In recent years, the IRS has devoted vast resources to compel taxpayers to report and pay taxes on offshore assets. As a result of these efforts, the IRS has recovered billions in unpaid taxes. Perhaps the most widely-known tool the IRS uses is the Offshore Voluntary Disclosure Program, or OVDP. When taxpayers submit to the OVDP, they will have to file up to eight years of amended tax returns and Foreign Bank and Financial Account (FBAR) statements, while paying taxes, interest and a penalty of 27.5%, or up to 50%, of the highest balance of these accounts.
The Foreign Account Tax Compliance Act, or FATCA, has major implications for people with dual citizenship in Israel and the United States. Under FATCA, foreign financial institutions are to provide account information for taxpayers holding more than $50,000 in foreign accounts to the U.S. government. Institutions that refuse to provide this information could face a withholding tax of up to 30% on any U.S. assets. FATCA is controversial in many locales as many believe the U.S. Government is infringing on privacy and interfering with the sovereignty of other nations.