Australia Makes The First FATCA Transmission Exposes 30,000 Accounts to IRS
Over the past decade, the United States has made significant strides in its attempt to curb the creation and maintenance of secret overseas bank accounts. Although the law that requires taxpayers to disclose an interest in a foreign account has been around for decades, President Obama’s administration is the first to encourage Congress to draft legislation that takes a hard line on bank secrecy. Since 2010, the State Department and the Treasury have been working together to plan and implement a process by which foreign nations are able to transmit information about American’s bank accounts to the IRS, and last week, the first electronic transmission of information on 30,000 foreign accounts in Australia held by U.S. citizens or entities was received by the United States from the Australian government.
A Brief Review of FBAR and FATCA Legislation
The Foreign Bank Reporting Act (FBAR) creates a legal responsibility for taxpayers to either declare that they do not have any ownership interest (or signature authority) in a foreign bank account that has had a balance of $10,000 or more, or provide information about any such account that does exist. It is not illegal to have a foreign bank account. But because the United States taxes its residents on their worldwide income, the IRS has an interest in keeping track of where their subjects are keeping their money. Although the keeping of a foreign bank, brokerage or miscellaneous financial account is not illegal, lying to the United States about its existence in order to facilitate offshore tax evasion is and the Department of Justice is having no problem throwing U.S. residents and those that facilitate offshore tax evasion in prison over this issue.
In the past, it was hard for the government to check the validity of declarations made by U.S. residents with regard to foreign accounts due to bank secrecy laws in Switzerland and other popular offshore tax havens. But in 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA), a game changer in the fight against undeclared foreign accounts. FATCA requires that foreign banks provide the IRS with extensive information about accounts determined to be owned by U.S. tax residents or entities. If a foreign bank fails to comply with law, they are subject to a 30% withholding on any of their funds transferred to the non FACTA compliant bank. These harsh penalties have forced many foreign governments, including Australia, to comply with FATCA and its provisions.
Australia’s FATCA Compliance Efforts
In April of 2014, Australia signed an Intergovernmental Agreement (IGA) with the United States that brought Australian financial institutions into compliance with FATCA. Under the agreement, Australian banks will transmit information about bank accounts that are believed to be owned by Americans to the Australian Taxation Office (ATO) and the ATO will then send that information to the IRS. According to Australian news sources, the ATO was interposed in the process in order to significantly reduce compliance costs of the foreign banks.
Last week, the first electronic transmission of Australian account information reached the United States. Information on over 30,000 accounts with U.S. depositors from financial institutions in Australia is now at the fingertips of the IRS and the Department of Justice. The details of the accounts will be analyzed and taxpayers will be criminally investigated and prosecuted if it is determined that they willfully failed to disclose a foreign account’s existence to the IRS.
The OVDP May Be An Option For U.S. Residents With Foreign Accounts
If you have a foreign bank account that has not yet been declared to the government, it is not too late to get help. The IRS has established a program that can help a taxpayer with a foreign account stay out of federal prison. The Offshore Voluntary Disclosure Program (OVDP) allows taxpayers to disclose their foreign account, pay any back-taxes, interest, and a reduced penalty in exchange for the government’s word that criminal prosecution will not be a repercussion of the taxpayer’s illegal activity. Although the OVDP is not right for everyone, it provides many taxpayers with a way out without the fear of spending a large part of their lives in a federal prison. But there is a catch: the OVDP is not available to those taxpayers who are already being investigated by the IRS or the Department of Justice for any tax reason. Thus, seeking the counsel of an experienced tax attorney should be your first priority if you have an undeclared foreign bank account.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have many years of experience assisting taxpayers in a variety of tax matters, including extensive experience in the OVDP process. In many situations, the IRS and Department of Justice will send their very best to prosecute cases that involve bank secrecy. Ensure that you are represented by a group of zealous tax professionals who are ready to advocate for your physical and financial freedom. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
