The world is getting smaller and it is getting harder to leave a pile of money in a far off corner unnoticed and untaxed. That is thanks to overlapping initiatives of the United States (FATCA), the Israeli Tax Authority, the Bank of Israel (directive to Israeli banks to check deposits are taxed) and the OECD (common reporting standard). In parallel, the US, Israel and other countries are offering voluntary disclosure procedures, commonly known as amnesties.The deal is: Come clean before they clean you up.Israel – general:Israel taxes worldwide income of Israeli residents. There are currently three main Israeli amnesty programs: • Regular amnesty program; • Anonymous amnesty program; and • Fast track amnesty procedure.The anonymous and fast track procedures are only available until September 6, 2015 (so hurry!), the regular amnesty is available until December 31, 2016.Taxpayers who committed tax offenses are encouraged come forward and report. In return, if the matter was unknown, the Tax Authority and state prosecutor may undertake to refrain from criminal proceedings. However, the tax remains payable in full and fines, interest and inflation indexation may apply, unlike past amnesties.Israel – trust amnesty:In 2006-2013 Israel generally did not tax foreign source income and gains of trusts with a foreign resident settlor (“Foreign Resident Settlor Trust”=FRST), if some conditions were met.But if a beneficiary exercised control or influence, that person was deemed to be a settlor, making the trust fully taxable in Israel from 2006.The term “control or influence” is not defined in the law, resulting in uncertainty.Also, past capital gains are often drawn into the tax net if trust assets were sold in 2014 onwards. Consequently, on March 9, 2014, the Tax Authority announced optional arrangements for trusts regarding 2006- 2013. Such an arrangement, if desired, must be elected by December 31, 2015.There are three possible arrangements: • No tax route – if there is no beneficiary control or influence; • Income tax route – Israeli tax on 1/3 to 2/3 of trust income derived in the years 2006-2013; • Capital tax route – Israeli tax at 3 percent to 6% of the value of trust capital as at December 31, 2013, plus distributions in 2006-2013; These optional arrangements amount to an amnesty for FRST trusts.What about olim (immigrants)?In general, new and senior returning residents (who lived abroad 10 years) may enjoy a 10-year tax holiday from Israeli tax on overseas income and gains if they became resident on or after January 1, 2007.In the trust context, some of the aliya tax breaks according to a Tax Authority Circular (Supplement 1 to Circular 1/2010, dated March 10, 2015).• Israeli Residents Trust, formed before August 1, 2013, by a non-resident settlor or a settlor in his tax holiday: no Israeli tax or tax reporting so long as the settlor is alive and in his tax holiday; • Other Israeli Residents’ Trusts: no Israeli tax or tax reporting so long as the settlor and all the beneficiaries in their tax holiday or are foreign residents.US – federal:American citizens residing in Israel are required to pay US federal taxes on their worldwide income and, where applicable, to file Foreign Bank Account Reports (“FBARs”). Nevertheless, many have not fulfilled these obligations.Recently, the chances of getting caught have risen dramatically. Israel and the United States have signed agreements under which the Israel Tax Authority and Israeli banks share information with the IRS. Consequently, Israeli banks are refusing to release funds unless American customers sign Form W-9, which allows banks to transmit account information to the IRS.Penalties for failure to file tax returns and FBAR are severe. Tax return penalties due to fraud can reach 75% of the amount of tax owed. Newly revised penalties for willfully (i.e., knowingly) not filing an FBAR may reach 100% of the value of the bank account and may involve criminal penalties. Even the penalties for non-willful violations can reach 50% of the account value.Fortunately, it is possible to come into compliance through one of two amnesty programs: the Streamlined Procedure and the Offshore Voluntary Disclosure Program (OVDP).“Streamlined” applies to people who were not “willful” in their noncompliance, and, for those residing outside the US, involves no penalties.In contrast, OVDP applies to people who willfully failed to comply and requires the payment of penalties based on the amount of tax owed, plus a penalty of 27.5% or 50% of the value of unreported bank accounts and rental real estate. But strategic advice and time are of the essence: Once a person initiates Streamlined, OVDP is no longer an option, and vice versa. And, if the IRS contacts the taxpayer before he initiates either Streamlined or OVDP, he is ineligible for both programs.The question of what constitutes willfulness is key. The IRS infers a taxpayer’s state of mind from objective facts. A taxpayer’s evasive actions (such as refusing to sign a W-9) could be used by the IRS to show willfulness. Moreover, the longer a taxpayer waits while articles like this are published, the harder it will be to convince the IRS that he did not know of the filing requirement.Further, “willful” includes “willful blindness,” which means that the person sensed that he should file a tax return or FBAR but chose to not learn more about the requirement.In contrast, someone who thought incorrectly that he need not file because he doesn’t owe taxes might be merely negligent and not willfully blind. It is a fine point of legal judgment to distinguish between negligence and willful blindness, requiring an experienced tax attorney to evaluate the circumstances.And because willful failure to file an FBAR is a criminal offense, the attorney- client privilege, provided by a tax attorney, is important.US – individual states:In general, state classification of an individual as a “resident” is unaffected by federal or foreign classification of that person. Rather, the states generally subject individuals to income tax as an in-state resident if the individual is domiciled in the state or is present in the state for at least a set number of days.The domicile test is particularly relevant to people who move to Israel without making aliya because their connections to the state from which they moved remain strong, while their commitment to remaining in Israel is apparently weaker. These people can expect to continue to be treated as residents of their former state, such that a failure to file an income tax return as a resident is likely to draw the state’s attention.However, even Israelis and others who are merely working in a state, (whether as an employee, independent contractor or otherwise), with no intention of staying in that state, can be taxed as residents on par with people who have been domiciled in the state all of their lives because the number-of-days-test will be applied to them.Fortunately, for a limited time beginning in September, Maryland, Missouri, Indiana, Arizona, Oklahoma, Kansas and Louisiana are offering tax amnesty to non-compliant personal income tax taxpayers, and Alabama and New Hampshire also are considering 2015 amnesties on personal income or comparable taxes. While the terms of the amnesties vary by state, in general they are available for some two months and provide for the waiver of penalties, some or all interest and, potentially, some back taxes.Relief is also available in states that are not offering tax amnesty. For example, people participating in New Jersey’s voluntary disclosure program may be excused from taxes more than four years old, with waiver of penalties. Similarly, Pennsylvania waives taxes more than four years old, as well penalties on the four years’ taxes. New York State’s voluntary disclosure program is less generous, but can still result in substantial savings from the waiver of penalties.Significantly, the mere desire to participate in a state’s amnesty or voluntary disclosure program does not guaranty that the state will accept that person’s offer. Therefore, it is important that the individual’s approach to the state be anonymous, so that other options remain open if the relevant state balks.As always, consult experienced tax advisers in each country at an early stage in specific email@example.com, firstname.lastname@example.orgDavid Fruchtman is the chairman of Rimon PC’s State and Local (Subnational) Tax Practice; Moshe Mark Feldman is a US federal tax partner with Rimon PC; Leon Harris is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.