required forms for three consecutive years. That means about 14% of existing non-profits lost their tax-exempt status. Most of the organizations that lost exempt status are charities but some are homeowners associations, civic associations, college fraternities, and other non-profit entities.

Nearly 10,500 of the organizations that lost their exempt status were based in Pennsylvania. More than 100 of them gave a Lancaster address.

If an organization appears on the list, it is because IRS records indicate the organization had a filing requirement and did not file the required returns or notices for 2007, 2008 and 2009.

The IRS thinks that the majority of the organizations are defunct. Some organizations claim they were on the list in error. Donors who made what they thought were tax-deductible contributions to organizations prior to the IRS’s publication of the list will still be able to deduct the donation on their taxes.

The Pension Protection Act of 2006 requires most tax-exempt organizations to file an annual information return or notice with the IRS. Small organizations (with less than $25,000 in revenue per year), which previously hadn’t been required to file tax reports, had to do so for the first time in 2007. Churches aren’t included; they still don’t have to file. The filing requirement is met by filing Form 990, 990-EZ, or 990-N.

Since passage of the 2006 law, the IRS has made extensive efforts to inform organizations of the changes. In 2010 the IRS published a list of at-risk groups and gave smaller organizations an additional five months to file required notices and come into compliance. About 50,000 organizations filed during this extension period.

Tax-exempt status is important for multiple reasons. Contributions by donors will not be tax deductible if the organization is not tax-exempt. The organization does not qualify for an exemption from the sales tax if the status is not currently tax-exempt. The organization must file a corporate tax return and pay income tax if it is not tax-exempt.

The revocation of tax-exempt status can’t be appealed or reversed. Organizations subject to automatic revocation that wish to have their tax-exempt status reinstated must file an application for exemption and pay the appropriate user fee. The IRS will allow small organizations (those with annual gross receipts of $50,000 or less for 2010) applying for reinstatement to pay a lesser application fee of $100 instead of the usual fee of $400 or $850. Also, the IRS will treat eligible small organizations applying for reinstatement before December 31, 2012 as having established "reasonable cause" for their filing failures, meaning their tax-exempt status will be reinstated retroactive to the date it was automatically revoked.

To find out if a nonprofit is on the list, go to www.irs.gov/charities. OpenData also provides on its website a searchable combined list. Go to http://opendata.socrata.com.

Failing to comply with annual reporting obligations is not the only way to lose your tax-exempt status. A non-profit may not provide private benefit to any officers, directors or employees. This is the prohibition against "private inurement."

A tax-exempt organization may engage in lobbying but on a restricted basis. If the organization contacts or urges the public to contact a member or employee of a legislative body to propose, support, oppose legislation, and the activities are substantial, the tax-exempt status is at risk. The rules are complicated and many organizations do not engage in lobbying as a matter of policy so as not to run afoul of the complex rules.

Political campaign activity is prohibited absolutely. The organization may not directly or indirectly participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office. An exempt organization may invite a political candidate to speak at an event provided that the organization ensures that 1) it affords an equal opportunity to political candidates seeking the same office, 2) it does not indicate support for or opposition to the candidate, and 3) no political fund-raising occurs. Equal access is not necessary if the candidate is a public figure speaking in a non-candidate capacity.

Activities generating excessive unrelated business income and failure to operate with an exempt purpose also put the exempt status at risk.

The Department of Justice, the Internal Revenue Service, and Congress have all identified "offshore tax evasion" as a primary enforcement target. The success of the enforcement effort so far has energized government efforts in these cases.

If you are an American taxpayer with an offshore account that you thought was secret, you have very little time to bring it into compliance. We are now in the second amnesty for unreported foreign income. The first amnesty was in 2009. In February 2011, the IRS announced a second amnesty for taxpayers with unreported foreign assets. It is called the 2011 Offshore Voluntary Disclosure Initiative – OVDI. The objective is to bring taxpayers who have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with U. S. tax laws.

This is the last amnesty. You will not get another chance. If you have unreported foreign accounts and/or unreported foreign income, after August 31, 2011 you will no longer be able to come forward under the amnesty. There is not much time left. The disclosure and its related amended return filings and payment of taxes, interest and penalty must be completed before August 31, 2011. Once the IRS gets your name from other sources, it is too late.

Foreign banks have boots (wingtips) on the ground in the U.S. selling accounts and services. The U.S. is threatening to expel them if the foreign banks resist cooperating with the IRS. This new "cooperation" is why there will not be a third amnesty program and why the second is less generous than the first.

Taxpayers are strongly advised to bring unreported foreign income and accounts into tax compliance to avoid discovery by the IRS, higher penalties, and criminal prosecution.

If you have unreported foreign income in any amount (there are no exceptions, a small amount of unreported income is still a violation) you have three choices:

(1) Do nothing and hope you don’t get caught. I definitely do not recommend this. The government now has TIEs (Tax Information Exchange Agreements), MLATs (Mutual Legal Assistance Treaties), John Doe summonses (like those used against UBS in Switzerland and HSBC in India) and a vast collection of information from the more than 20,000 voluntary disclosures already made. The new Foreign Account Tax Compliance Act (FATCA) also creates new reporting requirements for U.S. taxpayers and foreign financial institutions. If you do nothing, keep this in mind: "He who places head in sand, will get kicked in the butt.’

(2) Make a "quiet disclosure." Some U.S. taxpayers with undeclared foreign accounts are hoping to "sneak through" by amending their returns and paying taxes on unreported income from foreign accounts. This is what is referred to as a "quiet disclosure". This is not recommended. The IRS has made it clear that these returns have a high chance of being audited. It is also well known that so-called quiet disclosures have resulted in criminal prosecutions. The IRS is targeting amended tax returns reporting increases in income. Even though tax returns are amended and taxes paid, foreign account holders will still face penalties and criminal charges.

There are other problems with a "quiet disclosure". It only addresses payment of taxes and interest, not penalties. It does not address the issue of failure to file the Report of Foreign Bank and Financial Accounts (FBAR) disclosing the foreign account. If the foreign account was in the name of a foreign trust, then an IRS Form 3520 was probably due also.

(3) The third choice, and the recommended course, is for a taxpayer with noncompliant foreign accounts to enter the Offshore Voluntary Disclosure Initiative – OVDI. In order to participate in the 2011 OVDI, taxpayers must resolve any non-compliance within an eight year period, from 2003-2010. All filings and payments must be complete by August 31, 2011.

Taxpayers have to pay: 1) income tax deficiencies during the eight year period 2003-2010; 2) interest on the deficiencies; 3) a 25% penalty on the highest aggregate balance held within foreign accounts during the eight year period. For smaller foreign holdings not exceeding $75,000, the penalty will be reduced to 12.5%. ; 4) accuracy-related penalties of 20% of the back taxes; and 5) if applicable, 25% of back taxes for failure to timely file a return or pay tax shown on a filed return.

Taxpayers who participate in the OVDI will generally avoid 1) criminal prosecution; 2) civil and criminal penalties for failure to file FBARs; and 3) any taxes, interest, and penalties prior to 2003.

While the OVDI fines and penalties are significant, they pale compared to the consequences of an IRS criminal prosecution and imposition of all penalties for non-reporting.

If you are entering the OVDI or planning a quiet disclosure it is a very serious matter with potentially life altering repercussions. Don’t rely on the internet for your advice. Make sure you get a competent tax lawyer with experience in the amnesty program.