Foreign bank account reporting: Now what?
By acgua
The Internal Revenue Service announced an amnesty program for filing FBAR. The Amnesty program was not heavily publicized to the general population, and there were genuine questions on the scope of the amnesty: whether it applied to only UBS account holders and, if so, for what years. This is not the first time that the Internal Revenue Service has offered amnesty for FBAR.
There are quite distinct differences between this amnesty and past amnesty offers.
Past amnesty offers have received very tepid responses from the general public. The FBAR was created from the Bank Secrecy Act in 1970 under Title 31 of the U.S. Code. Now, this is both important and interesting, since the Internal Revenue Service derives its powers from Title 26 of the USC, not Title 31, Money and Finance. Since the Act's legislation, it has been left to languish in the backwaters of both the IRS and the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN). However, the U.S. Patriot Act gave the IRS the powers to fully investigate and enforce FBAR violations, powers that were previously only used by FinCEN under Title 31.
The enactment of the American Jobs Creation Act of 2004 gave the IRS more powers, as well as the leverage of more substantial penalties, when compared to the penalties that existed before 2004. If the IRS is able to sustain their willful violation accusation, the penalty is, amongst other penalties, the greater of $100,000 or 50 percent of the foreign bank balance, transaction, and possibly for every violation and every year.
As discussed in my prior article, on February 11, 2009, UBS consented to enter into a deferred prosecution agreement with the U.S. Department of Justice Tax Division and the U.S. Attorney's Office, admitting that UBS provided approximately 20,000 U.S. clients with bank accounts worth $20 billion and, of the 20,000 clients, 17,000 concealed their identities and income. In May 2009, UBS postured itself procedurally regarding how the names and related bank account information should be transferred to the U.S. government. UBS is seeking procedural resolution on a national level -- Washington, D. C. and Bern, Germany -- probably in reference to the new tax treaty discussion that occurred recently. However, Obama and the U.S. Treasury are seeking names of U.S. citizens, Green Card holders and foreigners doing business in the U.S. that are clients of UBS and collectively hold more than 52,000 bank accounts.
UBS had until April 30, 2009 to respond to the U.S. demands, as noted above. UBS has responded in a 50-page submission to the federal court in Southern Florida, attempting to reshape itself as a mere victim of international justice seeking resolution of bank secrecy between the U.S. and Switzerland. UBS responds that any conflict should be addressed at the national level of intergovernmental negotiations, rather than through attempts to coerce a private company. UBS also stated that their wealth management head, Raoul Weil, was no longer employed at UBS. Overall, the UBS court submission was saturated with its legal experts on constitution arguments and the Switzerland-U.S. Tax Treaty. This treaty is currently being re-negotiated and may be quite different from the currently existing one between Switzerland and the U.S. Also, the Swiss government acknowledges that it is expected that the U.S. will maintain incredible and intense pressure on UBS and the Swiss government.
Should the re-negotiated Switzerland-U.S. Tax Treaty allow information to be exchanged with the U.S. Treasury in relation to Americans's bank accounts and financial activities, then all Americans with accounts at banks in Switzerland are at extreme risk of legal prosecution by the U.S. Treasury. Therefore, it may be prudent to begin gathering banking information and reporting foreign bank accounts to the U.S. Treasury for current and past years, as well as amending your tax returns. Just how to accomplish this objective is open for debate, but an experienced tax attorney who is specifically knowledgeable and skilled in these areas should be retained to assist Americans with individual approaches to the U.S. Treasury that will lessen or eliminate penalty assessments for non-filing and non-reporting of interest income from foreign bank accounts. This is a high risk maneuver, which means you need to have the best legal advocate in your corner.
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
There are quite distinct differences between this amnesty and past amnesty offers.
Past amnesty offers have received very tepid responses from the general public. The FBAR was created from the Bank Secrecy Act in 1970 under Title 31 of the U.S. Code. Now, this is both important and interesting, since the Internal Revenue Service derives its powers from Title 26 of the USC, not Title 31, Money and Finance. Since the Act's legislation, it has been left to languish in the backwaters of both the IRS and the U.S. Treasury Department Financial Crimes Enforcement Network (FinCEN). However, the U.S. Patriot Act gave the IRS the powers to fully investigate and enforce FBAR violations, powers that were previously only used by FinCEN under Title 31.
The enactment of the American Jobs Creation Act of 2004 gave the IRS more powers, as well as the leverage of more substantial penalties, when compared to the penalties that existed before 2004. If the IRS is able to sustain their willful violation accusation, the penalty is, amongst other penalties, the greater of $100,000 or 50 percent of the foreign bank balance, transaction, and possibly for every violation and every year.
As discussed in my prior article, on February 11, 2009, UBS consented to enter into a deferred prosecution agreement with the U.S. Department of Justice Tax Division and the U.S. Attorney's Office, admitting that UBS provided approximately 20,000 U.S. clients with bank accounts worth $20 billion and, of the 20,000 clients, 17,000 concealed their identities and income. In May 2009, UBS postured itself procedurally regarding how the names and related bank account information should be transferred to the U.S. government. UBS is seeking procedural resolution on a national level -- Washington, D. C. and Bern, Germany -- probably in reference to the new tax treaty discussion that occurred recently. However, Obama and the U.S. Treasury are seeking names of U.S. citizens, Green Card holders and foreigners doing business in the U.S. that are clients of UBS and collectively hold more than 52,000 bank accounts.
UBS had until April 30, 2009 to respond to the U.S. demands, as noted above. UBS has responded in a 50-page submission to the federal court in Southern Florida, attempting to reshape itself as a mere victim of international justice seeking resolution of bank secrecy between the U.S. and Switzerland. UBS responds that any conflict should be addressed at the national level of intergovernmental negotiations, rather than through attempts to coerce a private company. UBS also stated that their wealth management head, Raoul Weil, was no longer employed at UBS. Overall, the UBS court submission was saturated with its legal experts on constitution arguments and the Switzerland-U.S. Tax Treaty. This treaty is currently being re-negotiated and may be quite different from the currently existing one between Switzerland and the U.S. Also, the Swiss government acknowledges that it is expected that the U.S. will maintain incredible and intense pressure on UBS and the Swiss government.
Should the re-negotiated Switzerland-U.S. Tax Treaty allow information to be exchanged with the U.S. Treasury in relation to Americans's bank accounts and financial activities, then all Americans with accounts at banks in Switzerland are at extreme risk of legal prosecution by the U.S. Treasury. Therefore, it may be prudent to begin gathering banking information and reporting foreign bank accounts to the U.S. Treasury for current and past years, as well as amending your tax returns. Just how to accomplish this objective is open for debate, but an experienced tax attorney who is specifically knowledgeable and skilled in these areas should be retained to assist Americans with individual approaches to the U.S. Treasury that will lessen or eliminate penalty assessments for non-filing and non-reporting of interest income from foreign bank accounts. This is a high risk maneuver, which means you need to have the best legal advocate in your corner.
*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.
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