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Have you been filing US tax returns but have unreported foreign bank accounts?

Is your offshore bank about to divulge your details to the IRS?

Are you asked to confirm being compliant with the IRS?

Here is How We Can Help You

Are you a US citizen who has been filing the US tax returns but failed to report their Swiss (or other offshore) bank account? If so, you should familiarize yourself with the below.

Due to significant pressure applied to the Swiss banks by the US government, Swiss banks will now likely throw away their vaulted bank secrecy and report American clients to the US government (including past clients who are no longer with the bank).

You may have already (or will soon) receive the following letter(s) from your bank:

  1. Informing you that they will provide your details to the IRS.
  2. Requesting that you provide a written affidavit confirming that you have filed a tax return & Foreign Bank Account (FBAR) form with the IRS.

At this point you can either:

  1. Hope that the IRS will do nothing with the information provided.
  2. Take proactive steps to minimize your liability.

While we can not do much if you choose option 1 (there is probably a house of worship nearby that could help), we can certainly get your situation straightened out and work on option 2.

Here is what we can do to help you become compliant before the IRS takes matters into its own hands:


3 Years of Amended Tax Returns

 

6 Years of Foreign Bank Account (FBAR) forms

 

Statement confirming your U.S. tax / FBAR filing compliance for your Swiss bank

 

Total Cost

$1,500


If form 8938 is required total cost is $1,800

We have already helped hundreds of expats file overdue tax returns and become compliant with the IRS and are familiar with the process.

Time is of the Essence

It is only a matter of time before the IRS learns about your Swiss bank account (even if you have already closed it). Having IRS find you first may result in a truly terrible outcome [1],[2]. Instead you should take proactive steps and come clean, thus avoiding the harsh treatment.


Frequently Asked Questions

1. Why is my offshore (i.e. non-U.S.) bank asking me to confirm that I have filed my US tax return & FBAR forms?

In 2009, UBS paid $780 million to the IRS for helping Americans stash money offshore. The US government is now going after all other Swiss banks - who face the choice of either closing down or settling. Part of the settlement involves:

  1. Providing details about the current and past American clients to the IRS
  2. Ensuring that existing American clients are compliant with US tax laws

2. How will IRS find out about my foreign bank account?

FATCA—the Foreign Account Tax Compliance Act—takes effect in 2014 and the IRS will start penalizing foreign banks if they don’t hand over data about American clients. Most foreign countries and their banks are getting in line to take their medicine from the IRS. So don’t count on bank secrecy anywhere.

On top of FATCA, the U.S. has a treasure trove of data from 40,000 voluntary disclosures, whistleblowers, banks under investigation and cooperative witnesses. So the smart money suggests resolving your issues. You can have money and investments anywhere in the world as long as you disclose them.

3. What is the risk if I fail to file truthful tax returns and/or FBAR forms?

Tax return and FBAR violations are dealt with harshly. Tax evasion can mean five years in prison and a $250,000 fine. Filing a false return? Three years and a $250,000 fine.

Failing to file FBARs can be criminal too. Fines can be up to $500,000 and prison can be up to ten years. Even civil FBAR cases are scary, with non-willful FBAR violations drawing a $10,000 fine. For willful FBAR violations, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation. Each year you didn’t file is a separate violation. Those numbers can really add up!

There Are Big Penalties. Failures can be considered tax evasion and fraud. The criminal statute of limitations is six years. Plus, the statute of limitations never expires on civil tax fraud.

FBAR Penalties Are Worse. The penalty for failing to file an FBAR is $10,000 for each non-willful violation. If willful, the penalty is the greater of $100,000 or 50 percent of the amount in the account for each violation. Each year you didn’t file is a separate violation. See Despite FATCA, FBAR Penalties Still Under Fire.

You Can Even Go To Jail. Tax evasion can carry a prison term of up to five years and a fine of up to $250,000. Filing a false return can mean up to three years in prison and a fine of up to $250,000. Failing to file a tax return can mean a one year prison term and a fine of up to $100,000. Failing to file FBARs can be criminal too with monetary penalties up to $500,000 and prison for up to ten years. See IRS May Find “Innocent” FBAR Violation Willful.

4. Can I instead just close my foreign bank account and avoid disclosure that way?

See Is Closing Foreign Bank Accounts An Alternative To Disclosure?

5. So what are my choices?

Tell the bank you’re compliant even if you’re not? This seems dangerous. The bank or the IRS will find out, maybe not right away, but eventually.

Don’t respond? Sure, you can do this for a while. But eventually, the bank will close your account. Banks routinely turn over the names of closed accounts, so that hardly solves the problem.

Join one of two IRS amnesty programs and tell your bank you’ve done it? This is the safest choice. The primary program is the Offshore Voluntary Disclosure Program. You pay back taxes and penalties but you will not be prosecuted. The other is the IRS’ Streamlined program for some US persons abroad. It is far less expensive if you qualify.

File amended tax returns and FBARs and pay any taxes you owe? Then tell the bank you’ve complied with IRS laws and wait? This may be the optimal choice if you have already filed your tax returns (hence ineligible for the Streamlined Procedure) but the amounts you have in foreign bank accounts are not egregious (ie you can make a case that you were not willfully hiding funds offshore).

Disclosure and penalties are vastly better than the alternative. And discovery by the IRS is looking more and more likely. Merely closing a foreign bank account does not solve disclosure problems.