COLUMN: Cash under-reporting in past tax years may hamper current chances in claim

Recent articles have indicated major sources of tension between coastal fishing, shrimping and charter industry workers and the Kenneth Feinberg-led BP/Independent Claims Facility Fund.  Aside from the widely-held basic concerns about slow claim reviews or complaints about the size of the checks received, a bigger concern for some is this: Feinberg announced that the Fund's adjusters may review up to two prior years of claimants' federal tax returns as a means of supporting (or perhaps corroborating) a claimant's current year loss of income claim.
There may be considerable potential for some hard-working Gulf residents in these industries getting little or nothing out of the Fund due to past tax transgressions. If the blogosphere is any indication, there is an accepted premise among a share of the non-claimant population, perhaps more prevalent in other parts of the country, that some of those who have made their living from the Gulf's fishing, shrimping, oystering and charter industries have cheated the IRS one way or another, and while I am not skeptical of every cash-business worker or owner, I do believe that understating income has undoubtedly occurred more than on occasion.  That may explain the rush by claimants to "blame Obama", or to otherwise trash the BP Fund's ongoing efforts to verify claims, citing their "privacy rights," "socialism", or other "governmental abuse".
Given any assumption that cash under-reporting in past tax years may hamper otherwise hard-working and deserving claimants (and unreported, falsified, or grossly under-reported previous income SHOULD rightly stand as a hurdle to claims, or should at least demand extra documentation), it seems the cash-strapped U.S. government ought to enact some type of amnesty bill that would allow any such claimants to amend or file returns for 2008 and 2009, subject to something like the following:
1.  Any such amended or filed return resulting in an unpaid tax liability would result in an actual obligation to pay, but any late fees or penalties would be waived, and other IRS assessments or remedies would be suspended.  Any possible criminal charges for previous failure to file or concealment by IRS would be waived.  Years prior to 2008 would not be open to audit or review, provided the individuals had in fact filed for such years.
2. If a claimant having made such amended or new filings for 2008 and/or 2009 files (or has pending) a claim on the BP/Feinberg fund, and a claim results in a payout-- or periodic payouts--, the Fund would be enabled and obligated to withhold some portion (perhaps 15-20%) which would be forwarded to IRS toward the 2008-2009 liability.
3. The sharing of claimant and taxpayer data between IRS and BP Fund would of course be necessary, but by law would be held absolutely confidential.
4. Any portion of a claimant's payout that is withheld and forwarded to IRS would not be counted as current year taxable income.
5. Craft the federal law in such a way that these voluntary filers who "come clean" on 2008-2009 would not owe any 2008-2009 tax  balances remaining after their allocated withholding from the Fund payout is exhausted.
Now if you are wondering what kind of a government-loving bureaucrat would write this opinion piece, consider that under the current Fund procedures, many current or future Fund claimants who chose not to report 2008 and/or 2009 income and pay taxes will get next to nothing on their current-year income claims.  If given a chance, under these or similar reasonable "amnesty" provisions--way more lenient than the IRS would normally consider in any other scenario--, these legitimate claimants would multiply their eligibility and credibility in the lost income claim process. Meanwhile, our government (which has run horrendous deficits under BOTH political parties) would benefit from a stream of previously undeclared and unpaid income taxes.  Who is it that would lose in this picture?

Peter Ehrlich
Santa Rosa Beach