Regarding so-called quiet disclosures -- when taxpayers file amended returns and delinquent foreign bank account reports without coming in through the offshore voluntary disclosure program or the streamlined program -- Best [senior adviser to the deputy commissioner (international), IRS Large Business and International Division] said, "The IRS recognizes that a quiet filing is a choice that the taxpayer has."
But Best added, "We would prefer that taxpayers come in through one of our programs so that we have tracking mechanisms, information gathering mechanisms set up, but ultimately it's up to the taxpayer."In the past, when I have heard IRS representatives pronounce on quiet disclosures they have been more discouraging than Ms. Best. I and other practitioners, however, have viewed quiet disclosures as a real option. Of course, the taxpayer will be required on the FBAR to explain the delinquency and should, if possible state the case for the IRS not to audit or assert an onerous penalty. Still, it is good to hear an IRS representative reported to have present quiet disclosures as an option without, apparently, saying stronger words of discouragement.
Quiet disclosures are not for willful actors. OVDI/P is for willful actors. But, for nonwillful actors, particularly those with facts and circumstances toward the nonwillful end of the spectrum can generally (at least conceptually) get better results by OVDI/P with opt out, by Streamlined and by quiet disclosure with audit (should always assume an audit in testing whether quiet disclosure is a viable option). In all three of those cases, the income tax is the tax plus interest with no accuracy related penalty for only open years and the FBAR penalty will be the nonwillful penalty for the open years. The key drill down, of course, is given the range of possible nonwillful FBAR penalties, a taxpayer may prefer the Streamlined with some certainty as to the offshore penalty (a surrogate for the FBAR penalty because the other potential penalties probably would not apply).