Bank Leumi is urging its U.S. clients to disclose information about their accounts to U.S.…
Watch Out for Letters From Your Foreign Bank Requesting Information On Your U.S. Residency
Numerous foreign banks are sending letters to their customers demanding personal information to ascertain whether the customer is a U.S. citizen or a U.S. resident. The foreign banks typically state they are required to obtain such personal information pursuant to the U.S. Foreign Account Tax Compliance Act (“FATCA”)
FATCA requires that foreign banks submit information to the United States government on all U.S. customers. Banks that do not cooperate are penalized with a 30 percent withholding tax. FATCA applies to nearly every foreign bank and nearly all foreign banks have already registered the United States government to share their U.S. customer. Some examples of foreign banks’ FATCA compliance include: Scotia Bank, Deutsche Bank, Bank of China, and thousands of other banks abroad.
The bank letters generally inform the customer that the account information may be disclosed to the IRS as necessary under FATCA and advising the customer to discuss their situation with a U.S. tax professional to ensure they are compliant with U.S. reporting obligations related to the foreign account.
All account holders should beware these new bank letters. The letters are a warning that U.S. persons are required to report all their foreign income and foreign bank accounts and assets (via the FBAR form). This letter may be your only warning before an IRS investigation takes place. Once the U.S government starts an investigation, the U.S. taxpayer will blocked from existing compliance programs and may have to pay a large penalty or face criminal prosecution.
We often recommend that U.S. taxpayers with undisclosed overseas accounts enter into the IRS’s new Streamlined Program (SDOP or SFOP) or Offshore Voluntary Disclosure program (OVDP). If a person has an undeclared overseas account at a foreign bank and has received a letter from their foreign bank they should retain a qualified tax attorney and come into tax compliance immediately.
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