Intro Guide to Fixing Quiet Disclosures for Taxpayers Abroad

Intro Guide to Fixing Quiet Disclosures for Taxpayers Abroad

A Guide to Fixing Quiet Disclosures 

Sometimes, an otherwise compliant taxpayer may end up making an intentional or unintentional quiet disclosure for the prior years’ disclosure of previously unreported foreign accounts, assets, or investments instead of submitting to one of the offshore disclosure programs such as the Streamline Procedures or Delinquency Procedures. Oftentimes, the reason that the taxpayer makes a quiet disclosure is because they were goaded into doing so by a CPA or other tax professional and/or were not made aware they were required to first go back to report in prior years first — before filing their current year international information reporting forms.

For example:

• • • Was the Taxpayer working with a tax professional?

    • Was the Tax professional forthright with the reporting requirements?

    • Did the tax professional properly inform the taxpayer of the responsibilities of filing the prior year’s FBAR first?

Unfortunately, even in situations in which the taxpayer relied on a tax professional, they may still become subject to fines and penalties because, at the end of the day, they are the ones who signed their tax return — and thus in the eyes of the IRS they are just as responsible as the tax professional who may have prepared the return. Nevertheless, let’s look at a few common situations and how the Quiet Disclosure may be resolved.

Unintentional Quiet Disclosure

More often than not, a quiet disclosure of foreign accounts, assets, or investments is unintentional. For example, let’s say Peter is a lawful permanent resident who has been living in the United States for four years. For the first three years, he was on an H-1B visa and met the Substantial Presence Test. Last year, he became a permanent resident and recently he did some more research into his tax requirements for next year’s filing. In conducting his research, Peter learns for the first time that he was supposed to go back and file the prior years’ international returns before filing the current year’s return (which Peter filed about eight months ago).

Technically, this is a quiet disclosure because Peter failed for the current year to disclose his foreign assets without first going back to the prior year, But, Peter may still be able to get into compliance using one of the amnesty programs and he should be fine. Thus, taxpayers who have not been audited by the IRS after submitting a quiet disclosure may still be able to get into compliance by submitting to one of the amnesty programs.

Intentional Quiet Disclosure

When a taxpayer submits an intentional quiet disclosure, the situation is more complicated. The first thing the taxpayer must consider is whether or not they were non-willful when they initially failed to report their foreign accounts. If they were willful then they originally were non-compliant, then they would not qualify for the Streamline Procedures or Delinquency Procedures. But, if their initial non-compliance was non-willful then it is important to do a thorough analysis of the facts and circumstances that led them to the quiet disclosure to assess if they qualify for amnesty.

Even though the taxpayer filed required disclosure there may be opportunities for them to fix the situation and they should speak with a Board-Certified Tax Law Specialist who specializes exclusively in these types of matters to get a good lay of the land before making any further representations to the IRS.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.