FBAR Quiet Disclosure
IRS Quiet Disclosure FBAR: If a Taxpayer missed their FBAR reporting, they are considered non-compliant. To get back into compliance, the IRS has developed several offshore amnesty programs. But, instead entering amnesty — some Taxpayers would rather take the gamble and submit a Quiet Disclosure. Is it ever the right strategy to file a Quiet Disclosure in non-willful or willful FBAR non-compliance case? No, it is never the right option for a Taxpayer to file a quiet disclosure to report offshore accounts. When a U.S. Person has foreign accounts, they may have an FBAR, FATCA or other international information reporting form filing requirement. The failure to file the proper offshore disclosure forms may result in significant offshore fines and penalties. The IRS has also develop various FBAR amnesty programs, which are also referred to as offshore voluntary disclosure or offshore compliance. With the Internal Revenue Service taking an aggressive position on matters involving foreign accounts compliance (see 8/2020 summary released by FinCEN), it is important to get into (or stay in) compliance. The Streamlined Program is the most popular program, but despite the reduced 5% penalty or penalty waivers available, some people try to circumvent the legal disclosure an instead submit an illegal disclosure, referred to as a Quiet Disclosure or Silent Disclosure.
What is a FBAR Quiet Disclosure
An FBAR Quiet Disclosure or “Silent Disclosure” comes in two (2) different flavors.
Either the Account Holder will just begin filing the current year, instead of going back and fixing the prior year unreported accounts first, or the Account Holder will go back and file the prior year FBARs, without using one of the approved FBAR Amnesty Programs, such as the Streamlined Filing Compliance Procedure for either U.S. Residents or Non-U.S. Residents.
Streamlined FBAR Filing Compliance
Streamlined FBAR Filing is a common form of offshore tax amnesty or offshore voluntary disclosure used by taxpayers worldwide who were non-willful and have unreported foreign accounts. It is a great program for certain taxpayers, presuming they are non-willful and meet the specific requirement of either the Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures. Both programs are used to report foreign accounts, assets, investments and income — but the domestic program is for U.S. Residents and the foreign program is for non-U.S. Residents. It is safer, legal and more effective than making an FBAR Quiet Disclosure.
Can You Sneak an FBAR Quiet Disclosure Past the IRS?
The IRS has made it known they will strictly enforce fines and penalties against anybody they catch illegally reporting foreign accounts & assets by way of an FBAR Quiet Disclosure
And, with the introduction of FATCA (Foreign Account Tax Compliance Act), renewed interest in FBAR (which originated back in the early 1970s) the introduction of various ITEG (International Tax Enforcement Groups) and the newly formed J5 (offshore Cryptocurrency and Tax Evasion), there is a much higher chance of U.S. Taxpayers getting nabbed by the IRS than ever.
As provided by the IRS:
“All quiet disclosures will be reviewed and will be subject to civil or criminal penalties as determined under existing law”
IRM 184.108.40.206 Quiet Disclosure
IRM 220.127.116.11 refers to the Internal Revenue Manual. In 2018, the IRM was updated to include a new section on Quiet Disclosures, which includes FBAR Quiet Disclosures.
- A quiet disclosure is made when a taxpayer files a series of amended tax returns to report previously unreported income from previously undisclosed foreign financial assets outside of the formal voluntary disclosure process with the IRS provided for by IRM 18.104.22.168.6. In most quiet disclosure cases, taxpayers also file delinquent FBARs to report previously undisclosed foreign accounts.
- IRM 22.214.171.124.5.3, Offshore Voluntary Disclosure Program – Quiet Disclosure Cases, requires the campuses that receive amended tax returns reporting foreign attributes to forward them to the Quiet Disclosure Coordinator in OVDP for review.
- See Exhibit 4.63.3-8, Quiet Disclosure Review Process.
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