Although we are not fans of Foreign Account Tax Compliance Act (or FATCA for
short), we begrudgingly acknowledge that the law is probably here to stay. More
importantly, with so many independent tax exchange agreements signed, the
chances of keeping an unreported foreign bank account secret from Uncle Sam are
not good. With or without FATCA, you are likely to get caught.
FATCA was part of Obama’s HIRE Act. The goal of the law is to require foreign banks to inform the IRS of the identity of account holders who are U.S. taxpayers, American citizens or have some connection to the United States. Although owning a foreign bank or brokerage account is entirely legal, failing to report the account is a crime.
Foreign accounts must be reported annually on a Report of Foreign Bank and Financial Accounts, more commonly called an FBAR. Beginning last year, certain account holders were also required to file a so called FATCA form, IRS form 8938.
We have many criticisms of the FATCA law. First, the definition of a qualifying foreign financial asset is different for FATCA and FBAR purposes. In other words, you may have to file one, two or none of those forms. The more complex the tax code, the more people make mistakes. Unfortunately, mistakes involving foreign accounts can be expensive. How expensive? Read this article to understand how one 79 year old woman is looking at 6 years in prison and penalties approaching $22 million!
The harsh penalties don’t account well for the difference between those who deliberately evade taxes through offshore accounts and the vast majority of people who simply don’t understand the complex foreign reporting requirements -American expats living overseas, dual nationals, Americans who inherited foreign accounts and green card holders.
The law puts so much burden – and risk – on foreign banks that many are simply turning away American depositors. That means it is very difficult for expats to open bank accounts.
With all these problems, it is easy to see why we have concerns with the law. We believe it is here to stay, however.
If you file and then opt out you will probably lower your taxes. Our ex IRS agents will help you.
FATCA was part of Obama’s HIRE Act. The goal of the law is to require foreign banks to inform the IRS of the identity of account holders who are U.S. taxpayers, American citizens or have some connection to the United States. Although owning a foreign bank or brokerage account is entirely legal, failing to report the account is a crime.
Foreign accounts must be reported annually on a Report of Foreign Bank and Financial Accounts, more commonly called an FBAR. Beginning last year, certain account holders were also required to file a so called FATCA form, IRS form 8938.
We have many criticisms of the FATCA law. First, the definition of a qualifying foreign financial asset is different for FATCA and FBAR purposes. In other words, you may have to file one, two or none of those forms. The more complex the tax code, the more people make mistakes. Unfortunately, mistakes involving foreign accounts can be expensive. How expensive? Read this article to understand how one 79 year old woman is looking at 6 years in prison and penalties approaching $22 million!
The harsh penalties don’t account well for the difference between those who deliberately evade taxes through offshore accounts and the vast majority of people who simply don’t understand the complex foreign reporting requirements -American expats living overseas, dual nationals, Americans who inherited foreign accounts and green card holders.
The law puts so much burden – and risk – on foreign banks that many are simply turning away American depositors. That means it is very difficult for expats to open bank accounts.
With all these problems, it is easy to see why we have concerns with the law. We believe it is here to stay, however.
If you file and then opt out you will probably lower your taxes. Our ex IRS agents will help you.
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