International Wire Transfer and IRS Audit

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 under OFAC. Also, folks at IRS are aware of attempts to send home a foreign account via cryptocurrency brokerages

The FATCA-related disclosures and suspicious activity reports may provide the IRS sufficient cause to launch an audit or, 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 circumstances, it may involve filing a few tax forms, such as:

• FinCEN Form 114, also known as the FBAR
• Form 926
• Form 5471
• Form 8858
• Form 8938

There could be grave consequences if you fail to report foreign accounts to the agency. And even inadvertent omissions and errors could trigger hefty penalties. On the other hand, willful tax evasion usually 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 an experienced 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.