The Offshore Voluntary Disclosure Program (OVDP) closes September 28, 2018 and account holders that fail to disclose offshore accounts will be investigated by IRS and DOJ. What is surprising is that the public underestimates the efforts of our government to assemble data and the amount of usable information it now has in its hands. Consider the following story.
There is an organized group in France called “Accidental Americans” comprised of 10,000 or more individuals who acquired U.S. citizenship, typically by being born in the U.S., who left America and live in France. One individual was born in California while his French father was on assignment. His family returned to France when he was four months old and he never returned to the US and he does not speak English. He has never had a U.S. social security number, is of modest means, has no U.S. assets and pays tax in France as a citizen. Because the U.S. taxes citizens on a worldwide basis, this individual has unfiled tax returns for many years and may or may not owe taxes. He is not alone. The IRS dragnet has identified all of these persons. To be fair, it is impossible to tell a tax cheat from an Accidental American on a computer screen without some inquiry. Why does this matter at all you ask?
French citizens are being denied or limited in their banking privileges because these Accidental Americans are identified by IRS as targets. A sovereign country, France, is bending to the IRS and France is not alone. French banks are reluctant to be viewed as non-cooperative in this era of Tax Information Exchange Agreements (TIEAs) and FACTA. The consequences for a French bank being denied access to the US or international banking and settlement networks would be catastrophic. It was not long ago that the Swiss banks, the bastion of secrecy, turned over volumes of information on US account holders when faced with DOJ subpoenas. There have been criminal prosecutions of bankers and account holders. Finally, there is FACTA. For those who are unaware, FACTA requires foreign banks and financial institutions to identify their customers in a manner that eliminates undisclosed accounts. A failure to observe these rules prevents the company from doing business.
If DOJ and IRS can identify Accidental Americans, what do people think will happen with all of the information turned over the government on the holders of foreign accounts. Some foreign banks and financial institutions have closed accounts of U.S. persons and turn away new business because they do not want any involvement with DOJ and IRS.
The IRS will take the personnel devoted to OVDP and the massive amounts of acquired data and begin issuing subpoenas to account holders who have not disclosed. Given that the penalties are not just monetary but also criminal, persons with undisclosed foreign accounts and assets would be wise to come forward. There are no rocks left to hide under after September 28th.
If you have any questions, please contact us
If you have questions or if you would like to discuss the matter further, please contact me, James McDonough, or the Scarinci Hollenbeck attorney with whom you work at 201-806-3364.