Bank Hapoalim – Photo: Ariel Jerozolimski
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.
Though 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 didn’t file the 1040, incorrectly answered the section on whether they hold foreign bank accounts with over $10,000, or failed to file the accompanying Foreign Bank Account Report (FBAR) form, the penalties can be monumental. The IRS can fine violators for up to 50 percent of the account’s maximum balance for each year of each violation.
Thursday’s agreement means the US will have precise details on which foreign bank account holders have failed to report their bank accounts, whether it was a purposeful attempt to evade taxes or an accidental oversight.
Though FATCA is an American initiative, Wednesday’s agreement also 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 Tax Authority knocking on their doors, asking for a slice.
View original Jerusalem Post publication at: http://www.jpost.com/Business/Business-News/Israel-agrees-to-turn-Americans-bank-accounts-over-to-IRS-351066
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