Since the onset of the original Offshore Voluntary Disclosure Initiative (OVDI) in 2009 and its successor Offshore Voluntary Disclosure Program (OVDP) and subsequent progeny programs, taxpayers with undisclosed offshore accounts or foreign accounts have for the most part been able to avoid criminal prosecution at the expense of paying fines for failing to disclose and report. Not being satisfied with avoiding the criminal prosecution, many taxpayers on their own or in conjunction with their tax professionals have attempted to “slip under the radar” by not entering the IRS disclosure programs (OVDI, OVDP, etc.) and instead filing amended tax returns which report the income. These filings have come to be known as quiet disclosures. The hope, of course, is that the IRS just accepts the filings undetected in the morass of the bureaucracy.
IRS literature and FAQs addresses these quiet disclosures in one way or another and repeatedly state they are not disclosures to avoid criminal prosecution nor the significantly higher penalties than taxpayers face as part of a voluntary disclosure program.
The IRS has been making attempts to uncover quiet disclosures and take appropriate action.
The General Accounting Office (GAO) is also making a noise about quiet disclosures and has studied the extent of quiet disclosures. Using different criteria than the IRS, the GAO has determined the number of potential quiet disclosures is far more prevalent than the IRS is uncovering.
The IRS is now considering the criteria and methods used by the GAO to identify potential quiet disclosures for the purpose of pursuing them to the full extent of the law. In additional criminal prosecution, this can also entail far higher penalties than those imposed under the various OVDI and OVDP programs.
In light of the GAO report and increased IRS efforts to identify quiet disclosures, anyone who has made a quiet disclosure in the past five to seven years with the hope of slipping through the cracks, even if pursuant to the advice of their tax adviser, may want to revisit the issue and reconsider whether to avail themselves of one of the OVDI or OVDP programs.
Horowitz Law Offices has represented numerous clients in IRS Offshore Voluntary Disclosure proceedings. For more information on voluntary disclosure, offshore reporting requirements, or other tax law matters, contact Horowitz Law Offices.