Sunday, November 9, 2014

IRS on Quiet Filings for Offshore Account Delinquencies or Underreporting (11/9/14)

Tax Notes Today reports the following on quiet disclosures (Amy S. Elliott,  IRS Working With SSA on Offshore Streamlined Filing Requirement, 2014 TNT 216-3 (11/7/14), no link available):
Regarding so-called quiet disclosures -- when taxpayers file amended returns and delinquent foreign bank account reports without coming in through the offshore voluntary disclosure program or the streamlined program -- Best [senior adviser to the deputy commissioner (international), IRS Large Business and International Division] said, "The IRS recognizes that a quiet filing is a choice that the taxpayer has." 
But Best added, "We would prefer that taxpayers come in through one of our programs so that we have tracking mechanisms, information gathering mechanisms set up, but ultimately it's up to the taxpayer."
In the past, when I have heard IRS representatives pronounce on quiet disclosures they have been more discouraging than Ms. Best.  I and other practitioners, however, have viewed quiet disclosures as a real option.  Of course, the taxpayer will be required on the FBAR to explain the delinquency and should, if possible state the case for the IRS not to audit or assert an onerous penalty.  Still, it is good to hear an IRS representative reported to have present quiet disclosures as an option without, apparently, saying stronger words of discouragement.

Quiet disclosures are not for willful actors.  OVDI/P is for willful actors.  But, for nonwillful actors, particularly those with facts and circumstances toward the nonwillful end of the spectrum can generally (at least conceptually) get better results by OVDI/P with opt out, by Streamlined and by quiet disclosure with audit (should always assume an audit in testing whether quiet disclosure is a viable option).  In all three of those cases, the income tax is the tax plus interest with no accuracy related penalty for only open years and  the FBAR penalty will be the nonwillful penalty for the open years.  The key drill down, of course, is given the range of possible nonwillful FBAR penalties, a taxpayer may prefer the Streamlined with some certainty as to the offshore penalty (a surrogate for the FBAR penalty because the other potential penalties probably would not apply).


  1. It seems that anyone going into streamlined should be reasonably confident that he will not be found willful, otherwise he is handing in all the data and calling attention to himself. At least with QD he is not calling so much attention to himself, and can play the odds that there will be no audit. I haven't heard any pronouncements that the IRS would use a different criterion for wilfulness under QD vs. Streamlined, so it does not seem that if streamlined is denied, the person would be better off than someone in similar circumstances who did a QD and was audited.
    It seems to me that the same fear that kept OVD participants with relatively good facts from opting out would also scare those with relatively good facts from Streamline into QD.
    On a policy note, those who went into OVDP because IRS frowned on QD, and were scared away from opting out, are far worse off because of 1) 20, 25 or 27.5% penalty, 2) accuracy penalty and 3) OVDP paid taxes since 2003, vs. Streamlined paying taxes for past 3 years, at a time when interest rates are low (reducing foreign income.)

  2. She cites 63 pled guilty, 7 convicted, 8 fugitive from the US and livin' it up on a beach somewhere.
    The price? 40,000 OVDI participants, a continuum that includes the willful bad actors as well as the good actors who had legitimate reasons for having foreign accounts and simply didn't know about reporting/taxes but who were strong-armed into OVDP and did not opt out.
    About as successful as setting a house on fire to get rid of a few ants in the sugar bowl.

  3. This article doesn't go into a lot of depth.
    My personal experience as a "US person" residing in the US but with a need for a foreign account for family reasons has been the following:
    Found only 1 bank in each of 2 EU countries willing to open an account; none in Switzerland.
    Minimums of 500K in one bank, 1 million in the other.
    Cannot buy any mutual funds, not even ETFs, whether US or European. One of the two banks will allow me to hold mutual funds I already own, and sell them, but I cannot buy any. The other bank will not allow me to hold mutual funds or ETFs, period.
    I am allowed to buy, hold and sell, stocks (including US stocks) and various currencies.
    Neither bank will accept orders or any communication to/from the US whether phone, mail, or email. I have to travel there or somewhere outside the US to send instructions. The prohibition of communication means I also cannot get statements, or the annual Form 1099s sent to the US.
    Of course both banks are FATCA compliant, and I'm compliant with US tax and FBAR requirements.
    If I were not resident in the US things would be slightly easier, but not much.

  4. Just wanted to add, Americans residing abroad face the reverse problem, of not being able to keep accounts in the US. The solution provided in the article (not telling the US bank that you no longer reside in the US, and providing the bank with a US mailing address) may work in practice, but may well be in violation of PATRIOT Act requirements to give the bank your true residential address.

  5. Such a Great post and these tips is very minor...

    see :

  6. Playing the odds can be really risky when it comes to the IRS. It is a good thing that there IRS tax lawyers out there. They definitely help out a lot of people.

  7. The person would be better off than someone in similar circumstances who did a QD and was audited.
    So it does not seem that if streamlined is denied And Irs recognizes that a quiet filing is a choice that the taxpayer has in which i am agreed with this statement.

  8. Not
    only is the Department of Justice getting desperate with finding and convicting guilty
    Swiss Bankers now a New York Federal Prosecutor is joining the race...

  9. The pendel swings both ways and something Jack has forgotten to report : First Swiss banker penalized for espionage ....A former UBS employee became the first Swiss banker in history
    to be penalized for espionage after being convicted for passing on bank
    statement details to US authorities in a decision that escaped media
    attention for almost three months.

  10. Marin Dunki is already 66 years old and retired and was a relatively "small fish"

  11. FOIA request on OVDP
    6,500 document pages from the IRS as a result of
    the Freedom of Information Act (FOIA) Request filed on behalf of the TaxProblemAttorney which is published by the Brager Tax Law Group.

    and Boris Johnson, accidental American, says he will NOT pay the US tax on the sale of his home in the UK!

  12. Jack could you help me understand something here, why does the IRS state :
    Reasonable Cause is not the following:
    –An uninformed belief that a return is not due
    –Lack of knowledge
    –Poor Health
    –Complexity of the Law
    – Originally being from another country
    –Being told by the Foreign Entity/Person that there are no U.S. filing requirements
    –Being told by a U.S. professional that put the taxpayer in the structure that there are no U.S. filing Requirements
    –Fully cooperating with the audit process
    –Incurring substantial accounting/attorney fees
    Some of those look like reasonable cause to me.How could being uninformed/misinformed not be reasonable cause??

  13. Jack, could you make a separate blog entry for the above FOIA information (first link in Global Capitalism's comment.) I would like to comment on the info after I've read it. And thanks GC for this link!

