Tax Law Center Blog

By Parag P. Patel, Esq. | Updated April 29, 2013

The recent report from a government watchdog agency called the Government Accountability Office (GAO) shows how well the IRS attack on offshore tax evasion is coming. The GAO makes recommendations to the IRS, and the IRS pays attention. Those recommendations could put some taxpayers in trouble. Particularly concerning is the Quiet Disclosure commentary. Below is an excerpt from the report.

Despite the significant risks of not coming forward through one of IRS’s

offshore programs, some taxpayers decide to do nothing and remain

noncompliant. Other taxpayers have attempted to disclose their offshore

accounts without paying all the delinquent taxes, interest, and penalties

required by the programs. In a quiet disclosure, taxpayers file amended

tax returns for all or some of the tax years covered by an offshore

program, and report the income from the previously unreported accounts.

The taxpayers would generally pay interest and either accuracy-related or

delinquency penalties on the newly reported income, but would avoid the

higher offshore penalty.

At the same time, taxpayers attempting quiet

disclosures would file late FBARs, if they had not previously filed FBARs,

or amended FBARs, if they had, to disclose the offshore accounts that

they had not previously reported. Taxpayers might also try to circumvent

some of the taxes, interest, and penalties that would otherwise be owed

in offshore programs by reporting the existence of any offshore accounts

and any income from the accounts on their current year’s tax return,

without amending prior years’ returns. These taxpayers would also likely

disclose the existence of the accounts by filing FBARs for the current

calendar year. This filing would appear similar to the opening of a new

account. Such a taxpayer would avoid paying any delinquent taxes,

interest, or penalties, unless audited. As described earlier, taxpayers who

are caught disclosing offshore accounts outside of one of IRS’s offshore

programs risk steeper penalties and criminal prosecution, based on the

facts and circumstances of their cases.

Patel Law Offices has consulted with hundreds of clients regarding their offshore compliance issues, including Quiet Disclosures. Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.

About the Author

Parag P. Patel, Esq. brings over three decades of experience to individuals and businesses facing complex tax problems. Holding advanced degrees from Georgetown University Law Center (J.D.) and New York University School of Law (LL.M. in Tax Law), the nation’s top tax programs, Mr. Patel delivers sophisticated and creative strategies in complicated federal and state audits, penalty abatements, and foreign asset/income reporting. His practice emphasizes international tax matters, specifically foreign financial account reporting (FBAR), voluntary disclosures, and penalty defense.

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