IRS Form W-9, FATCA and FBAR Compliance

The Foreign Account Tax Compliance Act (“FATCA”) produced a major catalyst for the usage of Form W-9 by the banks in order to identify whether their clients are U.S. taxpayers. This article explores the connection between the IRS Form W-9, FATCA and FBAR compliance.

IRS Form W-9

The essence of the IRS Form W-9 is to allow a person, who is required to file an information return with the IRS, to obtain a U.S. taxpayer’s correct taxpayer identification number (TIN) in order to report the required transactions (for example, income paid to the taxpayer).

The taxpayer should use Form W-9 to provide his correct TIN to the person requesting it (the “requester”) and, where applicable, to certify that the taxpayer’s TIN is correct, that the taxpayer is not subject to backup withholding, and so on.

Form W-9 should be used only by U.S. persons.

FATCA and Form W-9

The recent developments in U.S. tax compliance laws and regulations, especially the enactment of FATCA, forced many overseas banks to identify which of their customers are U.S. taxpayers and report certain information about these taxpayers to the IRS.

This is why there has been a huge surge of Forms W-9 sent out by foreign banks to U.S. persons. In some countries, the foreign banks’ usage of Forms W-9 has been especially widespread. Among these countries are Switzerland, France, Germany and even India.

Where a U.S. taxpayer fails to supply Forms W-9, the foreign banks usually force the closure of a foreign bank account with all of its potentially negative consequences. Moreover, intentional failure by a U.S. taxpayer to supply Forms W-9 may be used by the IRS against such taxpayer as circumstantial evidence of willful failure to file the FBARs.

FBAR Compliance and Form W-9

It is important to recognize the direct link between Form W-9 and FBAR compliance. The exposure of non-compliance with Report of Foreign Bank and Financial Accounts (“FBAR”) is the true reason behind the IRS strategies to force foreign banks to send out Forms W-9 to their U.S. customers.

Receipt of Forms W-9 from a foreign bank by U.S. taxpayers who are not in compliance with the FBAR filings is a watershed event for such taxpayers (many of whom may not have even heard of the FBARs in the past). This is when the U.S. taxpayers should immediately contact an international tax attorney in order to conduct voluntary disclosure of their foreign accounts (obviously, it is even better to do it independently of the receipt of Form W-9, but the form adds special urgency to such a disclosure).

Form W-9 and Offshore Voluntary Disclosure Program 2012

It should be recognized that receipt of Form W-9 by itself (i.e. without any IRS investigation or examination) does not prevent the eligibility to enter into a voluntary disclosure program.

In most situations, the 2012 Offshore Voluntary Disclosure Program (“OVDP”), which was announced by the IRS on January 9, 2012, would still be available even after a taxpayer receives Form W-9. On the other hand, if the taxpayer provides the required information on Form W-9 to a foreign bank and the IRS begins an investigation of this taxpayer (after receiving the relevant information from the bank), then the taxpayer is likely to be precluded from participating in the OVDP.

Contact Sherayzen Law Office For Help With Voluntary Disclosure of Foreign Accounts

If you received Form W-9 and you have not been in compliance with the FBAR requirements, you should contact Sherayzen Law Office immediately for professional legal assistance. Our experienced voluntary disclosure firm will analyze the facts of your case, determine the extent of your FBAR (and any other U.S. tax compliance) liability, advise you on the available options, implement the best option of your choice (including filing of all necessary tax forms and amending prior tax returns), and provide rigorous IRS representation.