Foreign Bank

1. Did you receive a letter from your Foreign Bank? Freeman Tax Law Your Help Line is at: (855)935-5945 www.freemantaxlaw.com

2. Didyou receive a letter from your Foreign Bank? Well… it might be your last chance to clean up the mess!! Foreign banks and foreign financial institutions (such as insurance companies, brokerages, funds, etc.) are rapidly sending letters to account holders that are U.S. persons (i.e., those that are U.S. citizens, Green Card holders and many U.S. Visa holders) requesting information to determine whether such account holders have disclosed their foreign accounts to the Internal Revenue Service ("IRS") and have complied with the appropriate U.S. laws. The receipt of these letters creates fear, anxiety and questions for those that have received them. It is the hope that this will help answer a few questions and provide some practical guidance. Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

3. What is the Foreign Bank or Financial Institution requesting in their letter? • The letter being sent by foreign banks differs in form each foreign bank and financial institution. Generally, however, the letters are very similar in substance and they usually request an account holder to disclose information as to whether the account(s) has been declared to the IRS through the filing of a Report of Foreign Bank and Financial Account ("FBAR") form and on the Form 1040 Federal Individual Income Tax Return. • In terms of timing, we have seen that banks and financial institutions are requesting that the customer provide information going back to 2008. • If the account holder has not disclosed the account, the letter provides the recommendation to participate in the various IRS Offshore Voluntary Disclosure Program (“OVDP”) and requests that the customer provide documentation that the have indeed entered the program. . In many cases, the banks and financial institutions request that these forms be provided to them. The foreign banks and financial institutions are also requesting that the account holder submit an IRS Form W-9, which is generally required to be completed by U.S. customers for tax reporting purposes. Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

4. What are the consequences of receiving this letter? • The consequences of the IRS receiving a U.S. taxpayer's foreign account information can be have serious consequences if the U.S. taxpayer has not previously reported the foreign account on an FBAR and/or has not reported all of the income associated with the foreign account on a U.S. tax return. • There are potentially significant civil (as high as 50% of the highest value of the account or $100,000, whichever is greater) and criminal penalties (up to 10 years imprisonment and up to a $500,000 criminal fine). Why did I receive this letter? The Foreign Account Tax Compliance Act ("FATCA"), is a law enacted by Congress in 2010 and effective beginning July 1, 2014. The law was enacted to identify noncompliance by U.S. taxpayers using offshore financial accounts. Under FATCA, foreign financial institutions will generally be required to comply with certain due diligence and annual reporting requirements regarding their U.S. account holders and enter into information sharing agreements with the United States. Foreign financial institutions that do not provide such information to the United States will face a penalty in the form of a withholding of 30 percent of certain U.S. source payments such as interest and dividends. Many U.S. taxpayers are receiving these letters because, in advance of the effective date of FATCA, foreign banks are undertaking the process of identifying account holders that have a U.S. tax connection. A foreign bank may find that an account holder has a U.S. tax relationship from information held by the bank such as a U.S. mailing address, a U.S. phone number, account holder birth place or the fact that upon opening the account information the bank was provided a U.S. passport, Green Card or U.S. Visa or other information indicating U.S. residence. If a foreign bank has identified an account as potentially having a relationship to United States, the institution is likely to send this letter to the account holder. Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

5. What are my options? OVDP What is a “Non-Prosecution Agreement” and why was it mentioned in my letter? If your account is based in Switzerland, your letter may have referenced that your Bank has entered into a “non-prosecution agreement” with the U.S. Department of Justice (“DOJ”). Basically, what this means is that the bank has agreed to participate in a program to proactively resolve potential issues that they have with the U.S. Department of Justice if they have “reason to believe” they violated tax laws of the U.S. There have been 106 banks in Switzerland that have entered into this initiative. The non-prosecution initiative requires the participating banks to disclose how they helped Americans hide assets, disclose the total number of U.S. accounts since 2008, provide their highest dollar value, and turn over the names of employees who managed these assets. The banks also must use independent examiners to certify findings to the DOJ. According to a January 26th, 2014 article in Bloomberg, “the program is the largest assault in a five-year U.S. Department of Justice crackdown on offshore tax evasion”. The price for participating in non-prosecution agreements with the DOJ is very high. Banks must pay 20 percent of the value of accounts not disclosed to the Internal Revenue Service on Aug. 1, 2008, 30 percent for such accounts opened between then and February 2009 and 50 percent for accounts opened after this date. • The OVDP is designed to encourage U.S. taxpayers with undisclosed foreign bank accounts and unreported income associated with those accounts to come into compliance with U.S. tax laws and avoid criminal prosecution. • Taxpayers accepted into the OVDP must file amended tax returns for an eight year period and pay all back taxes, interest, and an accuracy related penalty of 20 percent of the taxes due, and a civil penalty equal to 27.5 percent of the highest aggregate value of the U.S. taxpayer's foreign bank accounts during the eight-year period (subject to certain exceptions). Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

6. What are my options? Streamlined OVDP Should I close my account and move the money? We have all heard the saying that “you can run, but you can’t hide”. There is a lot of truth to that saying in this situation. Many taxpayers; however, have chosen the path of closing the account and moving the assets. Instinctually, it is the “flight or fight” response to receiving this type letter. Transferring the funds to another foreign bank is really not a great idea. Aside from the potential civil and criminal penalties that might be imposed as a result of such actions, the implementation of FATCA has changed the way bank secrecy laws work for U.S. people around the world. U.S. taxpayers with undeclared foreign bank accounts can no longer rely on foreign assurances that they will be protected by foreign bank secrecy laws or remain undetected by the U.S. government. Foreign banks and financial institutions are being asked through U.S. Department of Justice “John Doe” Summonses to provide “account migration” information, which eventually reveals the names of U.S. account holders that have transferred assets to other banks. Simply closing a foreign account and moving the funds elsewhere is not a good option because it is likely that the U.S. government will find out about it anyway.   • Another option for U.S. taxpayers who live overseas (including dual citizens) and have not filed U.S. returns is the IRS' streamlined non-resident compliance procedure. • U.S. taxpayers that are eligible for this procedure are generally required to file delinquent tax returns for the past three years and delinquent FBARs for the past six years. • Submissions that present a higher compliance risk are not eligible for the procedure and will be subject to a more thorough review and possibly a full examination (which in some cases may include more than three years), as well as the imposition of tax, interest and penalties. Freeman Tax Law  (855) 935-5945  info@freemantaxlaw.com  www.freemantaxlaw.com

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8. Freeman Tax Law About Freeman Tax Law Freeman Tax Law is a boutique tax law firm with national exposure equipped to handle all domestic and international tax law matters. At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning. Freeman Tax Law (855) 935-5945 info@freemantaxlaw.com www.freemantaxlaw.com