by Brian Mahany
Never a week goes by without more countries signing tax exchange agreements. Recently, many of those countries have been signing agreements with the United States Treasury. In 2014, foreign banks are required to disclose the identities of Americans with foreign accounts. While some countries have publicly rallied against the new regulations, they really have little choice.
Although the IRS can’t enforce its laws in foreign countries, it can impose taxes and deny the ability of non-compliant banks from doing transactions with U.S. banks. With many other developed countries agreeing to cooperate, offshore banks either must comply or face isolation.
Yesterday the Prime Minister of Barbados, Freundel Stuart, addressed a meeting of international business leaders. During his remarks he told attendees that signing a agreement with the United States made good business sense. According to published reports, Stuart was quoted as saying, “it will provide certainty for our business community and financial institutions. Moreover, for Barbados, entering into this type of arrangement will add credence to our commitment to being a transparent, responsive and well-regulated jurisdiction.”
Congress passed the Foreign Account Tax Compliance Act (“FATCA”). Since the law was passed, several countries have already signed agreements with the United States in anticipation of the law’s implementation.
U.S. taxpayers are already subject to FATCA and beginning this year, many with foreign accounts or property were required to file an additional schedule (Form 8938) with their tax return. Unfortunately, the definition of foreign financial assets under FATCA is different than that under the existing Foreign Bank and Financial Accounts (“FBAR”) filing requirements. The bottom line for individuals is to make sure your accountant or tax attorney is proficient with both regulations. If not, the penalties for noncompliance are some of the highest in the IRS arsenal.
Foreign banks, hedge funds, brokerage firms and even insurance companies are also impacted by the new law. Although the IRS just extended the implementation date for financial institutions from 2013 to 2014, there isn’t much time to implement the information gathering and reporting protocols required by the new law. Banks can’t simply rely on account holders to disclose whether they are U.S. taxpayers; the new regime requires due diligence and investigation by the banks.
The offshore reporting tax lawyers at Mahany & Ertl have helped many foreign and American taxpayers with a wide variety of foreign tax compliance concerns. We represent both individuals and foreign financial institutions. Earlier this year, the CPAmerica organization of accountants named us their exclusive legal services provider for offshore tax reporting. That means we are the ones the experts turn to for tough questions.
For more information and a completely confidential, no fee consultation, contact attorney Bethany Kroes at or (414) 223-0464. All inquiries protected by the attorney – client privilege. We can assist with a wide variety of tax issues including FATCA; FBARs; the offshore tax amnesty program (OVDI); Foreign Investment in Real Property Tax Act (FIRPTA); and foreign corporations, gifts and partnerships.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and coming soon, San Francisco, California.