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6 OUT OF 10. Svetlana’s problems are complex, but the solutions are made easier by the fact her recordkeeping is detailed and well-organized. Banach and Chang note clients are often surprised by the accounting and other costs for the Streamlined Program. In Svetlana’s case they’ll be between $5,000 and $10,000.
compliance. In addition, she must sign a docu- ment certifying her non-compliance wasn’t willful; should the IRS find evidence to the con- trary, she could be prosecuted for perjury.
Chang says, assuming Svetlana’s fully cooperative, it’s highly likely the IRS will waive penalties and interest triggered by her failure to file, but she’ll still have to pay tax on unreported Subpart F income.
And from now on, adds Banach, Svetlana should distribute the corporation’s investment income every year. This will ensure there’s no Subpart F income.
“She’ll still have the filing requirement,” but no double-tax problem.
Issue #3:
Income splitting
Says Chang: “I would tell Svetlana, ‘From a tax standpoint, there’s a savings. However, you have to realize [...] there might be a risk the IRS will say the income technically belongs to you, so you should be paying tax on it.’ ” AE
CLIENT ACCEPTANCE
5/10
Svetlana submits a Streamlined Program package and waits for the IRS’s decision. She gives income splitting serious consideration, but decides she doesn’t want to risk another run-in with the IRS. Since she’s going through the Streamlined Program, she’s worried about giving the taxman reasons to scrutinize other aspects of her situation.
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