Virginia La Torre Jeker J.D of the Global expat network in Dubai points out in her blog that very soon, banks in the United Arab Emirates will let the IRS full have full knowledge of which US taxpayers own what where, courtesy of FATCA. She relays important intelligence: "I just received a copy of correspondence sent from the Head of Personal Banking at a major UAE bank to its clients. The letter makes clear that the bank will be complying with the mandates of FATCA."
This is devastating news to US taxpayers who thought that their foreign bank accounts based in Dubai would be hidden form the IRS. Jeker, "the only US tax court admitted attorney in the Gulf," gives a great rundown of the timeline and why the all Dubai banks share foreign bank account information to start complying with FATCA:
"Generally, FATCA provisions will force non-US financial (and certain non-financial) institutions to provide the IRS with information about accounts held by Americans. Reporting will include the name, address and taxpayer identification number of each US account holder; the account number; account balance and value; the account’s gross receipts and gross withdrawals or payments; and other account related information requested by the IRS. The reporting mandates are scheduled in stages, with applications to join the IRS program commencing January 1, 2013; participating banks will be required to document all new accounts by June 30, 2013; search for existing accounts is to be completed by June 30, 2014 and the first reporting date for accounts will be September 30, 2014."
This information is all the IRS needs to commence an investigation. If someone has not reported these accounts on Form 8938, the IRS can match records with a taxpayers' return. It is incredibly easy — even if an FBAR has never been filed — for the IRS to figure out if someone is hiding accounts in Dubai.
For those who think they are one step ahead
Some taxpayers have told me that they are not worried, that they opened up the accounts using a passport other than American so it is unlikely that their information would ever be shared with the US. Which, sure, may protect them for the time being. However, banks are required under FATCA to perform due diligence. Here's the think to think about: there are a lot of competent employees inside every bank. If I had wire transfers into my Dubai account from a US bank and a bank employee saw those, well I'd really be wondering if the bank would share my information with the IRS or not. I think that would keep me up at night.
Jeker concludes her article by mentioning that for offshore foreign bank account holders in Dubai, they must come clean using an Offshore Voluntary Disclosure Program. Something she is absolutely correct about. If you need assistance with any unreported or misfiled accounts, contact us. We can help.