Felicia M. Seaton 370.
(photo credit: Courtesy)
This is part two of an interview with Felicia M. Seaton
(www.feliciaseaton.com), who has been practicing US law since 1996 and is also
licensed by the Israel Bar Association as a foreign attorney. She focuses her
practice on US income-tax compliance and US estate-planning law for Americans
and Israelis residing in Israel.
We spoke earlier about what FACTA is. A
question I frequently receive is how the government can get all this
information. Whatever happened to bank secrecy and client confidentiality?
legally circumvent countries’ bank-secrecy laws, thus far, nine countries have
signed inter-governmental agreements [IGAs] with the IRS agreeing to trade
information about account holders, and several countries issued a joint
statement regarding the implementation of FACTA. As of November 2012, the
Treasury Department announced that it was negotiating IGAs with 50
In addition, the threat of criminal prosecution is quite
persuasive. It was reported extensively this summer that 100 Swiss banks that
service US clients that have not yet been criminally investigated are willing to
settle with the IRS. Some 19 Swiss banks and Israeli banks based in Switzerland
are currently involved in IRS investigations or criminal cases.
institution wishes to be prosecuted, nor even investigated by the US government.
They do not wish to pay millions of dollars of fines like UBS paid. The banks
are no longer able to protect their customers’ secrecy. We cannot expect them to
do so any longer. It has even come to the Swiss Bankers Association recently
apologizing for banks’ conduct resulting in criminal prosecutions and civil
inquiries.Is this information sharing imminent or will it start in the
At the end of August of this year, a Department of Justice official
insinuated that US persons with interests in Swiss bank accounts are running out
of time to come into compliance; their names and account details will soon be
turned over to the US.
Switzerland is not the only country playing “Let’s
Make a Deal.” The UK reached agreements with several countries for information
exchange. Israel is a member of the OECD, and as such, an Israel Tax Authority
official announced at a conference earlier this year that discs containing
account information were already being exchanged monthly.What if I have
never filed or didn’t report everything?
Honestly, if you need to clean up your
filings, it is best to consult with tax professionals – both an attorney and a
CPA – who specialize in US income-tax compliance. This is true whether you have
never filed or whether you have been filing but only reporting some of your
income and/or assets. Start off on the right foot by doing it right the first
and only time. Create an accurate model for your future filings.
reporting obligation in the law since the 1970s Bank Secrecy Act has been
actively enforced by the IRS since 2003. The reporting form is the FBAR. This
obligation affects US persons who have “any interest” in an account located
outside of the US. “Any interest” can include an agent under a power of attorney
and a person who has signatory authority, so check with a tax professional to
determine whether you are required to file and what you are legally obligated to
include on your FBAR. If these non-US accounts had a cumulative balance on any
given one day of the year of more than US $10,000, filing is mandatory.
have heard some people don’t believe that they will get caught because the
government isn’t looking for the little guy. What do you say to that?
foremost, you risk criminal prosecution if you evade taxes. It is simple. US law
has set forth several criteria for determining whether a US taxpayer has
willfully evaded reporting or paying taxes. If you intentionally plan not to
report or file or pay your taxes, once you know of your legal obligation, you
are willfully evading taxes. This could end quite badly. Prison and fines are
the sentences for criminal prosecution.
Many clients have asked how the
IRS will enforce prosecution here in Israel. A spokeswoman for Bank Leumi
acknowledged in writing in February 2013 that the bank had “previously stated
that we are among the international banks within the scope of a US inquiry into
tax matters involving US customers.”
In the last six months alone five
people have pled guilty in criminal proceedings to counts of tax evasion in the
US, due to unreported Israeli bank accounts. Clean it all up once and for all,
and do it right. It is time.
The information contained in this article
reflects the opinion of the author and not necessarily the opinion of Portfolio
Resources Group Inc
. or its firstname.lastname@example.org
Aaron Katsman is a licensed financial adviser in Israel and the United States
who helps people with US investment accounts. He is the author of the book
Retirement GPS: How to Navigate Your Way to A Secure Financial Future with
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