Do You Have a Bank Account in Israel? The IRS May Be Targeting You

Denver Business Owner Sentenced to Prison over Payroll Tax Crimes
November 14, 2019
Colorado Business Owner Sentenced to Prison for Tax Evasion
November 18, 2019

Do You Have a Bank Account in Israel? The IRS May Be Targeting You

US investments in Israel targeted by IRS

The Internal Revenue Service (IRS) coordinates with global banking and financial systems and foreign governments to discover when U.S. taxpayers have failed to report foreign investments, income, foreign business income or bank accounts. Foreign banks have a strong incentive to cooperate with the IRS and identify U.S. account holders, as failure to do so can trigger enormous fines under the Foreign Account Tax Compliance Act (FATCA). To avoid these fines, various foreign banks have entered agreements and treaties with the IRS – and many have already delivered mass batches of customer data to the U.S. government (including banks in Switzerland, Belize, and Australia). Among the latest to be targeted are Israeli bank accounts, which were also an IRS focus in 2015, when Israeli banks began to disclose U.S. customer information. If you are a U.S. citizen, dual citizen, U.S. resident, or nonresident with bank accounts or securities in Israel, you should talk to an experienced tax lawyer about your reporting responsibilities – and how, if necessary, to correct past errors.

IRS Offshore Income and Information Reporting Requirements Now Targeting Israeli Bank Accounts

Our international tax attorneys have repeatedly cautioned taxpayers about the legal and financial perils of failing to report foreign bank accounts by filing an FBAR (FinCEN Form 114); filing Form 8938 (Statement of Specified Foreign Financial Assets); and/or satisfying other offshore reporting requirements, such as filing Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations). Thanks to technological advancements, the aggressive prioritization of FATCA enforcement, and cooperation from hundreds of foreign banks and governments, the IRS is increasingly able to locate and trace offshore funds – to the point where noncompliance is virtually guaranteed to be detected.

Whether the noncompliance was willful or accidental, it is always in the taxpayer’s best interests to consult a FATCA tax lawyer who possesses relevant experience in this area of tax law. In most cases, it is merely a matter of time before a foreign account audit or IRS criminal tax investigation will reveal tax compliance errors; yet by acting quickly and taking appropriate steps before the IRS launches an investigation or tax audit, it may be possible to limit penalties and prevent criminal tax prosecution, reentering the tax system with a degree of safety.

In the weeks and months to come, strategic action will be especially important for the U.S. holders of Israeli financial accounts, such as Israeli Business or Personal checking, savings or Investment accounts. The Jerusalem Post recently reported that “Israeli and foreign banks have sent threatening letters to new immigrants, foreign residents or those who are financially involved in foreign operations,” referring in the first instance to FATCA bank letters, which foreign banks may issue to American account holders to provide warnings and/or request information. This increased wave of enforcement stems, at least partially, from an agreement last year between Israel and nearly five dozen other nations (though Israel and the United States have been entered into FATCA agreements since at least 2014).

For additional information, taxpayers may wish to explore IRS Israel tax treaty documents, compare IRS tax treaty tables, or brush up on FATCA and FBAR reporting requirements. Our article discussing a 2016 Israeli Supreme Court decision on FATCA may also be of interest to readers.

See our 2011 OVDI Q and A Library

See our FBAR Compliance and Disclosure Q and A Library 

See our Foreign Audit Q and A Library

See our Criminal Tax Law Q and A Library

International FBAR + FATCA Compliance Attorneys for U.S. Holders of Israeli Bank Accounts

U.S. holders of Israeli financial accounts, though currently under scrutiny, are by no means the only taxpayers who are being watched by the IRS. If you have failed to disclose foreign investments or bank accounts located anywhere in the world, you are at risk for serious civil and/or criminal tax penalties. For 24-hour international tax assistance, call the Tax Law Office of David W. Klasing at (800) 681-1295 to speak confidentially with a FATCA tax attorney, or contact us online to schedule an appointment today.

In addition to our staffed main offices in Irvine,  the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los AngelesSan BernardinoSanta BarbaraPanorama CityOxnardSan DiegoBakersfieldSan JoseSan FranciscoOakland, Carlsbad and Sacramento.

Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship.  With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link.   Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.

Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company?  Absolutely not!  See our policies that address this issue here.

Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship.  With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link.   Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.

Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company?  Absolutely not!  See our policies that address this issue here.