Foreign Bank and Financial Accounts (FBAR) vs. Offshore Voluntary Initiative Program (OVDI)

Question: I have not been filing the Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) despite having a filing requirement. Should I file amended income tax returns reporting and paying the tax owed and file FBARs going forward instead of entering into the Offshore Voluntary Initiative Program (OVDI)?

Answer: The above technique is known as a quiet disclosure. Quiet disclosures are admonished by the IRS. The IRS has a FAQ section for its 2012 OVDI program. In FAQ Number 15 and 16, the IRS explicitly states that it will closely monitor these late filed amended returns to determine whether enforcement action is appropriate. The IRS goes on to state that it may, if criminal tax evasion is evident, refer the matter to the Department of Justice. In March 2013, the US Government Accountability Office (“GAO”), released a report, GAO-13-318, about offshore tax evasion. In the report, the GAO stated that quiet disclosures undermine the incentive to participate in OVDI. The IRS concurred with the GAO’s report and acknowledged that it will utilize methods to effectively detect and pursue taxpayers deciding to execute quiet disclosures.

 

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