IRS Quiet Disclosure (Summary 2019-2020)
IRS Quiet Disclosure: A Quiet Disclosure IRS involves the filing of late tax returns and international informational returns with the Internal Revenue Service. Quiet disclosure evolved from the increased and aggressive enforcement of foreign accounts compliance. There are two main types of Quiet Disclosure: Filing forward in the current year, without resolving past non-compliance; or Filing original or amended tax returns, and international information returns to report offshore accounts, assets or investments without filing under the Streamlined Procedures or Voluntary Disclosure Program (VDP). Filing a quiet disclosure is never a good option. That is because if you take this path and the Internal Revenue Service catches you, it may result in significant offshore fines and penalties. The most serious result is that you may have turned your non-willfulness into a serious willful tax fraud situation.
IRS Quiet Disclosure
With a Quiet Disclosure IRS, U.S. persons seeks to avoid approved voluntary disclosure methods of IRS tax amnesty, and “secret” file original or amended tax returns and international information returns.
Some of the more common filing requirements and reporting involves FBAR and FATCA. If you have not reported your offshore accounts, you are considered non-compliant. When you are non-compliant, the government may IRS fines and penalties.
Quiet Disclosure Experience (Example)
You sit at your computer researching Quiet Disclosure — contemplating whether you can get away with the illegal disclosure of foreign bank accounts, assets, investments and income. But, as you learn more and more about FATCA and PFIC — you sink deeper into your chair.
Is a Quiet Disclosure worth it?
You read stories online about people who have successfully submitted it, and others who crashed and burned. You consider voluntary disclosure, but don’t want to pay the penalties. Your spouse has had enough and has gone to bed — but that doesn’t deter you, not one bit. You want to get compliant, but don’t want to pay IRS penalties for unreported assets, accounts, investments and related income.
So you continue your research into the early morning hours, not sure what to do.
10 Reasons to Avoid Quiet Disclosure
Here are 10 reasons to avoid a quiet disclosure:
Quiet Disclosure are Illegal
If you knowingly submit documents in prior years that should have been reported timely, or you just begin filing forward – that is a crime.
That is not to say you’re going to be prosecuted, but the civil penalties alone can reach 100% value of the unreported accounts.
The Penalties are Major
If you get caught in a quiet disclosure, you will get hit with willful penalties. Those penalties can reach 100% maximum value of the unreported accounts. In addition, you can get hit with tax fraud, tax evasion and many other penalties.
You’ll Lose (Lots) of Sleep
The problem with the IRS, is that they move slow; molasses, slow.
For example, if you were a little rambunctious kid and got caught stealing a cookie from the cookie jar, you’ll pretty much know soon enough whether you got caught — or got away with it.
The IRS takes a lot longer, and if it turns out to be a civil tax fraud case, they can have unlimited time to enforce, while your Grandma gives you a stern warning (and a hug).
You’ll be Looking Over Your Shoulder (A Lot)
Because, when the IRS agents first introduce themselves to you, it will not be pleasant, and generally it will come as a surprise.
We have worked with many clients who have been surprised by the IRS, and these IRS “introductions” come in all shapes and sizes.
In each situation, the client told us they literally had no idea they were under any investigation.
Your Foreign Assets are at Risk
The United States has entered into bilateral tax treaties with more than 50 countries and FATCA agreements with more than 110 countries. In other words, the IRS is working with many foreign countries to facilitate the reduction of offshore tax crime – so your foreign assets are not safe.
Your U.S. Assets are at Risk Too
When it comes time to pay the Internal Revenue Service, the IRS is able to enforce and assess and collect against your U.S. Assets even if the penalties stem from foreign assets and accounts.
This may include the IRS pursuing a:
- IRS Passport Revocation
It Can Impact Your Immigration Status
Generally, if you were non-willful and you want to get into compliance, your immigration status should be safe.
But, if you get caught in a quiet disclosure, which can be criminal, then you could be subject to much harsher fines and penalties, which may impact your ability to renew or change your immigration status.
You Can’t go Back to Streamlined or Reasonable Cause
If you knowingly made a quiet disclosure, and get cold-fee later, you would have to make a voluntary disclosure under the traditional voluntary disclosure program instead of using one of the more lenient streamlined or reasonable cause options.
What if Your CPA or Accountant Gets Caught?
This is not uncommon.
Maybe your CPA or accountant finds himself or herself in trouble and wants to use your file (and other files) as leverage to try to reduce penalties against their practice.
Alternatively, your CPAs files might be audited by the IRS Office of Professional Responsibility (OPR), and this could put your Quiet Disclosure history and background at risk.
You May Not Even Need It
Here’s an example: Felicia is from Spain. She has foreign accounts that are worth $1 million. She never reported them because she never knew she had to report them.
Although she lived in the United States for many years, in 2017 she traveled back to Spain to be with her mother, and spent 350-days in Spain.
Felicia may qualify for the Streamlined Foreign Offshore Procedures (see below), in which she can legally fix her prior mistakes — and all penalties or waived.
IRS Enforcement of Offshore Penalties
Here is a list of common Offshore Penalties that may be amplified with a quiet disclosure:
The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign financial account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation (Whether it is per account or per FBAR is up to the Agent assigned to your case).
Form 8938 Penalties
Beginning with the 2011 tax year, a penalty for failing to file Form 8938 reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign securities ,etc. The penalties is $10,000, per return with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
Form 3520 Penalties
Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.
Form 3520-A Penalties
Information Return of Foreign Trust With a U.S. Owner. The penalty for failing to file each one of these information returns or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.
Form 5471 Penalties
Information Return of U.S. Persons with Respect to Certain Foreign Corporations. The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
Statute of Limitations
A quiet disclosure is all bad, because you are setting yourself up for major reporting issues going forward.
The problem with making a quiet disclosure, is that you have committed a form of tax fraud. This may lead to an “unlimited statute of limitations,” which means the IRS is not limited in the time they have to audit.
Even if the IRS cannot prove’ fraud,’ in most international income reporting scenarios, the IRS will have at 6-years to audit you.
The Internal Revenue Service developed several voluntary offshore compliance procedures to get into compliance. Quiet Disclosures, Silent Disclosures & Qualified Quiet Disclosures are illegal — even if you are non-willful.
We will discuss why a Quiet Disclosure is not worth the risk, and how to safely and cost-effectively get into compliance.
Why Hire Us?
Golding & Golding is board-certified, and specializes exclusively in IRS offshore disclosure. When researching quiet disclosure and offshore reporting, here is (generally) what you will find.
Board-Certified Tax Law Specialist Advice
The Board-Certified Tax Law Specialists that you spoke with all told you that you should absolutely never submit a quiet disclosure. They explain the risks, and you get it (even if you don’t like it).
Their fees may be higher than less experienced counsel (since those Attorneys just refer you out to a CPA to do much of the work, putting your attorney-client privilege and confidentiality at risk), but if it is a firm like Golding and Golding and all the fees (tax, legal and audit defense) are wrapped into one bundle – it may be worth it to you.
Accountants and CPAs
The Accountant you have been using for the past few years tells you not to worry about it, because the chance of getting caught is low.
Of course, he doesn’t want to lose your business or acknowledge his mistake – so the chance of him falling on the sword and taking responsibility is slim-to-none.
You reach out to other CPAs, EAs or Accountants, and they tell you speak with a Specialist.
Lesser Experienced Attorneys & More “General Practice” Firms
You contact a few newer private practice tax lawyers since their consultation fees are very small, or even free. They spend some of the time quoting information they found on our website, and other experienced law firm websites.
The rest of the time, they downplay the advanced credentials and certifications they don’t have, and explain why you don’t need a specialist.
We know, because those cases usually end up on our door-step. Examples of recent cases we had to takeover from less experienced Attorneys can be found by Clicking Here (Case 1) and Clicking Here (Case 2)
Offshore Disclosure Tax Amnesty: Golding & Golding (Board-Certified)
We specialize exclusively in international tax, and specifically IRS offshore disclosure.
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the Enrolled Agent credential
- Learn more about Golding & Golding’s Case Accomplishments
- Learn more about Golding & Golding Testimonials from prior clients
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.