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Quiet Disclosure – Offshore Account Penalty | IRS Quiet Disclosure

Quiet Disclosure - Offshore Account Penalty | IRS Quiet Disclosure (Golding & Golding)

Quiet Disclosure – Offshore Account Penalty | IRS Quiet Disclosure (Golding & Golding)

Quiet Disclosure – Offshore Account Penalty | IRS Quiet Disclosure

Quiet Disclosure: 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.

Quiet Disclosure

Is a Quiet Disclosure is 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…

Offshore Bank Accounts

You speak with some attorneys or CPAs who are willing represent you in a quiet disclosure (or take you streamlined when you were willful — which is just as bad).

Technically, you are out of IRS compliance for not properly reporting your foreign accounts, assets, investments, and/or income to the IRS…

…but can (and will) the IRS really find your foreign accounts?

What is a Quiet Disclosure?

Taxpayers who submit amended or original tax returns or FBAR (quietly) to the IRS by not submitting through Offshore Tax Amnesty, commit an illegal Quiet Disclosure, because they have violated U.S. Tax law.

As a result, the person has committed an IRS Tax violation or crime. The situation can result in an IRS Special Agent criminal investigation.

Quiet Disclosure IRS – A Dangerous Game

A quiet disclosure is really not worth it.

What do the professionals say?

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)

So, What Do you Do?

No matter what, you should never file a Quiet Disclosure (seriously, it’s just not worth it)

Here’s 10 Reasons Why You Should Never File 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:

  • Lien
  • Levy
  • Seizure
  • 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.

5 Safe Ways to Get into IRS Offshore Compliance

There are 5 main versions of the program. Here are the 5 Main Options:

(New) Updated Traditional IRS Voluntary Disclosure Program

When OVDP (Offshore Voluntary Disclosure Program) ended back in September 2018, the Internal Revenue Service was unclear as to whether a New “Offshore” Voluntary Disclosure Program would be introduced. Instead of a “new program,” the traditional voluntary disclosure program was expanded.

You can use the disclosure program to submit FBARs for your Foreign Bank Accounts, FATCA, PFIC, along with your Domestic Income

Resource: Summary of the Traditional IRS Voluntary Disclosure Program

Resource: Golding & Golding’s 8-Step Guide to See if you Qualify

SFCP – IRS Streamlined Filing Compliance Procedures

IRS Streamlined Filing Compliance Procedures are a stand-alone “streamlined” version of the traditional OVDP. The “stand-alone” streamlined filing procedures were created in 2014 by the Internal Revenue Service.

The purpose of the procedures are to assist taxpayers who were noncompliant with offshore reporting requirements – but were also non-willful.

If the Taxpayer can certify under penalty of perjury of being non-willful, the IRS reduces the penalty structure, and even waives the penalty for applicants who qualify as foreign residents.

Resource: Golding & Golding’s IRS Summary of IRS Streamlined Filing Compliance Procedures

SDOP – IRS Streamlined Domestic Offshore Procedures

SDOP is the Streamlined Domestic Offshore Procedures, and it is the program designed for for U.S. persons residing in the United States (or do not meet the technical “Foreign Resident Test”) 

Resource: Golding & Golding’s IRS Summary of IRS Streamlined Domestic Offshore Procedures

SFOP – IRS Streamlined Foreign Offshore Procedures

SFOP is the Streamlined Foreign Offshore Procedures. These are the Procedures for U.S. persons residing outside the United States is referred to as the Streamlined Foreign Offshore Procedures.

Resource: Golding & Golding’s IRS Summary of IRS Streamlined Foreign Offshore Procedures

DIRP – Delinquency Procedures for Offshore & Foreign Accounts and Assets

If you do not have any unreported income resulting in having to amend your tax returns — and all you have is unreported foreign assets, accounts or investments with no unreported income, you may be in luck. In these instances, in which you do not otherwise need to file for traditional offshore disclosure or the Streamlined Filing Compliance Procedures — you may qualify for the Delinquency Procedures and avoid any penalties.

Resource: Golding & Golding’s IRS Summary of Delinquent International Informational Return Submission Procedures

RC – Reasonable Cause for Offshore & Foreign Accounts and Assets

Reasonable Cause may be an option for some taxpayers. Specifically, if you were completely non-willful in your failure to disclosure, and were unaware that there was any reporting requirement, then the thought of paying any penalty may sound absurd.

Resource: Golding & Golding’s Summary of IRS Reasonable Cause for Offshore & Foreign Accounts & Assets

Fixing Lesser Experienced Law Firm mistakes.

IRS Voluntary Disclosure is complex enough for experienced practitioners who focus exclusively in the area of law, never mind relative newcomers who are trying to handle more than just offshore voluntary disclosure as part of their everyday tax practice.

We know, because those cases usually end up on our door-step. 

Resource: 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).

IRS Offshore “Potential” Penalty List

The following is a list of potential IRS penalties for unreported and undisclosed foreign accounts and assets:

Failure to File

If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty. The failure-to-file penalty is generally more than the failure-to-pay penalty.

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

Failure to Pay

f you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty.

However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Civil Tax Fraud

If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.

A Penalty for failing to file FBARs

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.

A Penalty for failing to file Form 8938

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.

A Penalty for failing to file Form 3520

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.

A Penalty for failing to file Form 3520-A

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.

A Penalty for failing to file Form 5471

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.

A Penalty for failing to file Form 5472

The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, 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.

A Penalty for failing to file Form 926

The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

A Penalty for failing to file Form 8865

Penalties include $10,000 for failure to file each 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, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

Fraud penalties imposed under IRC §§ 6651(f) or 6663

Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

A Penalty for failing to file a tax return imposed under IRC § 6651(a)(1)

Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.

A Penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2)

If a taxpayer fails to pay the amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding 25 percent.

An Accuracy-Related Penalty on underpayments imposed under IRC § 6662

Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty

Possible Criminal Charges related to tax matters include tax evasion (IRC § 7201)

Filing a false return (IRC § 7206(1)) and failure to file an income tax return (IRC § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.  Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. § 286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).

A person convicted of tax evasion

Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.  A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000.  A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.

How to Find Experienced & Reputable Offshore Voluntary Disclosure Counsel

Nearly all the experienced Attorneys in this field will have 5 Main Attributes:

  • Board Certified Tax Law Specialist
  • Master’s of Tax Law (aka LL.M.)
  • Dually Licensed as an Enrolled Agent or CPA
  • Around 20-Years of Private Practice experience
  • Extensive Litigation, Trial and related high-stakes experience.

Why is This Important? Because People Can be Whomever They Want to be Online

And that is the problem.

In recent years, we have had many clients come to us after being horribly represented by inexperienced tax counsel. While we are sure it is a problem in many fields, it seems to run rampant in IRS offshore voluntary disclosure.

These Attorneys ‘manipulate’ their past legal experiences, such as working for the IRS —  to make themselves sound more experienced than they are. You later find that they never worked as an attorney for the IRS, or even in the offshore disclosure department.  

The IRS has nearly 100,000 employees, and just being one of them does not make an attorney qualified to be an effective and experienced offshore voluntary disclosure tax attorney specialist.

IRS Offshore Disclosure is complex enough for experienced practitioners who focus exclusively in the area of law, never mind relative newcomers who are trying to handle more than just offshore voluntary disclosure as part of their everyday tax practice.

International Offshore Disclosure Lawyer Fees – How Much are They?

As in life, you get what you pay for.

To get the best representation possible, you need an experienced Board Certified Tax Law Specialist, with advanced degrees and advanced certifications.

If you want to hire a newer private-practice attorney that just opened shop a few years ago, hoping to save a little money on fees,  where they sold you on some “over-hyped” Kovel Letter – you’re putting yourself at risk.

Those cases usually end up on our doorstep down the line after the attorney made significant mistakes on the submission (sometimes costing the client significant amounts of time and fees that could have been avoided)

Golding & Golding – Board Certified in Tax Law

Golding & Golding represents clients worldwide in over 70-countries exclusively in Streamlined, Offshore and IRS Voluntary Disclosure matters. We have successfully completed more than 1000 streamlined and voluntary disclosure submissions.

Our Team Lead is a Board Certified Tax Law Specialist (Less than 1% of Attorneys nationwide) and Enrolled Agent, with a Master’s of Tax Law (LL.M.)

Mr. Golding leads his team in each and every case we accept for submission.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.

International Tax Lawyers - Golding & Golding, A PLC

International Tax Lawyers - Golding & Golding, A PLC

Golding & Golding: Our International Tax Lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70 different countries. Managing Partner, Sean M. Golding, JD, LL.M., EA and his team have represented thousands of clients in all aspects of IRS offshore disclosure and compliance during his 20-year career as an Attorney. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo and various Law Journals nationwide.

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, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)
International Tax Lawyers - Golding & Golding, A PLC