Voluntary Disclosures of Foreign Financial Account and Related Matters After OVDI 2011 (9/20/11)

The IRS has posted contact information for persons desiring to make noisy voluntary disclosures. See Voluntary Disclosure Contacts in IRS Criminal Investigation, here. The notice states:

Tax professionals or individuals who want to make a voluntary disclosure not covered by the 2011 Offshore Voluntary Disclosure Initiative, may contact an IRS criminal investigator at the numbers below.

I speculate that

1. As in the two programs (OVDP 2009 and OVDI 2011) the IRS will discourage quiet disclosures of foreign financial institution accounts.  Will the IRS and DOJ Tax will pick off one or two or more where the quiet is not quite up to snuff and prosecute?  (I can't define the up to snuff standard; it is like pornography -- you will know it when you see it and good practitioners will prevent their clients from submitting not up to snuff quiet disclosures.)
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Quiet Disclosures Being Moved into OVDI 2011 Process? (6/16/11)

There is some buzz in the community that persons making quiet disclosures are being moved into the OVDI 2011 process. While the information I have received to date is only sporadic and anecdotal, I thought it would be helpful to review the statute of quiet disclosures for foreign financial account tax and FBAR noncompliance.

I assume that readers of this blog are very familiar with the two successive programs -- OVDP 2009 and OVDI 2011. Many taxpayers who wanted to get into compliance felt that the civil penalties offered under these programs were too harsh under their facts. As I and commenters discuss in Opting Out of the IRS 2009 OVDP and 2011 OVDI (6/14/11), taxpayers could get into the program, achieve its principal benefit of no prosecution, and opt out to try to present the equities of their situation as a basis for achieving lesser penalties than offered under the programs. The fear among practitioners and taxpayers is that the IRS will harshly treat the taxpayers opting out. Certainly, for administrative purposes, the IRS wants to create significant risks to opting out in order to encourage the critical mass of taxpayers to stay in the program where the processing costs per taxpayer are significantly less than will be obtained in processing the audits and post-audit processes (including appeals and litigation) of taxpayers opting out.
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To OVDI or Not to OVDI - That is the Question (Of Quiet Disclosures and Doing Nothing) (5/23/11)

We have had a lot of discussion in the threads of other topics discussing some of the rough edges in the OVDI 2011 initiative (and its predecessor OVDP 2009 initiative).  The alternatives to participating are (i) quiet disclosure for some number of years or (ii) do nothing.  In either event, the U.S. account owner and signatories will have to comply in the future (include the income and answer the FBAR question on the 1040s and file the FBARs).  The question is, with those alternatives, should a taxpayer OVDI or not?  While each specific case is dependent upon the unique facts involved, the question I would like readers to address in comments is the issues the taxpayer and the practitioner should address in making the decision whether to OVDI.  To start that discussion, I quote the following from Charles P. Rettig and Kathryn Keneally, The Last, Best Chance to Disclose Foreign Financial Accounts and Assets—The 2011 Offshore Voluntary Disclosure Program and Beyond!, Journal of Tax Practice and Procedure 33 (Feb.-March 2011):

There are many considerations before a taxpayer should determine whether to participate in the 2011 OVDI. Is the taxpayer a realistic candidate for a criminal prosecution referral by the IRS or prosecution by the Department of Justice? (If so, the determination to participate should be simple and quick). Can that prospect somehow be reduced or eliminated by filing amended or delinquent returns and FBARs in lieu of a direct participation in the OVDI? (and what would be the potentially applicable penalties upon a examination of such returns and FBARs?). Could the government carry the burden of demonstrating that the taxpayer “willfully” violated the FBAR filing requirements? Since the OVDI asserts an offshore penalty based on foreign financial accounts and asset valuations, would the actual offshore penalty determination somehow be less outside the OVDI if limited to financial accounts? Will the government pursue noncompliant taxpayers through the required judicial process following assessment of an FBAR penalty? n9 Might the FBAR related mitigation guidelines set forth in the Internal Revenue Manual (IRM) somehow benefit the taxpayer outside the framework of the 2011 OVDI? Do these mitigation guidelines have any continued viability? How will various of the FAQs under the 2011 OVDI be interpreted in specific taxpayer situations?

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A Botched Foreign Account Quiet Disclosure Draws Criminal Charges (5/19/11)

The U.S. Attorney for Masschusetts filed an information against Michael F. Schiavo. The information is here. The gravamen of the misdeed recounted in the information is that Mr. Schaivo attempted a quiet disclosure for his foreign account but that, in that attempted quiet disclosure, he was less than truthful and complete. But, the information seems to say more than that. Readers can analyze the complete information at their leisure. I shall just cut and paste some of the key paragraphs that I think are relevant to professionals and students interested in this subject.

2. At all times material to this Information, HSBC Bank Bermuda Limited ("HSBC Bank Bermuda") (formerly The Bank of Bermuda, Ltd.) was a Bermuda bank headquartered in Hamilton, Bermuda. Beginning in at least in or about 2003 and continuing to at least 2008, Schiavo maintained an account at HSBC Bank Bermuda in which the balance ranged from approximately $65,000 to $150,000.
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