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Friday, March 29, 2024

New Yorkers Can’t Escape Paying Uncle Sam; Foreign Banks Share Information on Taxpayer’s Accounts

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U.S. citizens will have a hard time if they try to evade the IRS by hiding assets in foreign accounts.
U.S. citizens will have a hard time if they try to evade the IRS by hiding assets in foreign accounts.
American citizens are on the way to not being able to use foreign bank accounts to hide funds. Another step has been taken in the United States plan that requires 77,000 banks, investment funds and other financial institutions in Israel and across the globe to release any information about U.S. account holders. The information will be reviewed by the internal

Revenue Service, as part of the Treasury Department’s investigation on tax evasion through the use of offshore accounts.

The Finance Ministry announced in May an outline of a deal with the United States that will mandate Israeli financial institutions to sign agreements. The agreements will require the institutions to check for relevant accounts and annually submit a report containing the information along with any account holders’ information and account value of those who did not comply.

Individuals holding dual citizenships voice the most concern over the deal’s implementation; many of whom have not filed tax returns or have reported their income tax incorrectly. In recent years there has been an increase in IRS audits. With this agreement IRS agents will have a much easier time apprehending such individuals.

A list has been released of 77,000 foreign financial institutions, which will partake in the deal between the Finance Ministry and the U.S. Treasury Department. As part of a U.S. law that focuses on exposing American citizens hiding assets in foreign countries, the governments of nearly 70 countries have agreed to release information from their banks. Among the participating countries are many of the world’s top financial players. Also included are countries famous for being places where Americans hide assets, such as Switzerland, the Cayman Islands and the Bahamas.

515 of the 77,000 listed are Russian financial institutions. The U.S. ended negotiations between the IRS and the Russian government over Russia’s participation in activity in the Ukraine. Therefore, the Russian banks had to apply directly to the IRS without government input.

In March 2015, the financial institutions making the agreement will divulge to the IRS, names, account numbers and balances for all accounts held by U.S. taxpayers. Any foreign banks that refuse to follow the agreement with the IRS will face significant penalties. The law will require American banks to withhold 30 percent of specific payments to the disagreeable foreign institutions.

The Foreign Account Tax Compliance Act (FATCA) passed as law in 2010, was designed to persuade foreign financial institutions into providing information about U.S. account holders to the IRS. This was the beginning of an ongoing movement to deter American citizens from U.S. tax evasion.

On Monday the Treasury released the list of the banks in compliance with the agreement, so that American financial institutions know they could send them payments without withholding the 30 percent tax. After another round of information-sharing agreements, the list is expected to be updated by the Treasury next month.

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