by Patrick J. McCormick

When clients admit to a retroactive failure to meet filing requirements involving their offshore assets, the overarching question is typically the proper route for making a disclosure to the U.S. IRS. For a multitude of reasons, ‘‘quiet’’ disclosures (through which a client makes an informal disclosure to the IRS of past failures to report without participating in an IRS-authorized program) and prospective-only reporting (where, as the name implies, the client only reports the assets in the future and does not address the past failure) are problematic, often putting clients in extremely hazardous positions.

Advisers usually recommend a disclosure be made under one of two programs offered by the IRS: the offshore voluntary disclosure program or the streamlined program (for which two versions — one applicable to U.S. residents and a second for foreign residents — are available). Other narrower programs are also offered, but are only applicable in limited circumstances (such as the delinquent foreign bank account report submission procedures, used when clients previously failed to file required FBARs but did not fail to report income on their tax returns — most often used for clients maintaining only signature authority over foreign financial accounts).

Juxtaposing the two programs, the OVDP and the streamlined program contain markedly different terms and requirements. You can read the full details here: OVDP or Streamlined: Choosing an Offshore Disclosure Program.

About the author: Patrick J. McCormick is an associate with Kulzer & DiPadova PA in Haddonfield, New Jersey. 

This article was originally published by Tax Analysts in the July 11, 2016 edition of Tax Notes International.