Articles Posted in Offshore Bank Account Problems

Our tax attorneys have had many clients with Superannuation accounts in Australia. For those of you not familiar with Superannuation accounts, these are the Australian version of our tax-favored retirement plans. These Superannuation accounts, sometimes referred to as Supers, can be very problematic for immigrants from Australia to the U.S., because they may or may not be subject to taxation in the U.S. The ownership of a Super may trigger the requirement to file an FBAR (Foreign Bank Account Report, FinCEN Form 114, formerly TDF 90-22.1) and/or Form 8938, Form 3520 or Form 3520-A. The proper treatment of a Super under U.S. tax law has been the subject of many articles on the internet and confusion abounds. Part of this confusion is because there are different types of Supers and, depending upon the facts and circumstances, the U.S. tax treatment may differ.

Over a year ago, one of our tax lawyers had a conversation with the IRS’ Offshore Voluntary Disclosure Program (OVDP) hotline to ask about the treatment of a Super. We were told that no Form 3520 was required. The person we spoke to was obviously reading from a script and, of course, we asked for a copy. Just as predictably, we were told that it was an “internal document,” and, therefore, we couldn’t get it. This led our tax lawyers to file a Freedom of Information Act (FOIA) Request in early April 2015, which was received by the IRS, appropriately enough, on April 15th. The substance of the request was as follows:

Please provide all documents, including internal guidance materials and training materials, that have not previously been published in the Internal Revenue Manual or on the IRS’ website (including but not limited to memoranda, staff manuals, Powerpoint presentations, videos and any other materials) concerning or related to the IRS’ treatment of Australian superannuation accounts (aka “ASAs”) or other non-U.S. deferred compensation arrangements or employee trusts (but not including Canadian arrangements or trusts) for purposes of United States taxation and information return filing under the Internal Revenue Code (26 U.S.C. §1, et seq.), the Bank Secrecy Act (31 U.S.C. §15, et seq.), the Offshore Voluntary Disclosure Program (aka the “OVDP”), the Offshore Voluntary Disclosure Initiative (aka the “OVDI”), the Streamlined Filing Compliance Procedures (aka the “SFCP”) and/or Transitional Treatment under OVDP/I, including any such documents used by or available to IRS personnel working at the IRS’ Offshore Voluntary Disclosure Civil Hotline at (267) 941-0020.

One of the top priorities for the IRS and Department of Justice has been the focus on offshore financial accounts held by U.S. taxpayers, and used to avoid or defeat the assessment of tax. Underscoring the need for an increased focus on offshore tax enforcement is a 2008 U.S. Senate report showing that the use of offshore accounts results in the loss of more than $100 billion in tax revenues each year. From the DOJ’s use of “John Doe” summonses to force credit card and financial companies to release information about account holders, to FATCA and the Swiss Bank program, the U.S. government is committed to identifying and prosecuting taxpayers who avoid their tax obligations.

What is the Swiss Bank Program?

At its core, the Swiss Bank program allows Swiss Banks to pay fines, promise changes in the bank’s behavior, and pledge compliance and cooperation with FATCA and other offshore tax enforcement efforts in exchange for a deferred prosecution or non-prosecution agreement with the U.S. government. The deferred prosecution agreement provides the bank with legal assurances that it will not face further consequences for its alleged illegal behavior. Under terms of the Swiss Bank Program banks must: