How To Disclose Your Foreign Bank Accounts And Avoid Criminal Prosecution! FIVE STONE. tax advisers

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1 How To Disclose Your Foreign Bank Accounts And Avoid Criminal Prosecution!

2 Do you have or think you may have a foreign bank account that should be disclosed to the United States Government? Have you received a letter from your foreign financial institution, bank or broker indicating that you may be a target of an investigation by the United States Government? If you answer yes to either of these questions, the US Government does not take non-disclosure lightly. You could be facing criminal prosecution (up to 10 years in prison) and substantial penalties ($500,000 in penalties). The IRS is being very aggressive in their pursuit and people are facing criminal prosecution constantly. It is imperative that you seek knowledgeable legal representation that has the expertise and tools to help you avoid prosecution and significant penalties. What Assets You Must Disclose Foreign Bank and Brokerage Accounts Foreign Trusts Foreign Retirement Accounts Direct Ownership in foreign stock Foreign hedge and private-equity funds The Secrecy Act requires U.S. persons who own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account in a foreign country with an aggregate value of $10,000 or more to file a form TD F There are civil and criminal penalties that can and are being assessed for non-compliance.

3 Understand the Impact of FATCA. Here is why you care about the Foreign Account Tax Compliance Act (FATCA): 30% withholding on your investments The law requires Foreign Financial Institutions (FFI) to report directly to the IRS. FFI s that do not do this are subject to a 30% withholding on these investments. $10,000 initial penalty FATCA requires US citizens who have foreign financial assets in excess of $50,000 to report those assets. The IRS can impose a $10,000 civil penalty for failing respond. Up to $50,000 in additional penalties If you get a formal notice from the IRS that you need to file a Form 8938, you have 90 days to do so. After that, the IRS can assess additional civil penalties of $10,000 for each 30-day period (or part of a 30-day period) that is not reported up to a maximum penalty of $50,000. Face Criminal Prosecution by Not Submitting an FBAR Form. If you are a United States resident, citizen or not, or if you do business in the United States, whether you live here or out of country, and you have foreign financial interests with aggregate in excess of $10,000 you MUST complete and submit a Foreign Bank Account Report (FBAR) every year. You must submit an FBAR regardless of whether or not these accounts generate taxable income to the US Treasury Department s Financial Crimes Enforcement Network. Failure to file this report has both criminal and civil tax implications. CRIMINAL Up to 10 Years in Prison and/or $500,000 Criminal Penalty. CIVIL Fine up to $100,00 or 50% of the amount in account at time of violation.

4 If you want avoid criminal prosecution and the draconian criminal and civil penalties for FATCA and FBAR violations, the IRS is allowing people to voluntarily disclose their foreign financial interests through the Offshore Voluntary Disclosure Program (OVDP). If you think you need to get into the OVDP, there are couple things you will need to know: What To Do If You Have Violated FATCA or FBAR Get Attorney - Client Privilege Before disclosing information to the IRS through OVDP, you should retain an attorney that has significant experience in dealing with the IRS and the OVD program. Make Sure You Have a Kovel Accountant A Kovel accountant retained by your attorney provides you with an extension of the same attorney-client privileges you have with your attorney. Be sure that during the vetting process for an attorney, you ask each potential legal representative if they work with a Kovel accountant. Do Not Move Your Foreign Asset Money Until Your Attorney Says So Finally, one of the most important aspects of FBAR/FATCA cases is what to do with the money in the account. Closing an account or having the account closed for you by the foreign bank is an issue. Repatriating the funds back to the United States raises more issues and disposing of the funds can be seen as evidence of consciousness of guilt. Every situation is different so having a knowledgeable tax attorney is critical. Your Alternatives for Resolution The OVDP Process The goal of OVDP is to attain a Do Not Prosecute letter from the Criminal Investigations unit of the IRS. Before submitting for pre-clearance, many legal representatives will fail to conduct discovery to see if their client is currently in an exam or audit situation with the IRS. This basic step can be detrimental to the OVDP process. It is absolutely crucial that your legal representative understands the OVDP process. Should I Opt Out of OVDP? Timing is Everything In essence, you have to disclose to the IRS before a foreign bank or financial institution discloses for you. If you have already been disclosed, then you cannot take advantage of the protections afforded in OVDP. However, there are still credible alternatives for those that have already been disclosed to the IRS. Do NOT Attempt a Quiet Disclosure A quiet disclosure is usually described as filing amended tax returns and past due FBARs without coming forward to the IRS. To the IRS, a quiet disclosure is no disclosure at all. Nevertheless, some taxpayers may chart this route although it is not recommended.

5 We at Five Stone Tax Advisers hope you found this information helpful. Dealing with the IRS can be frightening and FATCA/FBAR matters are very serious. If you think you need help with a FATCA/FBAR situation, we are here for you. Our dedicated team of experienced, master tax legal representatives and certified public accountants specialize in all aspects of International Taxation but chiefly with the areas of law dealing with FATCA and FBAR. Due to the time sensitivity of these cases, your initial consultation is instantly our highest priority action-item with the goal of conducting the consultation same day. And you can rest assured that your consultation will be with an attorney. All of our FATCA/FBAR cases are assigned to our in-house team that consists of LL.M tax attorney s and Kovel accountants.