Washington Jewish Week Quotes Charles Ruchelman on IRS Scrutiny of U.S. Citizens' Bank Accounts in Israel
Washington Jewish Week quoted Charles M. Ruchelman regarding the IRS increasing its focus on U.S. citizens with Israeli bank accounts who are not voluntarily disclosing their overseas funds to the agency. The IRS is working closely with Israeli banks and bankers to investigate and prosecute those who fail to report their funds and accounts, and those who enable this to happen. For the complete article, please visit Washington Jewish Week's website.
Excerpt taken from the article.
"It's important to note," said Charles M. Ruchelman, a member of the Washington, D.C. law firm Caplin & Drysdale, "just as it occurred in Switzerland, it is now clear that the U.S. government is increasing its focus on Americans who are failing to report Israeli assets."
Previously, the IRS had focused on accounts in the Caribbean, Switzerland and India. Now, said Ruchelman, the IRS is working closely with Israeli banks and bankers and is ready to investigate and prosecute those who fail to report their funds and accounts, and those who enable this to happen.
United States citizens who have an interest in, or signature or other authority over, a financial account in Israel with assets in excess of $10,000. Ruchelman said people with these accounts are required to disclose the existence of such accounts on Schedule B, Part III of their individual income tax returns.
Ruchelman said because the U.S. and Israel have close relations and "thousands and thousands of Americans have accounts in Israel. … This is very much on the [IRS'] radar, and it will affect the Jewish community."
Ruchelman explained that the IRS started focusing on offshore accounts in 2008 or 2009, when a whistleblower who worked with one of the large foreign banks in Switzerland informed the government that Swiss banks were not only allowing Americans to open up accounts but enabling Americans not to report the funds therein.
"Switzerland prided itself on bank secrecy," said Ruchelman.
"The idea is: You come into us before we [the IRS] find you, and we will not prosecute you criminally and we will not impose the harsh penalty of 50 percent per year of nondisclosure, we'll only impose 27-and-a-half percent for one year," explained Ruchelman.
For the Jewish community, Ruchelman said, having a foreign bank account is not foreign. Many Jews who were living in Germany just before or during the Holocaust caught wind of what was happening on the ground and funneled money outside the area. If they escaped the Nazis and started a new life in the States, they left those accounts abroad as a safety net, just in case.
But America's system, he explained, only works if citizens properly self-report.
"If people aren't self-reporting, the system is breaking down," said Ruchelman. "It is a lot of assets that have been untaxed over the years."
Said Ruchelman: "If you do get caught, you are going to get hit pretty hard."