United States law requires citizens and resident aliens (i.e. green card holders) to disclose all of their income regardless of where it was earned. This includes reporting foreign trusts and bank and security accounts held in other countries. Depending on the value of the foreign accounts various forms are required.
The term "whistleblower" provides an excellent example of the difference between literal and figurative language. Someone who exposes suspected wrongdoing, perhaps because of financial incentives, rarely blows a literal whistle. But the impact of figurative whistleblowers looms large in many different arenas.
Much has been written, on our California tax blog and in the broader media, about the upcoming implementation of the Foreign Account Tax Compliance Act, also known as FATCA. Overseas financial institutions have been fretting about complying with the act's reporting provisions, but they can rest easy, at least for a time.
The Internal Revenue Service's inquiry into offshore tax evasion is a multi-pronged effort. While the IRS and the Department of Justice apply pressure to foreign governments and financial institutions, the IRS is also creating initiatives for U.S. taxpayers--living here in California or residing abroad--to come back into compliance with reporting requirements.
One month ago, we included a story on our California blog about Swiss banks providing employee information to the U.S. government. That disclosure by five banks, including Credit Suisse, HSBC and others, instigated a furor among that country's banking community as many bankers perceived the release of their names as a betrayal of confidence.
Just how much does a whistleblower stand to gain if he discloses valuable information on tax evasion and other illegal tax practices? As much as 30 percent of the total taxes the Internal Revenue Service recoups as a result of the information. For those who pull back the curtain on particularly large instances of tax evasion, a very handsome payday may be their reward.
The U.S. government's efforts to limit, punish and deter offshore tax evasion have been a frequent subject on this blog. The fruits of those efforts have been so appealing to other nations, however, that some countries want to reach similar terms with the Swiss government to prevent their own citizens from sheltering assets from taxation in the Alpine nation.
The Internal Revenue Service and the Department of Justice are increasing the pressure on Swiss banks in their search for taxpayers who have used offshore bank accounts to shelter assets from taxation. It was revealed this week that five Swiss banks, including major financial institutions Julius Baer, Credit Suisse and HSBC turned over employee records and contact information to the U.S. government.
The United States Treasury Department recently released new information regarding its attempts to collect taxes from Americans with offshore bank accounts. Officials have said that the final rules should be set for release later this fall, ensuring that the system will be ready for its scheduled 2014 implementation.
California residents with offshore bank accounts may be interested to hear of the latest development in the Internal Revenue Service's pursuit of those who have engaged in tax evasion by neglecting to report assets held in foreign countries. Earlier this week, a federal appellate court reversed a lower court's decision and ruled that a man's failure to file required Reports of Foreign Bank and Financial Accounts was willful, opening the door for increased penalties.