However, since 2008, a string of scandals involving foreign banks and investigations by the U.S. government into various non-U.S. financial institutions has garnered international media attention and changed the way governments around the world deal with offshore financial accounts.
- The main goal of FATCA was to make it more difficult for U.S. taxpayers to hide assets in offshore accounts and entities and therefore to increase U.S. tax revenue by ensuring income from those accounts is reported in the U.S. Government officials have estimated that the U.S. loses between $40 billion and $70 billion a year in unpaid taxes on offshore assets.
- FATCA requires worldwide financial institutions to report to the IRS certain information about accounts that are owned by U.S. persons (whom they identify through a variety of methods, including the request of Forms W-9).
- While FATCA has drawn intense criticism from around the world (and in the U.S.), it now appears that the law is here to stay, and other governments have made similar strides in increasing the scope of their international tax information exchange.
Over the three year program, the U.S. gathered information from 80 Swiss banks and collected over $1 billion in penalties from those banks.
The program also provided information to the IRS about other jurisdictions that may commonly hide U.S.-owned assets.
3. Data Mining. The IRS also continues to "Data Mine" to gather information provided by the more than 54,000 taxpayers who have filed under the IRS’ Offshore Voluntary Disclosure Program since 2009.
The U.S. will use this information to assess what other jurisdictions, foreign banks, and facilitators may be assisting U.S. clients in evading their tax obligations and to assist in future prosecutions.
4. Panama Papers. In April 2016 over 11.5 million financial and legal records from Panamanian law firm Mossack Fonseca where leak to the press, which underscores the risk of public disclosure of financial records related to undisclosed foreign financial accounts.
- An anonymous source provided the information in the “Panama Papers” leak to various global news organizations that have since been reviewing the files in detail.
- The leak created a scandal for many high-profile politicians around the world and forced some to resign.
- It was revealed that the firm had created over 2,800 companies in offshore havens for over 2,400 U.S. clients as well.
- While many of these transactions are legal, U.S. taxpayers must fulfill various foreign information reporting requirements with the IRS related to non-U.S. financial accounts and entities, or they face substantial penalties for noncompliance.
- In response to the Panama Papers, the U.S. government has also proposed and enacted new rules making it harder to conceal the identities of the true owners of companies.
- The release of the Panama Papers is just the latest example in the ongoing movement around the world to make it harder for taxpayers to hide their assets offshore and evade taxes.
- Nowhere has this movement been more pronounced than in the U.S., where government officials have repeatedly made clear that continuing to hide financial assets will get more and more dangerous and difficult, and that taxpayers should come forward as soon as possible to come into compliance with their U.S. tax and reporting obligations.
Marini & Associates, PA has assisted several hundred clients with coming into U.S. tax compliance and avoiding the draconian penalties that the IRS may impose on U.S. persons with undisclosed accounts.
Read more at: Tax Times blog