you should assume that the IRS will eventually be informed of your foreign account, and…
How Will the IRS Find Out By Your Foreign Account? Let’s Count the Dozens of Ways
1. FATCA (Foreign Account Tax Compliance Act of 2009) requires disclosure of your account information.
A. July 1, 2014 FATCA withholding began.
B. FATCA requires a 30 percent withholding tax on any “withholdable payment” made either to an FFI (foreign financial institution, e.g. an offshore bank) or certain other entities if it fails to comply with new reporting, disclosure, and related requirements.
C. FATCA reporting of specific account information is effective for accounts open as of January 1, 2014, and the reports are due March 15, 2015.
D. FFIs are required to:
a. Obtain information from each account holder as is necessary to determine which accounts are “U.S. accounts”
b. Comply with verification and due diligence procedures with respect to the identification of U.S. accounts
E. Report annually certain information related to any U.S. account maintained by such institution
F. Deduct and withhold 30 percent on certain pass thru payments made to the benefit of an account holder that refuses to provide the required information (a “recalcitrant account holder”)
G. Attempt to obtain a waiver in any case in which any foreign law would (but for a waiver) prevent reporting of information under the provision related to any U.S. account maintained by such institution and, if a waiver is not obtained, to close the account.
H. File a 1099 with the IRS, or provide detailed information about the foreign account, e.g. Name and address, Account Balance, Gross Receipts and Gross withdrawals.
2. IRS Investigations of numerous banks, including Credit Suisse, Julius Baer, HSBC, Basler Kantonalbank, Bank Leumi, Bank Hapoalim, and numerous others. The banks were required to disclose of your account information.
3. Swiss Bank Program where Swiss Banks seek non-prosecution agreements and were required to disclose of your account information. The Swiss Bank Program provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise US DOJ by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared United States-related accounts.
A. 106 Swiss Banks signed up
B. Information regarding the accounts held by the bank that existed as of Aug. 1, 2008 must be turned over to the IRS as part of the non-prosecution agreements (NPA)
C. June 30, 2015 is the deadline for Swiss banks to submit data to US DOJ
D. Make a complete disclosure of their cross-border activities;
E. Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
F. Cooperate in treaty requests for account information;
G. Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
H. Provide assistance to any state law enforcement agencies to authenticate documents to be used in state civil or criminal tax proceedings against individuals
I. Close all recalcitrant (noncompliant) accounts;
J. Demonstrate controls to prevent employees from assisting recalcitrant accountholders in further acts of concealment;
K. Use best efforts within term of the NPA to close dormant accounts; and
L. Retain all records for 10 years from the termination date of the NPA.
4. Whistle Blowers disclose of your account information in exchange for payment or non-prosecution.
A. Disgruntled Bank Employees
B. Bank Employees Under Indictment
C. Advisors and/or facilitators
F. Ex-business partners
5. IRS Activity
A. John Doe Summons, e.g., HSBC Summons for account information
B. Information submitted by more than 50,000 taxpayers participating in OVDP/OVDI as of January 2015, possibly including your banker, advisor or facilitator (who in turn is investigated and interviewed for information)
C. Sometime in 2012 Credit Suisse turned over client information to IRS pursuant to a treaty request
D. Guilty Plea by Wegelin Bank
E. Swiss Bank Clariden Leu turned over client information to IRS in late 2011
F. Ongoing negotiations with the Swiss government and Fourteen Swiss Banks who are under investigation by IRS and Department of Justice
G. 110 clients turned over to IRS by Swisspartners
If you have risk of discovery of tax non-compliance, you must seek the advice of a tax legal professional. Failure to do so can result in significant civil penalties or a referral for criminal tax prosecution. Patel Law Offices can explain your legal situation and present potential solutions.