***Update March, 2017. A group has gotten together to fight FATCA and testify in front of Congress in hopes of getting it repealed! Read updates here***
The future of FATCA
There were hopes and rumblings that FATCA may go away some day soon; but upon reading remarks from Acting Assistant Attorney General Caroline D. Ciraolo at the American Bar Association’s Tax Section midyear meeting on Friday, we can now say that doesn't seem likely. Some "highlights" of her speech:
"We will continue to work with our colleagues at the IRS with respect to the examination and assessment of penalties for violations of the Foreign Bank and Financial Account (FBAR) reporting requirements, file suits to collect outstanding FBAR penalties and defend against complaints for refund of FBAR penalties paid.
Where the IRS is aware of possible violations of the internal revenue laws by individuals whose identities are unknown, the department has sought and will continue to seek orders authorizing the issuance of “John Doe” summonses.
The government’s offshore enforcement arsenal also includes Bank of Nova Scotia summonses and grand jury subpoenas, which seek to compel a domestic financial institution to produce records located in a foreign country. These summonses or grand jury subpoenas have been utilized and upheld by courts despite the fact that producing the records in the United States would cause the financial institution to violate the laws of a foreign country. In appropriate circumstances the department will use – and enforce – such subpoenas and summonses.
So what can you expect in 2016? Additional civil enforcement actions and ongoing and new criminal investigations and prosecutions. Taxpayers who have participated in the IRS voluntary disclosure programs may be contacted and interviewed by the IRS and the department as part of their ongoing cooperation."
"At this point, the message is clear: taxpayers are required to maintain foreign records and produce them upon request. Those who underestimate the ability of the United States to pursue offshore tax evasion do so at their own peril."
After reading this hostile, aggressive language aimed as US persons who dare earn income overseas, I am both frustrated and saddened.
"Knowledge is power" – The IRS interpretation
Allegedly FATCA was created to close the tax gap, but how could that ever be true? The program does not generate revenue; it does not increase taxes. In reality it's a law passed so the IRS can continue to keep control. FATCA is all about reporting – it's a federal law that requires all US taxpayers, even those living outside of the US, to report their non-US financial accounts yearly. It also requires all non-US financial institutions to search their records for suspected US persons and report their identities and assets to the US treasury.
Foreign Financial Institutions all around the world are signing agreements to share their account holder information with the US. In the same speech, Ms. Ciraolo stated:
"In exchange for a non-prosecution agreement, these institutions made a complete disclosure of their cross-border activities, provided detailed information on accounts in which U.S. taxpayers have a direct or indirect interest, are cooperating in treaty requests for account information, are providing detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed and must cooperate in any related criminal and civil proceedings for the life of those proceedings."
"Co-operating" in exchange for "a non-prosecution agreement"? Really?
We've said it again and again – we don't agree with FATCA and we don't think the law is a good thing. We also know that you may have a hard time being in compliance; it's easy to make mistakes because the knowledge needed to file correctly is vast. You need to understand the reporting thresholds, know the filing deadlines, and comprehend exactly what needs to be reported.
Our job is to help those that have fallen victim to the complex tax laws. If you have any type of foreign financial account, you'll want to ensure you're in compliance to avoid the substantial penalties that can arise for not reporting, or reporting incorrectly. If you're concerned about any unfiled or potentially misfiled accounts, contact us to schedule a complimentary, confidential consultation. Call us at 888-727-8796 or email email@example.com.