MORE RISK FOR QUIET DISCLOSURES

I have previously written on the “quiet disclosure” alternative for complying with U.S. offshore reporting requirements. See my prior posts here and here. Under this alternative, late filing taxpayers will not participate in the Offshore Voluntary Disclosure Initiative (OVDI) program. Instead, they will simply file the delinquent returns and reporting forms late – (i.e., a “quiet disclosure”), and hope that the IRS does not pick up on them for audit or penalty purposes.

A key benefit of the OVDI program is the substantial mitigation of criminal tax prosecution. Those that proceed with a quiet disclosure do not obtain this benefit. Nonetheless, in pursuit of a policy of seeking to have taxpayers become compliant by whatever means, perhaps the Treasury Department would not want to pursue criminal prosecutions against quiet filers since that would likely deter future compliance by other taxpayers. Presumably, Treasury would prefer “quiet disclosure” to no disclosure.

Recent discussions by professionals suggest that quiet filers may be more at risk than they suppose. For example, some practitioners have indicated that it is clear that the IRS has figured out a way to detect non-program disclosures, and that such filers may be subject to civil penalties higher than those imposed on OVDI participants (even OVDI participants that opt out of OVDI penalty procedures).

See Jaime Arora, IRS Auditors Taking Closer Look at 'Quiet' Disclosures of Offshore Accounts, 2013 TNT 202-4 (10/18/13) for an article on this subject. Thanks to Mitchell Goldberg of our firm for bringing this article to my attention.