What Is a Quiet Disclosure?
An FBAR quiet disclosure occurs when a taxpayer, having previously failed to report foreign accounts or income, attempts to correct the omissions by filing amended tax returns and/or delinquent FBARs (FinCEN Form 114) without participating in a formal IRS disclosure program.
Unlike the now-closed Offshore Voluntary Disclosure Program (OVDP) or the current Streamlined Filing Compliance Procedures, a quiet disclosure of FBARs offers no penalty protection or criminal amnesty. In fact, the IRS has repeatedly warned that such filings may be treated as evidence of willfulness and concealment rather than good-faith compliance.
Why Some Taxpayers Use Quiet Disclosures
Despite repeated warnings from the IRS, some taxpayers and advisors continue to pursue FBAR quiet disclosures. Why?
1. Desire to Avoid the Willful FBAR Penalty
Under 31 U.S.C. § 5321(a)(5)(C), a willful failure to file an FBAR can result in a FBAR penalty equal to the greater of $100,000 or 50% of the account balance per violation, per year. The fear of this quiet disclosure penalty often drives taxpayers to risky shortcuts.
2. Avoidance of the 75% Civil Fraud Penalty
Taxpayers who amend returns to report previously omitted offshore income may face the 75% civil fraud penalty under IRC § 6663…
3. Avoiding the Cost and Burden of Formal Disclosure
Formal voluntary disclosures are time-consuming, costly, and require detailed documentation. FBAR Quiet disclosures might look like an “easier” path, but the risks are much greater.
4. False Belief That Amending Returns Is Enough
Some mistakenly believe that simply amending returns or filing late FBARs will resolve the issue. In reality, this can make matters worse.
Why Quiet Disclosures Are Dangerous
1. Civil Penalties Are Severe
If the IRS determines the taxpayer acted willfully, they may impose penalties under 31 U.S.C. § 5321(a)(5) up to 50% of the highest account balance per year…
2. Risk of Criminal Prosecution
A quiet disclosure IRS case may be treated as an aggravating factor, putting taxpayers at risk of criminal investigation.
IRS Actively Monitors for Quiet Disclosures
The IRS uses advanced analytics and global reporting systems under FATCA compliance to identify late FBARs, amended returns, and patterns that point to a quiet disclosure FATCA violation.
In 2014, Commissioner John Koskinen warned, “The IRS is actively reviewing amended returns and delinquent FBARs submitted outside of voluntary disclosure programs…”
This means even if someone thinks their quiet disclosure is unnoticed, IRS systems are built to detect them.
The Safer Path: Formal Voluntary Disclosure
Although the Offshore Voluntary Disclosure Program closed in 2018, taxpayers with potential willful violations can still use the Voluntary Disclosure Practice (VDP). Unlike an IRS quiet voluntary disclosure, VDP provides structured pathways and significantly reduces the chance of overwhelming penalties or prosecution.
Conclusion
An FBAR quiet disclosure is essentially a high-stakes gamble. It exposes taxpayers to harsh penalties, IRS scrutiny, and even criminal risk.
The IRS actively reviews offshore filings, and the penalties for getting it wrong are severe. If you are considering disclosure of foreign accounts, seek confidential guidance from an attorney who is also a CPA.
Schedule a confidential consultation with Verni Tax Law today and take the safer path forward.
Remember: Silence and secrecy do not equal compliance—they equal risk.
