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Foreign Financial Institutions or Facilitators List Jumps to 41

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    As we approach the last week of August, many things are changing for families around the United States. Schools are back in session, which means that many parents will finally be able to reclaim peace and quiet in their households for the better part of the day. Also, the weather will begin to cool and within a couple of months, everyone will have forgotten about the heat waves that have affected much of the United States. But one thing that is not cooling down is the Department of Justice’s efforts to crack down on those U.S. taxpayers that are maintaining secret bank accounts overseas. Unlike the weather to come, it appears as if the government is expecting prosecutions of Foreign Bank Account Reporting violators to heat up.

    August isn’t quite two-thirds over and the Department of Justice has expanded their list of Foreign Financial Institutions or Facilitators by nearly ten percent, this month alone. The list now stands at 41 foreign banks and financial institutions and can be found in its entirety here.

    The list of Foreign Financial Institutions or Facilitators acts as a public disclosure of all of the banks that the United States has established provides material support to those who seek to establish foreign bank accounts without disclosing their existence to the United States government, as required by the Foreign Bank Account Reporting (FBAR) laws. Although an online list may not seem very menacing at first glance, the implications of having ties to one of the banks on the list can be devastating to a taxpayer.

    Before jumping into the new additions to the list, it is important to understand what the list establishes. As we stated above, a bank’s name on the Foreign Financial Institutions or Facilitators list denotes the U.S. government’s finding that the bank or financial entity has either set up secretive bank accounts for Americans overseas, or have facilitated assistance to American taxpayers in their efforts to avoid disclosure of the account. When the Internal Revenue Service has established that a taxpayer is in violation of the FBAR laws, by way of failing to notify the IRS of their overseas bank account, a determination will be made as to whether the failure was willful or not. If the IRS determines (and the DOJ agrees) that the failure to file an FBAR was willful, the taxpayer will be prosecuted in federal court. Not only will the taxpayer be subject to a federal prison sentence, but they will also face the possibility of a penalty equal to 50% of the highest balance of the account that went undeclared.

    There are a few ways that a bank can end up on the Foreign Financial Institutions or Facilitators list. First, the government could have prosecuted or investigated the wrongdoing of the bank and come to the conclusion that their actions demonstrate assistance or facilitation to American taxpayers. One of the more common reasons that a bank is added to the list is participation in the Swiss Bank Program. According to information provided by the government, the Department of Justice will agree to not prosecute a foreign bank or financial institution if they come forward and admit that they had likely committed wrongdoing with regard to American bank disclosure laws. To participate in the program, the foreign bank must agree to fully cooperate with current and future investigations into tax matters, as well as pay a large penalty associated with their wrongdoing. But the real cost comes to the current or former customers of those banks.

    Once the banks agree to the terms of the Swiss Bank Program, the IRS and the DOJ will have unfettered access to the names and account information of Americans that have opened and/or maintained undeclared foreign bank accounts overseas. Once that happens, it is only a matter of time until an investigation is opened and the Department of Justice gets involved.

    The government does have a similar amnesty program for taxpayers who have maintained or currently maintain ownership or signature authority of a foreign bank account overseas with a balance of $10,000 or more. The Offshore Voluntary Disclosure Program allows taxpayers to avoid criminal prosecution in return for coming forward and paying a penalty, fees, and back taxes. But time is of the essence with the OVDP. Taxpayers are not eligible for participation in the program if the government has opened an investigation into a taxpayer’s affairs, regardless of the reason. Therefore, a simple income tax audit would likely disqualify a taxpayer from the OVDP.

    The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers determine the best steps to take with regard to their foreign bank accounts. When it comes to FBAR violations, the government is very serious and won’t stop short of throwing taxpayers in prison if your interests aren’t protected by a zealous legal advocate. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

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