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Rather than request to participate in one of the IRS’s Offshore Voluntary Disclosure programs and submit themselves to the arduous process and a miscellaneous percentage penalty based on account balances, some taxpayers have chosen to simply submit a few years’ worth of amended returns to an IRS service center, submit the appropriate information reporting forms, such as the FBAR or Form 3520, and hope that the IRS does not assess any penalties against them. This is called a “quiet disclosure.” Essentially, the taxpayer takes all of the steps required within the OVDP, without agreeing to pay the miscellaneous OVDP penalty. At first glance, this may seem like a great option, but it comes with many risks that should be considered before proceeding.

A taxpayer who submits a quiet disclosure cannot take advantage of any of the guarantees that come with participation in the Offshore Voluntary Disclosure Program. Criminal investigation or prosecution is a definite risk and the likelihood of severe civil penalties is increased. Quiet disclosures are considered to be evasive and non-cooperative, as a program to resolve issues has been outlined by the IRS and resolutely ignored by the taxpayer making the quiet disclosure. Arguments that may be persuasive in a reasonable cause analysis during an opt-out would likely be overshadowed by the taxpayer’s blatant attempt to avoid the disclosure process carefully constructed and administered by the IRS.

It is currently a top priority of the administration in Washington, D.C. to capture the revenue lost to the government through the use of and non-reporting of offshore accounts and the related income. The IRS has increased the number of audits in this area and is hiring more staff with expertise in international tax investigations. New laws have been passed and new agreements have been signed that provide the government with additional tools to enforce the tax laws and discover taxpayers who are violating them.

Quiet Disclosure and Offshore Accounts

Taxpayers who have already submitted a quiet disclosure may still be eligible to participate in the 2014 OVDP or the New Streamlined Offshore Programs, provided that they are not already being audited as a result of the quiet disclosure submissions. If you disclosed offshore financial assets or accounts without requesting permission to participate in the IRS OVDP, contact an experienced attorney at Brown, PC at 817-870-0025 or toll free at 888-870-0025 to discuss your options.

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