Israel iBanks: The Next IRS Target?

Matt Drudge has a good one today:

I know that Switzerland is no longer a sort of  tax haven — that the famed Swiss bank secrecy, anonymity, reluctanance to extradite anymore for tax crimes, is all gone. You see, once Switzerland realized that if they did not agree to give the IRS and US Department of Justice nearly everything that they wanted in the last few years, Swiss Federation would be locked out of the US market, and would essentially be out of business.

When I saw Drudge’s  above post “Tax Shelters: Why Israel Could be the Next Switzerland”… my gut reaction was:

“Wait, why is Drudge claiming Israel is a tax shelter now?”

Well he didn’t. Once you click on the link, you understand that the in context, he describes the fact that Israel is soon to be a defunct tax shelter haven in the same manner that Switzerland is no longer a tax shelter. Which is exactly correct, as our recent Israeli Offshore Disclosure clients tell us.

Also, consider this story by Eamon Javers at CNBC:

“On June 14, the Department of Justice unsealed an indictment against three American tax preparers for helping clients avoid taxes by moving money to Israel. The transgressions detailed in the indictment were relatively small-time. The indictment said the father and son duo of David and Nadav Kalai and their colleague David Almog at a firm called United Revenue Service helped several clients duck taxes by moving money to two Israeli banks, identified only as “Bank A” and “Bank B.”

Most of the financial transactions detailed were small — in the tens or hundreds of thousands of dollars. The men could not be reached for comment. But the indictment revealed the existence of a grand jury that is almost surely going after much bigger fish. And the details provided in it appear to suggest that “Bank A” is Bank Leumi, whose private banking operation is headquartered in Tel Aviv, and “Bank B” is Bank Hapoalim, which also maintains its global private banking center in Israel’s second-biggest city.”

So now for the two biggest anticipated questions:

1. Will  Israel allow the US to extradite any Israeli/US person for tax evasion?

Because tax evasion is a felony in Israel and because the US has a treaty with Israel, then yes, it is totally an extraditable offense in Israel. But does that mean Israel would do it? I hardly consider myself to be a foreign policy expert, but I will say that I could see Israel refusing to hand over a dual citizen.

Let’s face it, there has been a history of countries prosecuting Jews. But on the other hand, charges of tax evasion by Jews is not really a pillar of Judaism — the state of Israel was certainly not created to protect Jews from crimes of international tax evasion. And perhaps more importantly, the US is Israel’s only real ally in the world. So my feeling is that yes, Israel would certainly hand over those the Department of Justice (DOJ) suspects of tax evasion.

2. What should I do if I may have an undisclosed account in Israel?

Remember, the FBAR Offshore Voluntary Disclosure Program (OVDP) program is most likely available — Even if your bank, even if your personal banker is under investigation, the program is still available as long as YOU are not personally under audit or investigation by the IRS.

Here’s a quick story to illustrate the point: Earlier this year, I blogged on a recent Connecticut-based branch of a Swiss bank that was shut down by the DOJ. Soon I received call, from a man, hysterical. He wanted to know how to turn himself in, how much time he would have to serve, where he would be going to prison. He began crying, saying that wished he came clean earlier because he had undisclosed accounts.

He believed that because the DOJ had indicted his bank and his own personal banker, he could not get into the OVDP program, hence his life as he knew it was over. I asked him if he was under criminal investigation. He said he didn’t think so. I asked him if he was under audit. He said no. So I told him, that there was no time to waste, but if we acted quickly enough, we might be able to get him into the OVDI program.

The next day we faxed our OVDP letter (always fax it to the disclosure office along with sending it overnight). Then in a few days, we found out that he was allowed to get into the program. He was ecstatic that all he had to do was pay a fine to the IRS. Because if he was charged, he’d have to pay a larger fine AND then he would be looking at a jail sentence.

So what to do?

If you have unreported offshore accounts, contact us. We can help. It’s not too late. And if you call someone who tries to use scare tactics to get you to hire them, beware. Call us at 888-727-8796 or email info@irsmedic.com. Any information you share with anyone at our firm will be kept confidential.