Israel agrees to turn American’s bank accounts over to IRS
By Niv Elis
The Finance Ministry reached an agreement on Thursday to turn information on US citizens’ bank accounts over to the United States Internal Revenue Service, in compliance with a tough US law designed to counter tax evasion.
The 2010 Foreign Account Tax Compliance Act (FATCA) requires international financial institutions to turn over all the information on their US account holders, or else face tough sanctions from the US: withholding of 30 percent of all US-based transactions.
Though many expatriate Americans don’t know it, they are required to file their income with the IRS each year with a 1040 tax form. Tax agreements signed between the US and Israel mean that Americans in Israel earning less than $97,600 a year generally don’t need to pay any additional taxes, but they are still required to file the form.
If someone doesn’t file the 1040 form, incorrectly answers the section on whether they hold foreign bank accounts with over $10,000, or fails to file the accompanying Foreign Bank Account Report form, the penalties can be monumental. The IRS can fine violators for up to 50% of the account’s maximum balance for each year of each violation.
The agreement means the US will have precise details on which foreign bank-account holders have failed to report their bank accounts and whether it was a purposeful attempt to evade taxes or an accidental oversight.
“The agreements signed with the US Treasury Department will make it easier for the necessary financial institutions to provide the information on American accounts in Israel,” said Frieda Israel, deputy supervisor for state revenue at the Israel Tax Authority, who led the negotiations with the US Treasury Department.
The agreement provided for some exemptions for small financial institutions considered to be low-risk for abetting tax evasion.
For Americans who have not played by the book, there may still be an option for coming clean and avoiding enormous fines through the Overseas Voluntary Disclosure Program; if they come clean about their mistakes and file their old taxes they can pay a lower fee.
The program, however, was designed to get people to disclose their accounts before FATCA went into effect, so it is not clear whether the IRS will continue to offer it once it has people’s account information.
Although FATCA is an American initiative, Wednesday’s agreement opened up the possibility that the US would divulge account information on Israeli citizens living in the United States. That means Israeli entrepreneurs making big bucks in Silicon Valley may yet find the Israel Tax Authority knocking on their doors, asking for a slice.
Israel is not the first country to cooperate, as 28 countries had already signaled their compliance, including Britain, Canada, Denmark, Mexico, Ireland, Norway, Spain, Germany, France, the Netherlands, Japan, Italy and Hungary.
They may have been convinced to participate following a series of high-profile disclosures after notoriously secretive banks in Switzerland, such as UBS and Credit Suisse, agreed to disclose information on their American account holders in 2013, leading to prosecutions.
As The Jerusalem Post reported in August, several Israeli banks may have already begun disclosing account holders’ information even ahead of the FATCA compliance deadline.
In December 2012, Bank Leumi sent letters to its American customers urging them to disclose their accounts. The IRS caught whiff of the warnings, and seven months later said it would no longer accept early amnesty for Leumi account holders who had reported their previous nondisclosure, according to a Forbes report.
With the compliance deadline in sight, Globes reported, US citizens withdrew $4 billion to $5b. from Israeli banks.
Author: Ida Real Estate
I have dealt with people starting from my teen years whether it was a junior counselor position, volunteering in community centers for the elderly, working as a secretary and as a real estate agent. Dealing with the public is a learning experience and challenging. Someone once told me that a person can learn from every being they meet whether it be a child or a stranger they met for 2 minutes. This I hold true. I have met so many people and have learned a lot and keep learning. My father who ran his own business made it a point to provide good service to all his customers no matter how small the customer. I hope to offer quality, honesty, and result in happy customers whether they are sellers, buyers, or renters.