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Last chance to clean up your Foreign Bank Accounts with the IRS

//Last chance to clean up your Foreign Bank Accounts with the IRS

Last chance to clean up your Foreign Bank Accounts with the IRS

If you received a letter from your Foreign Bank Account, consider this your last chance to clean up your tax filings with the IRS.

Jeffrey S. Freeman, J.D., LL.M

If you recently received a letter from your Foreign Bank or Financial Institution about your filings with the IRS you may be confused, concerned, and have some questions. Let us help you understand why this is not a letter to be thrown in the junk pile.

Why did my Foreign Bank contact me?

In 2010 Congress enacted a law called The Foreign Account Tax Compliance Act (“FATCA”) that would be effective beginning July 1, 2014.  The purpose of this law is to identify U.S. taxpayers that are taking advantage of offshore financial accounts to avoid paying taxes. FATCA places responsibility on foreign financial institutions to share information with the IRS about U.S. account holders. If financial institutions do not provide the required information to the United States will face financial penalties in the form of a withholding of 30 percent of certain U.S. source payments, such as interest and dividends.

Banks are currently identifying account holders that have a U.S. tax connection based on their mailing address, phone number, or passport of Visa information used to open the account. Your bank contacted you because they have identified you as a U.S. account holder and are making preparations for the FATCA effective date.

What are they requesting from me?

Foreign banks and financial institutions (such as insurance companies, brokerages, pensions, etc.) are requesting documentation to determine if you have disclosed your foreign bank account to the IRS. Each institution may word their request differently, but generally, they are looking to see if you have filed an FBAR form (a Report of Foreign Bank and Financial Account form) and declared the account on the Form 1040 Federal Individual Income Tax Return. Some banks are also requesting a copy of the IRS Form W-9, which is generally required to be completed by U.S. customers for tax reporting purposes. Some institutions are requesting this documentation going back to 2008.

What if I never disclosed this account to the IRS?

Your letter should recommend that you participate in the various IRS Offshore Voluntary Disclosure Program (OVDP) and provide documentation that you have indeed entered the program.

Since you have received a letter from your foreign bank you can be assured that they are going to provide the IRS with your account information. If the IRS receives your foreign account information and you have not previously reported the foreign account on an FBAR and/or has not reported all of the income associated with the foreign account on a U.S. tax return there are serious consequences including civil and criminal tax penalties. Most importantly, once the IRS receives your  foreign account information you may no longer participate in the IRS offshore voluntary disclosure program which enables the taxpayer to come forward voluntarily to disclose the account to avoid the severe penalties and criminal prosecution.

Do not ignore this letter. Now is the time to consult with an experienced attorney to explore the options available on how to come forward to voluntarily disclose your foreign accounts.

About Freeman Tax Law

Freeman Tax Law is equipped to handle all domestic and international tax law matters. At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.

Freeman Tax Law

(855) 935-5945

info@freemantaxlaw.com

www.freemantaxlaw.com

By | 2017-01-01T11:27:56+00:00 May 13th, 2014|Freeman Tax Law|Comments Off on Last chance to clean up your Foreign Bank Accounts with the IRS