Caroline D. Ciraolo was quoted in a recent Tax Notes article entitled “Panamanian Summons Seen as Better Path to Law Firm Client Info,” published on August 11, 2021. The article addresses the John Doe summons authorized on July 15, 2021 to obtain information from third parties – shipping services and financial companies – in an effort to identify clients of Panama Offshore Legal Services (POLS).
The article notes:
Caroline D. Ciraolo of Kostelanetz & Fink LLP, who was the acting head of the Justice Department Tax Division when most of the Swiss banks came clean on U.S. tax evasion, said the IRS and Tax Division experiences with the Swiss bank program will allow them to make more fruitful use of the information about POLS they get from the summonses. Like Ziering and Neiman, Ciraolo said she saw no possibility of an attorney-client privilege challenge to the summonses because they target third-party information.
Ciraolo noted that POLS’s U.S. taxpayer clients still have time to consider the IRS’s voluntary
disclosure program. Those taxpayers should find tax counsel and discuss the possibilities for
returning to compliance, she said.
The IRS’s receipt of permission to serve a John Doe summons isn’t an event that would trigger a
timeliness failure, Ciraolo noted. However, it will cut off another path for returning to compliance — the filing of qualified amended returns, she said.
Ciraolo pointed to the government’s comment that the POLS John Doe summonses grew out of
information received from the OVDP. “This is an example of why we need voluntary disclosure,” she said.
However, the IRS, and particularly its Criminal Investigation division, still needs resources for the voluntary disclosure practice to be effective, Ciraolo said. If CI develops a backlog of submissions for pre-clearance, the agency could receive information about a submitting taxpayer during that delay, she said.
Ciraolo said that timeliness should always be measured not from when the IRS gets around to
reviewing a pre-clearance submission but from when the taxpayer first applied. Not only could
delays create that sort of confusion, but at any stage in the process, taxpayers could be delaying
payment opportunities and thereby accruing interest and penalty liabilities, she said.
The government needs to avoid the possibility of processing delays sufficient to discourage
taxpayers from making voluntary disclosures, Ciraolo said. That scenario would hinder the
enforcement emphasis coming from the president, Congress, and IRS leadership, and it provides yet another reason to ensure the agency is properly funded, she said.
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