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The IRS Readmits American Account Holders of Israeli Bank Who Were Previously Booted From the 2012 OVDP

irs-reverse-decision-to-deny-amnesty-israeli-account-holders-admitted-into-OVDPThe IRS – without admitting the exact reason for having previously denied OVDP amnesty to Bank Leumi customers – has reinstated eligibility into the 2012 OVDP for American Citizens holding foreign accounts at Israeli banks and dozens of other American Citizens who had been denied amnesty or kicked out of the program after having fulfilled their obligations.

The decision of the IRS to disqualify US Taxpayers of amnesty and eligibility into the 2012 OVDP after many of them had satisfied their contractual obligations has been reversed.  American Citizens who had held foreign financial accounts at Bank Leumi and Mizrahi Tefahot Bank were readmitted into the 2012 OVDP along with dozens of other American Taxpayers who – for one reason or another – had their amnesty revoked after having initially been approved for admittance into the program.

The IRS has neither made a comment on the reason for the denial nor the reason for having reversed the decision.

As for the reason for the amnesty revocation, some speculate that a glitch in the IRS database had occurred – that names had actually been received before these taxpayers applied for the OVDP but were approved because the database ‘withheld’ the names upon initial review.  Then again, it could have been a matter of human error or internal miscommunication.  It also could have been due to the fact that both Bank Leumi and Mizrahi Tefahot Bank were identified as having been involved with shady tax practices to not only assist with American tax evasion but also to further their own financial agenda.  Whatever led to numerous clients being kicked out of the program after having been cleared for eligibility, it had a very negative impact on program participation.

The IRS’s decision to reverse the decision could have been due to a letter criticizing the decision and the potential fallout sent by the Assistant Attorney General for the Tax Division, Kathryn Kennelly, the overwhelming protest by US Citizens and tax attorneys, or a combination of both.

The minimum penalty for failure to file an FBAR is $10K.  Entry into the 2012 OVDP offers a maximum additional penalty of 27.5%.  UBS has acquired numerous foreign banks and companies and is offering financial and informational assistance to further US investigations and American Taxpayers who are identified as not having reported foreign financial accounts could wind up paying up to 50% of their total estate in additional fees.

The American Taxpayers who have been admitted once again into the 2012 OVDP have escaped criminal pursuit and maximum fees, and they are still liable for millions of dollars worth of fines.  Failing to file an FBAR (Foreign Bank Accounts Report) in and of itself is worthy of a $10K fine.  Additional penalties are assessed by the value of your estate.  The OVDP offers a discounted fee with a maximum of 27.5%.  American Taxpayers who ‘cross their fingers and hope the IRS doesn’t figure it out’ will be charged 50% of their estate balance in addition to a $10K fine for each year Form TD F 90-22.1 wasn’t filed.  In addition to the aforementioned fees there is also a 20% accuracy penalty assessed on underpayments of offshore penalties and interest accruing regularly.

Considering that the United States has not only struck an agreement with Switzerland which will give them access to virtually every US account opened since 2008 and that UBS has acquired multiple foreign banks and other companies and is willing to share information on US Persons with foreign assets and donate $91M to help fund US investigations, the chances of having at least one unreported foreign financial account discovered by the US are becoming much greater.

Read the full story on Forbes.