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Qualified Intermediary
Qualified Intermediary
Using offshore accounts is not illegal for U.S. Taxpayers, but hiding
income in undeclared accounts is illegal. Foreign banks who violate the
Qualified Intermediary Program rules may be denied access to the
entire American Banking System.
According to the IRS, foreign banks in the QI Program hold more than
$35 billion abroad in accounts for U.S. individual investors,
partnerships, trusts, family foundations and corporations, but withheld
taxes of only 5% on that amount in 2003.
The proposed new rules will go into effect in 2010. Under the new QI
Program rules: Participating banks must alert the IRS to any potential
fraud they detect, whether through their own internal controls,
complaints from employees or investigations by regulators.
The IRS will audit small samples of individual bank accounts in the
program (on a "no-names basis"), to determine whether U.S. investors
have control over foreign entities (set up by the banks).
Participating banks must hire external auditors to monitor their
compliance. The auditors must identify the bank employees
responsible for preventing tax abuses. The external auditor will be
required to report "red flags" to the IRS. Banks using foreign-based
external auditors (including foreign branches of U.S. auditors) will have
to work with an American auditor, who will accept joint responsibility
for the audit.
Gary S. Wolfe
A PROFESSIONAL LAW CORPORATION
9100 Wilshire Blvd., Suite 530 East
Beverly Hills, CA, 90212
Tel: 310-274-8847 Fax: 310-274-3118
http://www.gswlaw.com
email: gsw@gswlaw.com