4 Costly Myths Taxpayers Have About the IRS’s Offshore Voluntary Disclosure Program (OVDP)

People who have undisclosed income in offshore accounts can — and frankly, should — take advantage of the IRS’s Offshore Voluntary Disclosure Program (OVDP).

As the term suggests, the program allows taxpayers to voluntarily disclose all foreign accounts and fully clear their tax liability (including taxes owed, interest and penalties), instead of risk getting flagged in the future and paying much steeper price. While the IRS treats each case individually, penalties for failing to report offshore accounts start at 50 percent of the balance. Furthermore, if there is suspected fraud or tax evasion, criminal prosecutions can commence.  

Although the OVDP has been around since 2009, there remains a significant amount of misinformation and misunderstanding regarding how it works — and just as importantly, how it doesn’t work. Here are four costly OVDP myths that persist:

Myth #1: Taxpayers are better off informing the IRS of undisclosed offshore accounts by amending their tax returns vs. using the OVDP.

Fact: Taxpayers who provide any disclosure of unreported foreign assets must be prepared to provide supporting information, such as bank statements. As such, reporting outside the OVDP is a categorical mistake that will not “fly under the radar screen.” The IRS can and will use the new information to develop a case against a taxpayer, which may (and likely will) lead to severe civil penalties and/or criminal prosecution.

Myth #2: Once a taxpayer enters into the OVDP, it is not possible to dispute the findings levied by the IRS after their investigation.

Fact: While remaining in the OVDP, taxpayers may contest and challenge the IRS’s findings. Agents can make mistakes, and some financial statements and other data may be open to interpretation.

Myth #3: Taxpayers who enter the OVDP expose themselves to having all of their tax returns open to examination.

Fact: The normal statute of limitations to examine a tax return is three years. However, it can be extended to six years in cases where there has been a substantial omission of income. And in cases where the IRS can show fraud, there is no statute of limitations.

Myth #4: Taxpayers who enter the OVDP must be prepared pay a penalty of 50 percent of the value of their undisclosed foreign assets.

Fact: The minimum penalty taxpayers are exposed to outside the OVDP is 50 percent of the balance (or value) of their undisclosed foreign assets. However, within the OVDP the maximum is 27.5 percent. This means taxpayers who wisely take advantage of the OVDP — while it is still being offered — will keep at least 72.5 percent of their foreign assets.

Moving Ahead

Buoyed by the Panama Papers and other high-profile investigations and revelations, the IRS is aggressively cracking down on taxpayers with undisclosed foreign assets. If this scenario applies to you — regardless of your motives for failing to disclose — the smartest and best thing you can do is consult with an attorney. Contact the Tax Law Offices of Jeffrey B. Kahn today to learn more about the OVDP and how it may benefit you. We can help you contact the IRS and proactively provide disclosure rather than risk having the IRS contact you.

For more information about how to deal with the IRS if you have offshore bank accounts, download our FREE eBook today:

Sovereign Management In Panama Now Under DOJ/IRS Investigation.

Important announcement to U.S. taxpayers that opened offshore bank accounts through a company called Sovereign Management & Legal, Ltd. Based in Panama, the company offers to help Americans open offshore bank accounts with nominee corporations. Knowing that many people who do take these actions are also committing tax evasion, the IRS and Justice Department obtained a John Doe summons from a federal judge. The IRS hopes to find Americans who used Sovereign to open accounts.

Federal Court Approves U.S. Government Issuance Of John Doe Summonses

A Federal Judge recently approved the Internal Revenue Service’s issuance of what is known as a “John Doe” summons to several entities in the U.S who utilized the services of Sovereign Management & Legal Ltd. (“Sovereign”). These entities include FedEx, DHL, UPS, Western Union, the Federal Reserve Bank of New York, Clearing House Payments Company LLC and HSBC USA. According to Sovereign’s website and the government’s Petition filed with the U.S. District Court for the Southern District of New York, Sovereign provides Offshore Banking, Corporation and Trust services. The U.S. government alleges that U.S. taxpayers used those services to conceal ownership of assets held offshore to evade U.S. taxation.

A “John Doe” summons may be issued when the government is unsure of the exact identity of the person(s) for whom they are seeking the information. These summonses seek information that the government cannot procure through the Foreign Account Tax Compliance Act (“FATCA”) and serves as the latest effort in the IRS’s recent push to achieve global tax compliance from its citizens. FATCA, enacted by Congress in March of 2010, requires foreign financial institutions to report certain information about U.S. taxpayer held foreign financial accounts or foreign entities in which U.S. taxpayers hold a substantial ownership interest.

In the context of offshore financial holdings, the government has recently issued John Doe summonses to a number of financial institutions requesting account information for U.S. taxpayers with ownership or signature authority over foreign accounts without knowing the names of the specific taxpayers whose information it is seeking. For a John Doe summons to be approved, the government is required to make a showing in court that (1) the summons relates to a particular person or ascertainable group, (2) there is a reasonable basis for believing that such person or group may have failed to comply with any provision of the internal revenue law, and (3) the information sought is not readily available from other sources.

The Federal District Court found that the government met its burden with respect to these requests. For example regarding the courier companies named in the Summons, the government believes that the John Doe summonses will assist them in identifying U.S. clients of Sovereign through records of shipping services between Sovereign and taxpayers in the U.S.

HSBC USA is among the entities named in the government’s Petition because of its correspondent bank accounts held at the bank by HSBC Hong Kong and HSBC Panama. The correspondent account provides banking services to the foreign bank that does not have a U.S. branch so that the foreign bank may reach U.S. customers. The government alleges that HSBC USA’s records relating to the correspondent accounts will assist the government in determining the identity of Sovereign’s clients who held accounts with HSBC Hong Kong and HSBC Panama through wire transfer information and cancelled checks retained by HSBC USA.

The government’s Petition further requests authority to issue summonses to gather wire and electronic fund transfer information from the New York Federal Reserve, Western Union and Clearing House Payments Company. According to the Petition, the New York Federal Reserve Bank maintains the primary electronic funds transfer system for domestic U.S. fund transfers, Western Union also facilitates transfers of funds, and the Clearing House Payments Company operates the main electronic funds transfer system for processing international U.S. dollar funds transfers made between international banks. All of these sources are believed to contain information relevant to discovering the identities of U.S. taxpayers hiding assets offshore through services allegedly provided by Sovereign.

The John Doe summons has already proved to be a powerful tool to help the IRS gather information, including names and account information of U.S. taxpayers with foreign accounts or other foreign financial interests. The IRS has used the John Doe summonses to target individuals with foreign accounts who are hoping to “wait out” the IRS and thus avoid making a voluntary disclosure as well as those intending to avoid future reporting requirements. Once a taxpayer is on the IRS’s radar, IRS Criminal Investigation will no longer clear them to come into compliance under the protections of a voluntary disclosure program.

Services Offered By Sovereign Management That Could Facilitate Tax Evasion By U.S. Taxpayers.

Curious about the services offered by Sovereign, I visited their website.

One of the services offered by Sovereign is an “anonymous offshore ATM / debit card”. Long associated with tax evasion, offshore debit cards are a popular way for people with hidden assets to repatriate their money into the United States. Transferring money into your U.S. account would leave a paper trial but an anonymous debit card allows one to spend money in the United States and make ATM withdrawals with very little paper trail.

Sovereign advertises that their cards have neither a name imprinted on them nor encoded in their magnetic strips.

Of course, to open a foreign bank account most foreign banks want to see a passport. Sovereign has that covered too. For a fee, Sovereign offers “aged” offshore shelf corporations that already have bank accounts. Why present a passport when you can buy a company “off the shelf” that already has an offshore account?

Still need more anonymity? Sovereign offers “nominee director service”.

Worried that you might lose control of your funds or your offshore shelf company? Sovereign has an answer for that too. Their nominee directors come with undated resignation letters.

Sovereign advertises that for a mere $3,500 you can own a ready made Nevis corporation owned by a Panamanian foundation, complete with bank account. An aged company or one with nominee directors is extra, of course.

While none of these things alone are illegal, the IRS considers them to affirmative acts of tax evasion. Unless you have some valid business purpose, having a nominee entity will at a minimum get you audited and if you get caught with an unreported foreign account, you could land in jail.

Is There A Risk Of Getting Caught?

Absolutely! In the case of Sovereign, because they are located in Panama, their customer lists are beyond the reach of the Justice Department. The courier companies however can be subpoenaed and they carry checks and incorporation papers back and forth to Sovereign. Likewise the major credit card companies and ATM networks can be subpoenaed for the financial transactions flowing through their institutions. If you have not reported your foreign income and you have not disclosed your foreign bank accounts, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Program (OVDP) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS. Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.  Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in San Francisco, Los Angeles, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

U.S. Cracks Israeli Bank Leumi – Bank Admits to Assisting U.S. Taxpayers in Hiding Assets in Offshore Bank Accounts

Americans with Israeli bank or other financial accounts could face a tough tax season in 2015 if they do not come forward and disclose their assets to the IRS.  Israeli banks have come under increased scrutiny by the IRS in regards to disclosing the accounts of their American clients.  In particular, three Israeli banks- Bank Hapoalim, Bank Leumi and Mizrahi Tefahot- have been under investigation by the Department of Justice.

The first Israeli bank to now bow to the United States is Bank Leumi. A deferred prosecution agreement between the Bank Leumi Group and the U.S. Department of Justice was filed today in the Central District of California that defers prosecution on a criminal information charging the bank with conspiracy to aid and assist in the preparation and presentation of false tax returns and other documents to the Internal Revenue Service.  This is the same type of agreement that the United States has with Swiss Bank giant UBS AG.

This unprecedented agreement marks the first time an Israeli bank has admitted to such criminal conduct which spanned over a 10 year period and included an array of services and products designed to keep U.S. taxpayer accounts concealed at Bank Leumi Group’s locations in Israel, Switzerland, Luxembourg and the United States.

Bank Leumi Group will pay the United States a total of $270 million. Of this total payment, $157 million represents a penalty for U.S. taxpayer accounts held at Leumi Private Bank in Switzerland.  This $157 million penalty is consistent with the department’s Swiss Bank Program, which permits certain Swiss Banks to avoid prosecution by making a full and complete disclosure of their U.S. taxpayer-held accounts and paying substantial penalties.  The agreement further provides that Bank Leumi Luxembourg and Leumi Private Bank will cease to provide banking and investment services for all accounts held or beneficially owned by U.S. taxpayers.

As part of its agreement with the department, the Bank Leumi Group provided the names of more than 1,500 of its U.S. account holders.  Additionally, the Bank Leumi Group will continue to disclose information to the government regarding its cross-border business and provide testimony and information regarding other investigations.

To avoid prosecution, many other Israeli banks will begin turning over information as early as July 2014.
The prompt release of U.S. accountholder information by Israeli banks is a result of the IRS’s efforts to fully implement the 2010 Foreign Account Tax Compliance Act (“FATCA”) which requires foreign banks and financial institutions to report the assets of their American account holders.  Lack of compliance, banks were warned, would limit their ability to do business in America.  FATCA was passed as part of the U.S. government’s effort to crack down on U.S. tax evaders.  Initially, the IRS concentrated its efforts on Swiss Banks.

This focus has led to an increase in the enforcement of the requirement that Americans and American residents file a Foreign Bank Account Report on every account held abroad that is worth more than $10,000.

Increased enforcement has impacted a wide circle of Americans, mainly Jewish, with ties to Israel. It includes not only those who have immigrated to Israel, or made aliyah, as adults, but also children of American citizens who are citizens themselves but may have never even visited the United States. The law is also relevant to any American who has opened an account in Israel in the past for use during visits to Israel or to help manage rental income in Israel.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.  U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year.  Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

U.S. taxpayers with account holdings should seriously consider coming forward and disclosing their assets to the IRS.  If you have never reported your foreign investments on your U.S. Tax Returns, the IRS has established the Offshore Voluntary Disclosure Program (“OVDP”) which allows taxpayers to come forward to avoid criminal prosecution and not have to bear the full amount of penalties normally imposed by IRS.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s Offshore Voluntary Disclosure Program (“OVDP”).  Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law.  Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

2015: A New Year And A New Era – Number Of FATCA Compliant Countries Continues To Increase

Under the Foreign Account Tax Compliance Act (“FATCA”), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000. Institutions that fail to comply could effectively be frozen out of U.S. markets. As of this blog posting, the U.S. has entered into Intergovernmental Agreements (“IGA’s”) with 48 countries for the implementation of FATCA.

The 48 countries with IGA’s already in place are:

Australia Czech Republic Isle of Man Mexico
Austria Denmark Israel Netherlands
Bahamas Estonia Italy New Zealand
Barbados Finland Jamaica Norway
Belgium France Japan Poland
Bermuda Germany Jersey South Africa
Brazil Gibraltar Latvia Spain
British Virgin Islands Guernsey Liechtenstein Slovenia
Canada Hungary Lithuania Sweden
Cayman Islands Honduras Luxembourg Switzerland
Chile Hong Kong Malta Turks and Caicos Islands
Costa Rica Ireland Mauritius United Kingdom

Countries that have reached IGA’s in substance and have consented to being included on this list are:

Algeria Dominica Macao San Marino
Angola Dominican Republic Malaysia Saudi Arabia
Anguilla Georgia Montenegro Serbia
Antigua & Barbuda Greece Montserrat Seychelles
Armenia Greenland Moldova Singapore
Azerbaijan Grenada Nicaragua Slovak Republic
Bahrain Guyana Panama South Korea
Belarus Haiti Paraguay Taiwan
Bulgaria Holy See Peru Thailand
Cabo Verde Iceland Philippines Trinidad & Tobago
Cambodia India Portugal Tunisia
China Indonesia Qatar Turkey
Colombia Iraq Romania Turkmenistan
Croatia Kazakhastan St. Kitts and Nevis Ukraine
Curaçao Kosovo St. Lucia United Arab Emirates
Cyprus Kuwait St. Vincent and the Grenadines Uzbekistan

Click here for progress and developments IRS has made in gathering information from foreign banks and foreign governments.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

Time is running out. The IRS is giving taxpayers one last chance to come forward and voluntarily disclose foreign accounts and unreported foreign income before the IRS starts investigating non-compliant taxpayers.

Don’t let another deadline slip by. If you have never reported your foreign investments on your U.S. Tax Returns or even if you have already quietly disclosed or in 2012 OVDI, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (“OVDP”). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

It’s A Small World After All – Number Of FATCA Compliant Countries Continues To Grow To Meet July 1, 2014 Deadline

Under the Foreign Account Tax Compliance Act (“FATCA”), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000. Institutions that fail to comply could effectively be frozen out of U.S. markets. As of this blog posting, the U.S. has entered into Intergovernmental Agreements (“IGA’s”) with 38 countries for the implementation of FATCA.

The 38 countries with IGA’s already in place are:

Australia Denmark Isle of Man Mexico
Austria Estonia Italy Netherlands
Belgium Finland Jamaica New Zealand
Bermuda France Japan Norway
British Virgin Islands Germany Jersey South Africa
Canada Gibraltar Latvia Spain
Cayman Islands Guernsey Liechtenstein Slovenia
Chile Hungary Luxembourg Switzerland
Costa Rica Honduras Malta United Kingdom
Ireland Mauritius

Countries that have reached IGA’s in substance and have consented to being included on this list are:

Algeria Czech Republic Malaysia Serbia
Antigua Cyprus Montenegro Seychelles
Armenia Dominica Moldova Singapore
Azerbaijan Dominican Republic Nicaragua Slovak Republic
Bahamas Georgia Panama South Korea
Bahrain Greenland Paraguay Sweden
Barbados Grenada Peru Taiwan
Barbuda Guyana Poland Thailand
Belarus Haiti Portugal Turkey
Brazil Hong Kong Qatar Turkmenistan
Bulgaria India Romania Turks and Caicos Islands
Cabo Verde Indonesia St. Kitts and Nevis Ukraine
China Iraq St. Lucia United Arab Emirates
Colombia Kosovo St. Vincent and the Grenadines
Croatia Kuwait San Marino
Curaçao Lithuania Saudi Arabia

Click here for progress and developments IRS has made in gathering information from foreign banks and foreign governments.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

Time is running out. The IRS is giving taxpayers one last chance to come forward and voluntarily disclose foreign accounts and unreported foreign income before the IRS starts investigating non-compliant taxpayers.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2014 Offshore Voluntary Disclosure Program (OVDP). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California qualify you for OVDP.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

U.S. Hammers Credit Suisse – Bank Pleads Guilty in Criminal Tax Case

Credit Suisse Agrees to Pay $2.6 Billion to Settle Probe by U.S. Justice Department

Credit Suisse Group AG became the first financial institution in more than a decade to plead guilty to a crime on May 19, 2014 when the Swiss bank admitted it conspired to aid tax evasion and agreed to pay $2.6 billion to settle a long-running probe by the U.S. Justice Department.

Attorney General Eric Holder, in announcing the charges, said the bank engaged in an “extensive and wide-ranging” scheme to help U.S. taxpayers hide assets.

The criminal charge filed Monday in federal court outlined a decades-long, concerted attempt by Credit Suisse to “knowingly and willfully” help thousands of U.S. clients open accounts and conceal their “assets and income from the IRS.” Mr. Holder said the bank destroyed account records sent to the U.S. for client review, concealed transactions and “failed to take even the most basic steps to ensure compliance with tax laws.”

Even after a U.S. crackdown on Swiss accounts in 2008 led Credit Suisse and rival UBS AG to tighten restrictions on the kinds of services they would provide to American customers, they continued to take steps that hindered investigators, the filing said. Credit Suisse didn’t conduct a thorough inventory of the accounts its managers oversaw, and some managers helped clients move their assets to other offshore banks so they would remain hidden to the U.S., according to the filing.

When it became clear in 2010 that the Justice Department was investigating the bank’s conduct, Mr. Holder said Credit Suisse “failed to retain key documents, allowed evidence to be lost or destroyed, and conducted an inadequate internal inquiry.”

“This conspiracy spanned decades,” Mr. Holder said. “Credit Suisse not only knew about this illegal, cross-border banking activity; they willfully aided and abetted it. Hundreds of Credit Suisse employees, including at the manager level, conspired to help tax cheats dodge U.S. taxes.”

Prosecutors have also charged eight former Credit Suisse employees with helping aid tax evasion.

The financial terms of the settlement include a $100 million payment to the Federal Reserve, more than $715 million to the New York Department of Financial Services, and about $1.8 billion to the Justice Department. Credit Suisse already has set aside more than $800 million, or about a third of the total settlement, to deal with the issue.

In addition Credit Suisse is handing over information that Deputy Attorney General James Cole said would lead to the IRS identifying specific non-compliant U.S. account holders.

The settlement marks the Justice Department’s biggest victory in its crackdown on tax evasion since UBS agreed to pay $780 million as part of a deferred-prosecution agreement in 2009. As part of that deal, UBS acknowledged aiding U.S. tax evasion but didn’t plead guilty.

Still, Credit Suisse’s relationships with its clients and partners may take a hit. Many pension and mutual funds have guidelines that prevent them from dealing with institutions that have pleaded guilty to criminal charges.

With big wins by the U.S. against UBS and Credit Suisse, the momentum to break Swiss Bank Secrecy Laws that historically fostered tax evasion grows stronger. Roughly a dozen Swiss banks are still subjects of criminal investigations by U.S. authorities and all of Switzerland’s 106 banks are taking part in a self-reporting program run by the U.S. Justice Department.

In response to a government crackdown on Americans hiding money overseas, more than 43,000 taxpayers joined a voluntary Internal Revenue Service disclosure program to acknowledge previously unknown accounts. The IRS estimates that Credit Suisse had more than 22,000 U.S. customers with Swiss accounts Although it is not clear how many of those were hidden from the IRS, a Congressional panel has concluded that Credit Suisse actively recruited Americans to open secret Swiss accounts.

Don’t think that only Swiss banks are being targeted. Federal prosecutors also are negotiating a multibillion-dollar settlement with French bank BNP Paribas to end an investigation into alleged evasion of sanctions.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

What Should You Do When Your Swiss Bank Sent You A Letter That Your Foreign Account Is To Be Disclosed To the IRS?

Since the last quarter of 2013, an increasing number of U.S. taxpayers with accounts in Swiss banks have received letters from Swiss Banks regarding participation in the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). The Program was established by the Department Of Justice (“DOJ”) and along with the provisions of the Foreign Account Tax Compliance Act (“FATCA”) has been ratified by the Swiss Parliament thus conferring a legal obligation on all 106 Swiss Banks to comply. If you have a Swiss bank account and received one of these letters, pay close attention to this blog.

Letters from Swiss Banks: What They Usually Say

In these letters from Swiss Banks, the taxpayers are typically advised (sometimes with the somewhat offensive phrase “as you almost certainly know”) of the fact that their Bank will participate in the Program and disclose the taxpayer’s accounts in Switzerland. Then, the letters typically discuss three issues.

First, the letters from Swiss Banks ask the taxpayer to confirm whether he has already properly disclosed their Swiss bank accounts to the IRS. Some banks, like Banque Cantonale Vaudoise (“BCV”) even go as far as asking the taxpayers to confirm that other international tax compliance forms, such as Forms 5471, 3520 and, surprisingly, PFIC From 8621, have also been filed with the IRS. Other banks just ask for some sort of documentation that everything has been properly declared to the IRS.

Second, the letters from Swiss Banks ask the taxpayers are asked to verify if his Swiss bank accounts were disclosed as part of the official IRS Offshore Voluntary Disclosure Program (“OVDP”).

Third, the letters from Swiss Banks inform the taxpayers with undisclosed Swiss Bank accounts about the existence of the OVDP and encouraging you to enter into the OVDP, obtaining more information about the OVDP from the Bank, and, finally, offering to provide the necessary bank statements for the taxpayer to enter the OVDP. Some banks (for example, Nue Privat Bank) will even later offer to supply the tax information (though, these reports should be approached with a great deal of skepticism because these statements could contain a number of mistakes, such as failure to recognize the application of PFIC rules). Most letters from Swiss Banks also provide space for the taxpayers to express their consent to the disclosure of their undisclosed Swiss bank and financial accounts to the IRS.

Consequences for U.S. Taxpayers Who Received Letters from Swiss Banks

It is difficult to overstate the great impact that these letters from Swiss Banks may have on the taxpayer’s position. I want to concentrate on two most important effects of the letters from Swiss Banks. First and foremost, they provide notice to the taxpayer about the requirement to disclose their Swiss bank and financial accounts (and, in case of BCV and some other banks, other foreign assets such as business ownership) to the United States. Even if a taxpayer simply did not know about the FBAR requirement in the past, his behavior as a result of receiving these letters from Swiss Banks will now be subject to scrutiny – failure to act on these letters for a long time and willful disregard of them may change the taxpayer’s position from non-willful to willful, subjecting him to draconian FBAR willful penalties, including opening the possibility of criminal penalties to be applied.

Second, upon fulfilling the Notice requirement with these letters, the Swiss banks are free to disclose certain information to the IRS under the US-Swiss FATCA treaty. Once the IRS receives such information from the Swiss Banks, the exposed U.S. taxpayers most likely will not be able to participate in the OVDP.

Hence, once the taxpayers receive these letters, time becomes a crucial factor, because, if the decision to enter the OVDP is made by these taxpayers, it should be implemented as soon as possible.

What Should You Do Upon Receipt of Letters from Swiss Banks?

Your initial response to the letters from Swiss Banks may determine the entire course of your case.

1. Consult an OVDI/FBAR Tax Attorney

The first and most crucial step is not to panic and contact an OVDI/FBAR tax attorney who specializes in the voluntary disclosure of the foreign bank and financial accounts as well as other assets.

I want to emphasize that you need to contact an experienced OVDI/FBAR tax attorney, not an accountant. Offshore voluntary disclosure is a legal issue and its venue should be determined by an attorney, not an accountant. I have seen too many cases where accountants horribly mishandled their clients’ cases (on both strategic and tactical issues) because the accountants overstep the limitations of their profession and enter the world of legal advice.

The geographic location of your OVDI/FBAR tax attorney should not matter; a much more important factor should be the attorney’s experience in the case and you personal feeling of trust. If the attorney immediately advises you to enter the OVDP program without even considering the facts of your case, consider it a red flag and seek second opinion.

2. Try to Obtain As Much Information As Possible While Preparing for the Initial Consultation

During the initial consultation, the attorney will have no choice but to rely on you for the initial information required to assess the state of your case. So, try to get as much information as possible regarding your foreign bank accounts while preparing for the initial consultation. You should not have to wait for the foreign bank account statements or bring your originally filed U.S. tax returns in order to have a productive initial consultation.

3. Retain an OVDI/FBAR Tax Attorney to Handle Your Case According to the Proposed Strategy

After the initial consultation, you should have a pretty good idea of what your options are. Think about these options and the attorney’s recommendations, but not take too much time to do so (remember, time is of the essence in these cases). Make your decision and retain an OVDI/FBAR tax attorney that you like for your case.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California have helped numerous U.S. taxpayers with the voluntary disclosure of their foreign bank and financial accounts as well as other foreign assets. Let us qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

It’s A Small World After All – Number Of FATCA Compliant Countries Continues To Grow

Under the Foreign Account Tax Compliance Act (“FATCA”), foreign banks, insurers and investment funds must send the Internal Revenue Service information about Americans’ and U.S. permanent residents’ offshore accounts worth more than $50,000. Institutions that fail to comply could effectively be frozen out of U.S. markets. As of this blog posting, the U.S. has entered into intergovernmental Agreements (“IGA’s”) with 32 countries for the implementation of FATCA.

The 32 countries with IGA’s already in place are:

Australia Estonia Isle of Man Netherlands
Austria Finland Italy Norway
Belgium France Jamaica Spain
Bermuda Germany Japan Switzerland
Canada Gibraltar Jersey United Kingdom
Cayman Islands Guernsey Luxembourg
Chile Hungary Malta
Costa Rica Honduras Mauritius
Denmark Ireland Mexico

Countries which are close to having an IGA in place are:

Bahamas Cyprus New Zealand Slovak Republic
Brazil India Panama Slovenia
British Virgin Islands Indonesia Peru South Africa
Bulgaria Kosovo Poland South Korea
Columbia Kuwait Portugal Sweden
Croatia Latvia Qatar
Curacao Liechtenstein Romania
Czech Republic Lithuania Singapore

Click here for progress and developments IRS has made in gathering information from foreign banks and foreign governments.

Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. Willful failure to report a foreign account can result in a fine of up to 50% of the amount in the account at the time of the violation and may even result in the IRS filing criminal charges.

The IRS is giving taxpayers one last chance to come forward and voluntarily disclose foreign accounts and unreported foreign income before the IRS starts investigating non-compliant taxpayers.

If you have never reported your foreign investments on your U.S. Tax Returns, you should seriously consider participating in the IRS’s 2012 Offshore Voluntary Disclosure Initiative (OVDI). Once the IRS contacts you, you cannot get into this program and would be subject to the maximum penalties (civil and criminal) under the tax law. Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California qualify you for OVDI.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.