- 1. Freeman Tax Law Your Help Line is at: (855)935-5945
www.freemantaxlaw.com Did you receive a letter from your Foreign
Bank?
2. Presentation Template Did you receive a letter from your
Foreign Bank? Well it might be your last chance to clean up the
mess!! Foreign banks and foreign financial institutions (such as
insurance companies, brokerages, funds, etc.) are rapidly sending
letters to account holders that are U.S. persons (i.e., those that
are U.S. citizens, Green Card holders and many U.S. Visa holders)
requesting information to determine whether such account holders
have disclosed their foreign accounts to the Internal Revenue
Service ("IRS") and have complied with the appropriate U.S. laws.
The receipt of these letters creates fear, anxiety and questions
for those that have received them. It is the hope that this will
help answer a few questions and provide some practical guidance.
Freeman Tax Law (855) 935-5945 [email protected]
www.freemantaxlaw.com 3. Presentation Template . In many cases, the
banks and financial institutions request that these forms be
provided to them. The foreign banks and financial institutions are
also requesting that the account holder submit an IRS Form W- 9,
which is generally required to be completed by U.S. customers for
tax reporting purposes. What is the Foreign Bank or Financial
Institution requesting in their letter? The letter being sent by
foreign banks differs in form each foreign bank and financial
institution. Generally, however, the letters are very similar in
substance and they usually request an account holder to disclose
information as to whether the account(s) has been declared to the
IRS through the filing of a Report of Foreign Bank and Financial
Account ("FBAR") form and on the Form 1040 Federal Individual
Income Tax Return. In terms of timing, we have seen that banks and
financial institutions are requesting that the customer provide
information going back to 2008. If the account holder has not
disclosed the account, the letter provides the recommendation to
participate in the various IRS Offshore Voluntary Disclosure
Program (OVDP) and requests that the customer provide documentation
that the have indeed entered the program. Freeman Tax Law (855)
935-5945 [email protected] www.freemantaxlaw.com 4.
Presentation Template Why did I receive this letter? The Foreign
Account Tax Compliance Act ("FATCA"), is a law enacted by Congress
in 2010 and effective beginning July 1, 2014. The law was enacted
to identify noncompliance by U.S. taxpayers using offshore
financial accounts. Under FATCA, foreign financial institutions
will generally be required to comply with certain due diligence and
annual reporting requirements regarding their U.S. account holders
and enter into information sharing agreements with the United
States. Foreign financial institutions that do not provide such
information to the United States will face a penalty in the form of
a withholding of 30 percent of certain U.S. source payments such as
interest and dividends. Many U.S. taxpayers are receiving these
letters because, in advance of the effective date of FATCA, foreign
banks are undertaking the process of identifying account holders
that have a U.S. tax connection. A foreign bank may find that an
account holder has a U.S. tax relationship from information held by
the bank such as a U.S. mailing address, a U.S. phone number,
account holder birth place or the fact that upon opening the
account information the bank was provided a U.S. passport, Green
Card or U.S. Visa or other information indicating U.S. residence.
If a foreign bank has identified an account as potentially having a
relationship to United States, the institution is likely to send
this letter to the account holder. What are the consequences of
receiving this letter? The consequences of the IRS receiving a U.S.
taxpayer's foreign account information can be have serious
consequences if the U.S. taxpayer has 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 potentially significant civil (as high as 50% of the
highest value of the account or $100,000, whichever is greater) and
criminal penalties (up to 10 years imprisonment and up to a
$500,000 criminal fine). Freeman Tax Law (855) 935-5945
[email protected] www.freemantaxlaw.com 5. Presentation
Template What is a Non-Prosecution Agreement and why was it
mentioned in my letter? If your account is based in Switzerland,
your letter may have referenced that your Bank has entered into a
non-prosecution agreement with the U.S. Department of Justice
(DOJ). Basically, what this means is that the bank has agreed to
participate in a program to proactively resolve potential issues
that they have with the U.S. Department of Justice if they have
reason to believe they violated tax laws of the U.S. There have
been 106 banks in Switzerland that have entered into this
initiative. The non-prosecution initiative requires the
participating banks to disclose how they helped Americans hide
assets, disclose the total number of U.S. accounts since 2008,
provide their highest dollar value, and turn over the names of
employees who managed these assets. The banks also must use
independent examiners to certify findings to the DOJ. According to
a January 26th, 2014 article in Bloomberg, the program is the
largest assault in a five-year U.S. Department of Justice crackdown
on offshore tax evasion. The price for participating in
non-prosecution agreements with the DOJ is very high. Banks must
pay 20 percent of the value of accounts not disclosed to the
Internal Revenue Service on Aug. 1, 2008, 30 percent for such
accounts opened between then and February 2009 and 50 percent for
accounts opened after this date. What are my options? OVDP The OVDP
is designed to encourage U.S. taxpayers with undisclosed foreign
bank accounts and unreported income associated with those accounts
to come into compliance with U.S. tax laws and avoid criminal
prosecution. Taxpayers accepted into the OVDP must file amended tax
returns for an eight year period and pay all back taxes, interest,
and an accuracy related penalty of 20 percent of the taxes due, and
a civil penalty equal to 27.5 percent of the highest aggregate
value of the U.S. taxpayer's foreign bank accounts during the
eight-year period (subject to certain exceptions). Freeman Tax Law
(855) 935-5945 [email protected] www.freemantaxlaw.com 6.
Presentation Template Should I close my account and move the money?
We have all heard the saying that you can run, but you cant hide.
There is a lot of truth to that saying in this situation. Many
taxpayers; however, have chosen the path of closing the account and
moving the assets. Instinctually, it is the flight or fight
response to receiving this type letter. Transferring the funds to
another foreign bank is really not a great idea. Aside from the
potential civil and criminal penalties that might be imposed as a
result of such actions, the implementation of FATCA has changed the
way bank secrecy laws work for U.S. people around the world. U.S.
taxpayers with undeclared foreign bank accounts can no longer rely
on foreign assurances that they will be protected by foreign bank
secrecy laws or remain undetected by the U.S. government. Foreign
banks and financial institutions are being asked through U.S.
Department of Justice John Doe Summonses to provide account
migration information, which eventually reveals the names of U.S.
account holders that have transferred assets to other banks. Simply
closing a foreign account and moving the funds elsewhere is not a
good option because it is likely that the U.S. government will find
out about it anyway. What are my options? Streamlined OVDP Another
option for U.S. taxpayers who live overseas (including dual
citizens) and have not filed U.S. returns is the IRS' streamlined
non-resident compliance procedure. U.S. taxpayers that are eligible
for this procedure are generally required to file delinquent tax
returns for the past three years and delinquent FBARs for the past
six years. Submissions that present a higher compliance risk are
not eligible for the procedure and will be subject to a more
thorough review and possibly a full examination (which in some
cases may include more than three years), as well as the imposition
of tax, interest and penalties. Freeman Tax Law (855) 935-5945
[email protected] www.freemantaxlaw.com 7. Presentation
Template Our Offices In The U.S. International Locations: Geneva,
Switzerland Basel, Switzerland Bern, Switzerland Zurich,
Swizterland London, UK Paris, France Hong Kong, China Cayman
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Francisco, California Palo Alto, California Los Angeles, California
Phoenix, Arizona Freeman Tax Law (855) 935-5945
[email protected] www.freemantaxlaw.com 8. Freeman Tax Law
About Freeman Tax Law Freeman Tax Law is a boutique tax law firm
with national exposure 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 [email protected]
www.freemantaxlaw.com
