An influential group of criminal tax lawyers is sharply criticizing the IRS for its decision to prosecute some people who came forward to confess that they had used foreign bank accounts to evade taxes, saying it goes against longstanding practice of encouraging taxpayers to come forward to report their tax violations.
In 2008 and early 2009, shortly before the agency announced a special six-month limited amnesty program, some taxpayers with undeclared accounts from Swiss bank UBS confessed to the IRS that they had avoided taxes.
A letter dated March 30 and signed by 32 lawyers, many of them former high-ranking tax officials now in private practice, said the IRS actions "smack of trickery." They said that because the taxpayers had turned themselves in, they shouldn't be prosecuted. The letter said heavy-handed treatment of some account holders could cause taxpayer confessions to "grind to a halt."
The IRS and Justice Department nevertheless proceeded with a handful of prosecutions, according to signers with knowledge of the events.
The letter's signers included former top Justice Department officials Gerald Feffer, Paula Junghans, and Cono Namorato, and former IRS Criminal Investigation Chief Mark Matthews.
The letter acknowledged the government's long-held right to reject confessors if it already has their names or has opened an audit. But it argued that subjecting these taxpayers to rare public prosecutions would look like a double-cross. The writers also warned that if the government went ahead with prosecutions, it would radically change the "risk assessment" they offer their clients and lead to fewer voluntary disclosures.