Tax Law Los Angeles
Despite the IRS mellowing their position on international finances, somewhat, they are paying closer attention than ever to international finances. Even with the revisions to the Offshore Voluntary Disclosure Program in 2012 giving more leniency, in an effort to get more people to come forward and claim their offshore holdings, penalties can still be severe. Offshore banking compliance is more important than ever before.
These penalties can be seen as far back as 2011 when the government turned their eye on banks located in India, giving the first indication they were looking beyond the typical, tax-free Swiss institutions. The IRS quickly followed by opening field offices in Panama, Australia, and China. Tax Information Exchange Agreements have been signed by all the former “tax havens,” including Liechtenstein and Monaco.
Tax Information Exchange Agreements are a sign of the vanishing secrecy of the banking industry, and of increased cooperation between governments, which is bound to continue, as our world becomes increasingly interconnected and interdependent.
Businesses are expected to be as efficient and as profitable as possible. It’s why they exist. It is to be expected that businesses will take advantage of every resource at their disposal. For multi-national corporations, this may mean operating and storing their assets in countries with lower overheads and tax rates. When used properly – and ethically – offshore banking makes perfect business sense, and may even help to build up developing nations.
To make sure businesses are in compliance, the IRS and Department Of Justice have launched a vast and scoping initiative aiming to correct the convoluted world of international finance. According to a report from the US Senate in 2008, secret offshore bank accounts cost the US Treasury Department $100 billion, annually, giving them every incentive to want to rectify the situation.
This initiative, which started back in 2008, has prosecuted some the world’s largest banks. An example of the widening scope of the IRS includes the UBS AG, Switzerland’s largest bank, in 2008, to the tune of $780 million in fines, penalties, interest, and restitution. In 2013, the Tax Division secured a guilty plea from Wegelin Bank, the oldest private bank in Switzerland and the first foreign bank to plead guilty to felony tax charges. This plea also secured a John Doe summons that allows the United States to subpoena anonymous US account holders, using Swiss banks to avoid income taxes, striking a major blow to the global financial underground.
The list goes on and on. It is obvious that the IRS and DOJ are serious about offshore banking, trying desperately to claim that lost revenue.
It is vital to make sure your offshore holdings are in compliance with the US’ international tax laws, to stay out of the IRS’ line of fire.
With the IRS closing in on international financial institutions all over the world, the heat is rising. You can rest assured that your offshore bank will be asking, at some point, if you are in compliance with the IRS rules and regulations.
With more than 7 million Americans living, and holding assets, abroad, the IRS has more incentive than ever before. They will get their money, at whatever cost.
In the case that you receive a letter from your bank, here’s what to do:
Failure to file an FBAR can result in criminal charges, as well, with non-willful FBAR omissions earning a fine of $10,000, in each instance. Willful violations can result in either a $100,000 fine or 50% of the total amount of the foreign bank account, whichever comes first. Every year you failed to file an FBAR is its own violation.
What To Do About It
With the adoption of the Foreign Account Tax Compliance Act, also known as Fatca, as of July 1, 2014, offshore banking prosecution is likely to become vastly more widespread and rampant.
Here’s what you can do, to make sure your offshore account is in compliance:
To find out if your offshore holdings are in compliance, or to learn more about international finances, contact us today!