December 07, 1992
IRS Says Nonfilers Who Come
Forward Are Not Prosecuted
Responding to the apprehensions of people who want to come
forward and file delinquent tax returns but are concerned about the IRS criminal
investigations, the IRS has explained how it handles such cases.
In a speech Friday to the Tennessee Tax Institute in Nashville, IRS Commissioner
Shirley Peterson said that the IRS is aware that some nonfilers are anxious about
identifying themselves to the IRS because of the possibility of prosecution. Commissioner
Peterson outlined the IRS' long-standing practice of not recommending prosecution of
nonfiler cases when the taxpayer voluntary discloses nonfiling and reiterated that the
vast majority of nonfilers need only be concerned about filing and paying what they owe.
"Some taxpayers may receive a letter from a service center about a delinquent
return and believe erroneously that they are being criminally investigated,"
Commissioner Peterson said. "The nonfiler program is a long-term effort to improve
tax compliance and the whole purpose is to get people back in the system, not to prosecute
ordinary people who made a mistake."
The IRS is responsible for investigating possible criminal violations of the tax law.
Under IRS procedures, any taxpayer who is under criminal investigation must be notified by
a IRS criminal investigator. At the end of the investigation, if warranted, the IRS can
recommend to the Department of Justice that prosecution be pursued. However, the final
decision to seek prosecution rests with the Department of Justice.
Since 1952, the IRS has made a practice of taking into consideration the fact of
taxpayer's voluntary disclosures when determining whether to recommend criminal
prosecutions. The IRS' voluntary disclosure practice is not an amnesty or a grant of
immunity from prosecution. While the IRS will not assure that it would never, under any
circumstances, recommend the criminal prosecution of an individual who comes forward
voluntarily to report the failure to file of one or more tax returns, the IRS' practice
has been not to do so where the person:
- Informed the IRS that he/she has not filed tax returns for one of more taxpayer periods;
- Had only legal source income, in other words no part of the income was earned from
activity which is illegal under federal or state law;
- Made the disclosure prior to being contacted by the IRS-- in this context, "contact
by the IRS" means that the taxpayer and/or the taxpayer's representative has received
notification by the IRS by a telephone call, letter or personal visit that the taxpayer is
under criminal investigation;
- Either filed a true and correct tax return or cooperated with the IRS in ascertaining
the correct tax liability; and,
- Either paid in full the amount due or, in those situations where the taxpayer was unable
to make full payment, made bona fide arrangements to pay.
Commissioner Peterson said that the IRS has no intention of altering its practice or
departing from the consistent manner in which it has applied the voluntary disclosure
practice in determining whether to recommend criminal prosecutions in nonfiler cases. She
also said that the Internal Revenue Manual will be updated to assure consistent guidance
to all employees about agency practice.
However, Commissioner Peterson pointed out that it is always to the taxpayer's benefit
to come forward as soon as possible. In some cases of egregious nonfiling, the initial
contact from the IRS will be for criminal investigation purposes.
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