The US Foreign Account Tax Compliance Act, or FATCA, has wrought significant and I believe historical change in the transparency of international banking and resulting US taxation. With the capitulation of Union Bank of Switzerland or UBS ($780 million), and Credit Suisse ($2.7 Billion) more than 100 additional swiss banks have reached agreement with the US Justice Department and are providing information about personal US taxpayer accounts, balances, transactions and accumulated interest.
Hiding money in a Swiss account is not longer a strategy, and those who have done so face a daunting review, audit and potential criminal tax allegations by the IRS as they compare actual data with what US taxpayers have reported on previous years’ FBARs.
Moving that money to another location may not simply be possible. Presently over 80 sovereign nations and their banking and taxation authorities have signed on to FATCA and are providing information directly to the IRS about US taxpayers. The threat of exclusion from US markets is very real and has produced evident results, even in China and Russia.
How real is the impact of FATCA? The US was negotiating with Russia when the annexation of Crimea suspended those talks. At the last moment, Putin agreed to enact a law that required Russian banks to send the desired information to the IRS. Russian financial institutions and their economy could not withstand the impact of being frozen out of US markets. FATCA is an effective global weapon.
What does this mean for you as a US taxpayer? FATCA is real, and has forced financial institutions in over 80 nations worldwide to provide your information directly to the IRS. The IRS knows about your accounts, their activity, and they are in the process right now of comparing that information to what you have previously reported on prior year tax returns and FBARS.
Many placating tax advisors, CPAs and even attorneys suggested the streamlined option under OVDP telling their clients not to worry about “willful” versus “non-willful” behavior…”look at how much you’ll save.”
This is simply poor advice. If FATCA was powerful enough to force the Swiss, Chinese and the Russians to comply do you think the IRS will let US taxpayers off with a light fine when they have actual real data of their offshore investments and activities for years? Do you honestly believe the US invested billions of dollars into passing the legislation and then prosecuting global institutions in order to get a few settlements?
This is about one thing: collecting tax revenues from US taxpayers who have under-reported their offshore income and as a result underpaid US income taxes. Once the IRS has your data (which in most cases they already do) it is simply a matter of connecting the dots, and calculating the check you will be required to write.
By the way, they have a tremendous club to use against you as well: criminal tax evasion charges. Any pattern or attempt to under-report offshore income results in a “willful” determination under the tax code and US law. This exposes you to criminal charges. Once the IRS has the information, they simply deny your streamlined application and come after you with the full force of US tax law. The “hope” of the light penalties offered by the streamlined option will evaporate into the harsh reality of harsh back taxes, draconian penalties, interest, and yes – criminal charges.
You know in your own heart of hearts if you’ve sheltered income offshore. If you have, a streamlined application is a heavy risk that includes the real possibility of jail time. Is it worth it? We invite you call us at 866-631-3470 for a complimentary and candid conversation that is protected by the attorney-client privilege.