Call Now (800) 681-1295
Close

What to Do After Receiving a Letter from Your Foreign Bank

Table of Contents

    If you are an American citizen or green card holder and hold an interest in or signature authority over foreign financial accounts, chances are you will eventually receive a rather unnerving letter from your bank or financial institution. While the wording of the letter will vary based on your financial institution, the jurisdiction the account is located in, the model of intergovernmental agreement (IGA) in effect, and the basis for the problem the general message set forth is nevertheless typically very similar. That is, the message is typically along the lines that the foreign financial institution has identified your account(s) to the United States and that the IRS is likely to soon be in possession of your identity and account information.

    Because FATCA penalizes foreign financial institutions that do not hand over Americans account information, it is never advisable to ignore a FATCA letter. In light of the potential consequences for even unintentionally failing to disclose foreign assets, taking no action can never be recommended. Furthermore, depending on how your actions are perceived by the IRS, charges for criminal tax fraud are conceivable.

    If you are faced with this or a similar situation, you should contact an experienced Tax Attorney, such as David W. Klasing, immediately. Your tax lawyer can work to mitigate your criminal exposure while minimizing the FBAR penalties you face.

    What are the potential consequences of a FATCA letter?

    Receiving a FATCA letter regarding undisclosed foreign accounts often means that you are facing extremely serious tax problems. If you have already received the FATCA letter you are facing a potential criminal issue and the 2014 Offshore Voluntary Disclosure Initiative program is no longer an option.

    If your failure to disclose your foreign accounts via a Report of Foreign Bank and Financial Accounts (FBAR) (FinCen Form114) is considered to be non-willful, you could still face significant fines. Penalties can be assessed at $10,000 per unreported account, per tax year. If your failure to make required foreign account disclosures is determined to be willful, even more onerous penalties will apply. A willful violation of the Banking Secrecy Act (BSA) can carry a penalty of the greater of $100,000 or 50% of the account value for each year the account was undisclosed. Assuming the account balance was $100,000 and a 5-year FBAR statute, penalties could be assessed at $50,000 per year. Over the course of 5 years penalties alone would total $250,000 or more than twice the amount originally contained within the account. Interest and other criminal penalties may also apply.

    Do not contact your original tax preparer

    If you have already received a FATCA letter or call, your first impulse may be to contact the individual who originally prepared your taxes. However, taking such action is never advisable. This is for a number of reasons. First, there is a clear conflict of interest for the original preparer. The original preparer may be facing an investigation or penalties themselves due to your tax issues. When faced with the potential loss of their license and other penalties, one would have to assume that the original preparer will act in their own self-interest. Unfortunately, their interests do not align with your own and you are likely to end up in a situation where it is your word against theirs.

    Furthermore, it is never advisable to contact the original preparer because the accountant-client privilege, to the extent that it exists, is extremely limited. The original tax preparer is likely to be government witness number 1 against you and the accountant-client privilege will not prohibit the original prepared from disclosing anything you have communicated. In contrast, the attorney-client privilege is universally recognized in all 50 states and in federal court. Additionally, the attorney-client privilege is extremely robust and will permit you to speak freely regarding your tax concerns without fear of it being disclosed or used against you in court proceedings.

    Do not discuss the matter without an experienced Tax Attorney present

    If you have received a FATCA letter about potential violations of the tax code or Banking Secrecy Act, it is prudent to refrain from any public comment or private conversations regarding the matter unless you have legal counsel present. In the case of private conversations, these should be avoided because the individual you discuss the matter with can then be called as a witness against you.

    Also, you should never speak to anyone from the IRS without counsel present. This is especially true if you are approached in-person by an agent from the IRS Criminal Investigation Division at time you are not expecting it. If a situation like this should arise, demanding to have an attorney present before speaking with them should end the inquiry unless they take the unusual step of arresting you.

    In short, if you have received a FATCA letter about undisclosed foreign accounts, you face a potentially perilous situation. Your main goal should be to try and mitigate criminal exposure while getting the lowest FBAR penalties the situation permits. Working with a Tax Attorney and CPA, such as those of the Tax Law Offices of David W. Klasing, can improve the likelihood that you achieve these goals. To schedule a reduced rate tax law consultation, contact me online or call (800) 681-1295.

     

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    California
    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    Arizona
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    Texas
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    Nevada
    (702) 997-6465
    Florida
    (786) 999-8406
    Utah
    (385) 501-5934