Croatia and U.S. To Begin Sharing Account Information
If prompted to name off a commonly known tax haven, Americans would likely spout off Switzerland, the Cayman Islands, or Luxembourg. It is possible that a very large number of countries could be identified before one asserted that Croatia is a potential hiding-place for offshore funds. Nonetheless, the United States and the Croatian government recently announced a new information-sharing agreement that will bring financial intuitions in Croatia into compliance under the domestic FATCA laws. This may be a cause for concern for any American with an account with a foreign institution in Croatia that has not been declared to the IRS.
Details of the New Agreement with Croatia
The agreement, which was announced last week, is just another milestone in the U.S. government’s attempt to establish a worldwide presence in the arena of financial information collection. Since Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010, the State Department has been quick to use its international political power to encourage countries to voluntarily share information with the IRS. In short, Uncle Sam wants to know what you are doing with any significant amount of money whether it is within the U.S. or without.
Kenneth Merten (U.S. Ambassador to Croatia) and Croatian Finance Minister Boris Lalovac effectuated the agreement and according to the announcement, Croatia will also be sharing information with tax authorities across the European Union. This is consistent with Croatia’s recent admission into the EU back in 2013. In order to comply with both the FATCA requirements and similar standards of the EU, Croatia will adopt information-sharing policies outlined by the Organization for Economic Cooperation and Development (OECD), of which the United States is also a member.
Under Croatia’s new procedures, financial institutions in Croatia will be required to provide American account information to the Croatian taxing authority who will then relay that information to the IRS. The agreement between the nations is reciprocal in that the IRS will collect and disseminate information regarding financial information of Croatian citizens back to their domestic Finance Ministry.
For Americans with foreign accounts, news of another country entering into an information-sharing agreement represents an escape route that is progressively getting more and more narrow. Soon, no nation will be without some type of agreement with the United States with regard to foreign account identification. Some taxpayers think that finding a country with weak diplomatic relations with the U.S. is a solid strategy to avoid foreign account detection. But alas, even strong tension between the United States and Russia did curb advice from Moscow to its banks specifically allowing them to comply with FATCA regulations. The truth of the matter is that soon, there will be no jurisdiction where neither the government or the private banks will be willing to keep your financial secrets and when the U.S. government finds out about your hidden account, any evidenced effort to hide your wealth will likely result in a criminal prosecution for willful noncompliance of domestic tax law.
Americans Can Use the OVDP to Avoid Prison
But the story certainly does not have to end that way. The IRS has made an effort to allow for a temporary method to safely disclose your foreign accounts without facing the possibility of incarceration. Further, for those taxpayers whose conduct was not willful, the IRS is willing to reduce some of the fines and penalties associated with the violation of the Foreign Bank Account Reporting laws. The Offshore Voluntary Disclosure Program has been a way for thousands of Americans to come forward and come clean without fear of draconian penalties or the real possibility of a lengthy stay in a federal prison.
Though, the OVDP has several strings attached to it. First, you cannot already have an open investigation or examination with regard to any tax issue. Thus, if a country (like Croatia) has passed along information to the IRS regarding your foreign account, there is a pretty substantial chance that you will be disqualified from the program. This means that time is of the essence to file an application to be a part of the program and be accepted while you can. Second, when applying for the OVDP, there are particular documentation requirements that must be met, declarations that must be made, and evidence that must be included in order to ensure the timely and accurate processing of your application. The application should be completed and reviewed by an experienced tax attorney to make ensure accuracy and completeness.
The tax law professionals at the Tax Law Offices of David W. Klasing have years of experience in assisting taxpayers come clean about their foreign accounts. When time is of the essence and the process is detail-oriented, the best advocate to have in your corner is David W. Klasing and his team of tax professionals. Contact the Tax Law Offices of David W. Klasing today at 800-805-9718 or online for a reduced-rate consultation.