The past decade has brought a sea-change to the world of international banking. While at one time, secret undisclosed accounts held by wealthy Americans and others were simply a fact of life and something that everyone who could did, today, the same cannot be said. Today’s world no longer represents “business as usual” when it comes to offshore accounts held in both traditional and non-traditional tax havens. In fact, foreign accounts held or controlled by U.S. taxpayers that exceed certain balance thresholds must be disclosed to the U.S. government regardless of the jurisdiction where the funds are kept.
In short, a world of banking secrecy has, in a few short years, been transformed into a world where regular and routine disclosures are absolutely mandatory. FATCA and its corresponding international agreements along with FBAR disclosures have driven this change. As people adjusted to the new regime the IRS offered some programs to mitigate the consequences of nondisclosure, like the variants of the Offshore Voluntary Disclosure Program (OVDP), but the continuation of these programs are far from guaranteed. The IRS is free to change the terms of these programs at any time and has, in fact, gradually made the programs less favorable to noncompliant taxpayers. In light of the increased risk of detection due to taxpayer’s disclosure obligations and the IRS’ waning patience for undisclosed foreign accounts, it has never been more important or pressing to achieve and maintain full offshore tax compliance.
How does FATCA and its IGAs Increase my Risk of Offshore Account Detection?
FATCA or Foreign Account Tax Compliance Act, empowers federal prosecutors with additional tools to identify, investigate, and prosecute U.S. taxpayers who fail to disclose their foreign financial accounts and foreign assets. Under FATCA, disclosure thresholds are based on the whether the taxpayer is living within the United States or abroad and his or her filing status. In general, married taxpayers filing jointly from a foreign nation or jurisdiction will have the greatest filing threshold. By contrast, taxpayers filing individually and living in the U.S. are subject to the lowest reporting thresholds.
International Agreements Can Reveal Your Offshore Account
These obligations can be enforced because foreign financial institutions in jurisdictions where an international agreement is in effect must, depending on the model of agreement utilized, provide information about U.S. linked accounts to their domestic tax authority or directly to the U.S. government. Banks and financial institutions that fail to do so can face a 30 percent withholding penalty. Countries where an IGA tax information sharing agreement is in effect or has been agreed to in principle includes:
- Australia
- Austria
- Bahamas
- Bahrain
- Brazil
- Canada
- China
- Colombia
- Costa Rica
- Ecuador
- France
- Germany
- Hong Kong
- Italy
- Iraq
- Japan
- Jersey
- Liechtenstein
- Luxembourg
- Macao
- Mexico
- Montserrat
- Netherlands
- Peru
- Poland
- Qatar
- San Marino
- Saudi Arabia
- Singapore
- South Korea
- Switzerland
- Taiwan
- United Kingdom
To be absolutely clear, this list only represents a fraction of the nations that have signed or agreed to an international agreement to share tax data with the United States government. More than 110 nations have either executed an agreement or agreed in principle to provide once secret banking information to the U.S government. Discovery of your undisclosed accounts can trigger civil or criminal tax charges.
Tax Lawyers & CPAs Handle Offshore Tax Issues
The tax professionals of the Tax Law Offices of David W. Klasing are attorneys and CPAs. We are dedicated to assisting taxpayers in correcting offshore account and other tax errors that can result in criminal or civil tax charges. To schedule a reduced-rate consultation at our firm call 800-681-1295 today or contact us online.
