This essay is concerned with a situation where the IRS audits your quiet disclosure of foreign assets and foreign income. The IRS audit can be an absolute nightmare in this case. Not only will the audit examine the accuracy of the disclosure, but the IRS may actually raise the issue of willful and non-willful FBAR penalties as well as the potential income tax fraud penalty.
So, is everything lost if the IRS audits your quiet disclosure? The answer is “no”. While the situation may undoubtedly be dire, it is not hopeless if the case is handled properly. While it is not possible to discuss in this article the whole spectrum of strategies available to taxpayers in such a situation, this article attempts to line out the three most important steps that you should do if the IRS audits your quiet disclosure.
1. If the IRS Audits Your Quiet Disclosure, You Should Not Panic
An IRS audit is always a stressful event. The stress increases exponentially if the audit involves a quiet disclosure of foreign assets and foreign income.
While your situation may be difficult, you should try to resist the panic. Panic is an emotional condition where a person starts acting irrationally and may follow a course of action that may worsen the already difficult situation.
2. If the IRS Audits Your Quiet Disclosure, Do Not Try to Handle the Audit by Yourself
Do NOT attempt to solve the IRS audit of your quiet disclosure by yourself, even if you believe that you were non-willful in your original noncompliance. This is extremely dangerous and may result in imposition of non-willful or even willful penalties. US international tax law is so complex that you may easily get yourself in trouble even if you believe that you are doing well.
There is a myth that the IRS is somehow gracious when a taxpayer represents himself and will be willing to reduce the penalties – this is completely false, especially in a situation involving a quiet disclosure. The IRS agents follow procedures and they will follow them ruthlessly until they run into a legal defense built by a lawyer. Without such a defense, there is nothing to stop the IRS from imposing penalties to the extent an agent believes is justified by the facts of the case.
3. If the IRS Audits Your Quiet Disclosure, You Should Immediately Find and Retain an International Tax Lawyer
Get yourself an international tax lawyer to help you with an IRS audit of your quiet disclosure. This can be a highly complex situation and you should have a professional by your side to guide you throughout the process. This is the best way to assure that your case will be handled properly.
In this case, a professional must be an international tax lawyer, not an accountant. I am always suspicious of cases where accountants start to go beyond their professional capacity and take on the legal defense of their clients’ cases. While it may be tolerable in simple domestic cases (though still not recommended), it may result in a horrific outcome where the IRS audits a quiet disclosure.
Sherayzen Law Office Can Be Your International Tax Lawyer if the IRS Audits Your Quiet Disclosure
If the IRS audits your quiet disclosure, you should consider retaining Sherayzen Law Office, Ltd. as your international tax lawyer to represent you during the IRS audit. Sherayzen Law Office is an international tax firm which focuses on helping its clients with their voluntary disclosures and the audits of these voluntary disclosures. The firm is not only a leader in the field, but it has also extensive experience in combating and reducing the IRS penalties associated with prior tax noncompliance.