Brazil is the latest country to enter into an information-sharing agreement with the United States. Last week, the two nations came together to sign the Intergovernmental Agreement (IGA) and jointly announced the details. What can be gleaned from the announcement is that if you are an American with assets in accounts in Brazil, your financial information will soon be shared directly with the IRS. But the agreement doesn’t end there. If you are a Brazilian national, living in the United States, you are also in the crosshairs, as the IGA will also require the IRS to send financial data on Brazilians back to Brazil’s Finance Ministry. Are you prepared with a criminal tax lawyer?
The Model 1 IGA between the U.S. and Brazil was expected last year, but when news broke about United States’ efforts to spy on the Brazilian government, including the President himself, tensions rose and information-sharing talks came to a screeching halt.
Brazil joins a growing list of over 80 countries and foreign jurisdictions that have agreed to share information with the United States. With the Foreign Account Tax Compliance Act (FATCA) taking effect on July 1st of this year, foreign banks and governments have been lining up to share information about Americans’ foreign accounts. The overwhelming urge of banks to give up their account-holder information stems from the want to avoid a 30% withholding on all outbound transfers to that bank that flow through the United States.
Back at home, federal law requires that Americans with foreign accounts that have a balance in excess of $10,000 at any point in the calendar year must report those accounts to the IRS (as well as any interest or other income derived from those accounts). The penalties for non-compliance with the FBAR (Foreign Bank Account Reporting) laws can be somewhat draconian. If it is determined that a taxpayer willfully failed to notify the government of their account when they should have, they will be assessed a penalty of 50% of the account balance for each year that the account went unreported. Such a penalty structure can easily create a total penalty that is 2 or even 3 times the highest balance of the account. To make matters worse, a taxpayer can be sentenced to up to three years in prison for each year of non-reporting.
It seems that every week there is a new country that is teaming up with the U.S. government in their effort to create a worldwide network of information sharing. If you have money in a foreign account and haven’t declared its existence to the government, you are playing Russian Roulette with your freedom. The government does not discriminate when it comes to whom they prosecute and throw in prison for violating federal law.
Luckily, there is a way to avoid some of the harshest potential penalties for having not reported your foreign bank account. The Offshore Voluntary Disclosure Program was established to allow taxpayers to come forward and comes clean with the government. In exchange for paying a small penalty (in comparison to the possible 50% fine), you can avoid spending time in a federal prison. Though it is important to understand that there is no time to waste. With account information flowing into the databases of the IRS, it is only a matter of time until they match your name and your foreign account. Once the feds have found you out and opened an inviestigation, you are no longer eligible to participate in the OVDP.
The tax professionals at the Tax Law Offices of David W. Klasing have extensive experience helping taxpayers navigate the OVDP and have successfully kept our clients out of prison through their program participation. It is easy to try to convince yourself that you may slip through the cracks and that you will never get caught. Though it is possible, it is a suckers’ bet. And you aren’t gambling with a Las Vegas budget; you are gambling with your freedom and your family’s livelihood. Call the Tax Law Offices of David W. Klasing today at (800) 681-1295 for a reduced-rate consultation.