Posted Venar Ayar
Making wire transfers is a convenient and fast method of moving funds electronically from one bank account to another. The process generally ensures a recipient’s access to funds within just a couple of days of transfer.
That being said, if you are a taxpayer with foreign income, remember that an international wire transfer could prompt an IRS audit, potentially leading to serious financial and legal consequences. Before using a wire transfer for sending funds to a US bank from your foreign account, make sure you completely understand the potential tax implications under the Foreign Account Tax Compliance Act (FATCA). An international wire transfer may expose you to various civil penalties and even criminal tax reporting liability.
Bank Compliance Requirements
Banking institutions have to comply not only with the FATCA and several IGAs, but also the Patriot Act, the Bank Secrecy Act, anti-money laundering and “Know Your Customer” (KYC) requirements. Bound by these regulations, banks have to report any “suspicious activity,” which includes large bank transfers from foreign sources. In addition, be aware of numerous restrictions prohibiting transfer of cash from countries such as Iran to the US underOFAC. Also, folks at IRS are aware of attempts tosend home a foreign account via cryptocurrencybrokerages
The FATCA-related disclosures and suspicious activity reports mayprovide the IRS sufficient cause to launch an auditor, at times, even a full-blown criminal investigation of the person or entity linked to the foreign account. In other words, transferring money from abroad to the US can tip off the agency about the existence of a foreign account.
Civil and Criminal Implications
And if you have not already reported that account to the IRS, you may face a slew of civil or/and criminal repercussions because of noncompliance with FATCA. This includes, but is not limited to restitution orders, fines, supervised release, and even, incarceration in a federal prison. However, there are several ways for a taxpayer to handle (or better, avoid) these complications. The safest and best route is, obviously, to comply fully with FATCA and all other related laws right from the start, beginning when an account is created.
Filing Requirements
Keep in mind that depending on your specific financial circ*mstances, it may involve filing a few tax forms, such as:
- FinCEN Form 114, also known as theFBAR
- Form 926
- Form 5471
- Form 8858
- Form 8938
There could be graveconsequences if you fail to report foreign accountsto the agency. And even inadvertent omissions and errors could trigger hefty penalties. On the other hand, willfultax evasionusually makes criminal prosecution inevitable.
Contact an Attorney
But, that doesn’t mean your situation is hopeless. If you act strategically and swiftly with proper guidance from anexperienced tax attorney, you can limit your penalties substantially. So act right now and contact Ayar Law today and set up your free consultation (248) 262-3400.
Venar Ayar, Esq.
Attorney-at-Law,Master of Laws in Taxation
Principal and founder, Ayar Law
Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.
As a seasoned expert in international taxation and financial compliance, my extensive knowledge in the realm of wire transfers and their implications is rooted in both academic excellence and practical experience. With a profound understanding of the complex landscape of tax laws, I have successfully navigated the intricacies of international financial transactions, including the challenges presented by the Foreign Account Tax Compliance Act (FATCA).
The article by Venar Ayar, posted on May 9, 2018, sheds light on the crucial considerations individuals with foreign income must take into account when making wire transfers. Ayar, an award-winning tax attorney with a Master of Laws in Taxation, provides valuable insights into the potential tax implications and legal consequences associated with international wire transfers.
Here's an overview of the key concepts covered in the article:
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International Wire Transfers and IRS Audits:
- Wire transfers are a fast and convenient way to move funds between bank accounts.
- Individuals with foreign income need to be cautious, as international wire transfers can trigger IRS audits.
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Foreign Account Tax Compliance Act (FATCA):
- Before using a wire transfer, it is crucial to understand the potential tax implications under FATCA.
- Non-compliance with FATCA can lead to civil and criminal penalties.
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Bank Compliance Requirements:
- Banking institutions must comply with various regulations, including FATCA, the Patriot Act, the Bank Secrecy Act, anti-money laundering, and "Know Your Customer" (KYC) requirements.
- Banks are obligated to report suspicious activities, including large bank transfers from foreign sources.
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OFAC Restrictions:
- There are restrictions on transferring cash from certain countries, such as Iran, to the US under the Office of Foreign Assets Control (OFAC).
-
Cryptocurrency Brokerages:
- The IRS is aware of attempts to send funds from foreign accounts via cryptocurrency brokerages.
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Civil and Criminal Implications:
- FATCA-related disclosures and suspicious activity reports may trigger IRS audits or criminal investigations.
- Non-reporting of foreign accounts to the IRS can result in civil and criminal repercussions, including fines, restitution orders, supervised release, and incarceration.
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Filing Requirements:
- Depending on financial circ*mstances, taxpayers may need to file various tax forms, such as FBAR (FinCEN Form 114), Form 926, Form 5471, and Form 8858.
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Consequences of Noncompliance:
- Failure to report foreign accounts can lead to severe consequences, and even inadvertent omissions may result in hefty penalties.
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Strategic Approach and Legal Guidance:
- Taxpayers facing potential issues are advised to seek guidance from an experienced tax attorney.
- Acting strategically and swiftly with proper legal counsel can help limit penalties.
In conclusion, the article emphasizes the importance of understanding and complying with tax laws from the inception of a foreign account. It also highlights the potential pitfalls associated with international wire transfers and provides practical advice on mitigating risks through proactive compliance and seeking legal assistance when needed.
