Americans with Israeli bank or other financial accounts could face a tough tax season in 2014 if they do not come forward and disclose their assets to the IRS. Recently, 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- are under investigation by the Department of Justice. 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. As the IRS cracks down on offshore accounts and on suspected fraud from overseas, Israel faces extra scrutiny. A recent report issued by the Government Accountability Office found that 4% of the accounts reported worldwide through this program were in Israel, making it the fifth most likely destination for overseas bank accounts.
Israeli banks have increased their efforts to identify clients who are United States citizens and report them to the IRS. A series of prosecutions against American citizens trying to avoid reporting their accounts in Israel and against tax preparers who advised their clients to use Israel as a tax shelter helped drive home the point. Accordingly, Israeli banks have been urging their American account holders to come forward and disclose their assets under the Offshore Voluntary Disclosure Initiative (OVDI). In December 2013, Bank Leumi, the largest commercial Bank in Israel, sent out a letter to their American clients to come forward under the program.
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 Initiative (OVDI) 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 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 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.