Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

FINDING OFFSHORE BANK ACCOUNTS & REAL ESTATE: IN CHINA

China has now joined the U.S.’ efforts to combat tax evasion by entering into the Multilateral Convention on Mutual Administrative Assistance in Tax Matters effective August 27, 2013.  

The gravamen of this new treaty with China is that the U.S., by and though the U.S.’s FATCA, will be able to easily identify individuals and entities with offshore bank accounts (and other financial interests, such as rental property, businesses, investments, income and assets) in China.    This is because by entering into this convention, China, has agreed to exchange financial information spontaneously for tax, financial, and other investigations, such as, audits.   By way of this treaty, China has bound their banking, financial, and other institutions to the United States’ FATCA law.   FATCA requires Foreign Financial Institutions (FFI) to report all of their information on U.S. citizens and permanent residents.  FFIs and their employees that do not comply will have their income and assets seized by the U.S. government.

After reviewing this treaty, our founding partner, Steve Moskowitz, said that:

Most of the taxing authorities in the world have gotten together to exchange information, and to assist the other countries in their tax audits, and to actually physically seize the assets and income in the home country and then pay it over to the U.S. taxing authorities, in exchange for like treatment.  As such, the U.S. government can now find you easily and enforce its tax laws against you.

Compliance with FATCA by Chinese financial institutions will affect many unaware U.S. citizens, green card holders, and other residents with ties to China.  Because a large portion of our cliental are of Asian descent (one of the unique characteristics about our tax law firm is that we have a number of native born Chinese and Korean associates and staff members), we are often asked questions about how the U.S. taxing authorities will treat Asian culture.  

  • For instance, how with the IRS identify a person who has a Chinese name and an American name?

The answer is it is now easy for the IRS to identify bank accounts held overseas because it is the banking institutions themselves (and the individual bankers) who face criminal and civil penalties for not reporting the account holder.    

  • Another common question is: if my CPA or tax preparer advised me incorrectly, can I be held responsible criminally or will this mitigate the civil penalties?   

The answer is that the government may choose to prosecute you anyway and it is your attorney’s job to convince the IRS or a Judge or jury that you are not the one who should be punished by prison time and stiff monetary penalties.   Further,  your attorney may have to advocate on your behalf in several different courts and/or jurisdictions. (such as, federal criminal and civil venues, state tax agencies, and more).  

When it comes to the civil penalties, the government rule is even more unfair because it seeks to punish people for breaking a law that the government admits people have never heard of.  Please see our article published in the California Tax Journal for specific information:   A Closer Look at the Non-Willful FBAR Penalty.   

Moskowitz LLP, is a tax law firm that successfully represents U.S. Citizens and green-card holders who have financial interests outside the United States to legally meet American tax laws while minimizing their criminal exposure, monetary fines and penalties.   Please contact us today for more information.

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