First the Swiss, now the Israeli banks are feeling the pressure by the Internal Revenue Service.
Israeli Bank Leumi is pushing US clients to disclose tax information to US authorities. Leumi is encouraging US clients to enter into the IRS Offshore Voluntary Disclosure Program, as the crackdown on off shore accounts expands to Israel.
The Offshore Voluntary Disclosure Program’s purpose is to give US citizens with previously undisclosed offshore accounts and income an opportunity to come clean. If US citizens do enter into the program and comply with all the requirements specified by the IRS, then they may receive in return a promise of no prosecution and “possibly” reduced fines and penalties. Since 2009, over 38,000 US citizens with offshore accounts and undisclosed income have taken responsibility and enrolled in the Voluntary Disclosure Program. The IRS has recovered approximately $5.5 billion as a result of the Offshore Voluntary Disclosure Programs.
Bank Leumi, apparently under pressure from the US, stated that they would help their US clients in this process, with assistance in gathering information and documents that are in the banks possession and are required by the Offshore Voluntary Disclosure Program. They have also setup a hotline to assist with various questions. Bank Leumi and two other Israeli banks, Bank Hapoalim and Mizrahi-Tefahot, are in the crossfires and are currently under investigation by the U.S. Justice Department. The expansion of the international banks’ compliance and their encouragement to their clients to participate in the IRS Voluntary Disclosure is also attributable to the upcoming full implementation of FATCA (Foreign Account Tax Compliance Act) in 2014, and a requirement is that foreign institutions assist US clients in compliance with US tax laws.
Account holders are feeling the pressure from banks to provide Forms W-9 with the identity information because FATCA requires foreign financial institutions to collect and turn over data on US clients with accounts of at least $50,000, or to withhold portions of client accounts and send the money to the IRS. In March 2012, Bank Leumi requested that clients submit Forms W-9, sign declarations stating that accounts complied with US tax law, and include in the declarations that they “explicitly waive banking secrecy/consent to such disclosure.”.
Clients with foreign bank accounts, including accounts in Israel, are encouraged to see a competent tax attorney to discuss possible options and solutions. Our Former IRS Attorneys are available to consult with you regarding offshore accounts, Offshore Voluntary Disclosure Program and FATCA requirements. Please contact us at (310) 550-6200 to schedule a consultation.