FATCA – the Foreign Account Tax Compliance Act. President Obama and the IRS love it. Banks, foreign financial institutions, customers, privacy advocates and quite a few taxpayers hate it. Whatever your feelings, as more countries join, it looks like FATCA is here to stay. Add Austria to the list of countries ready to join. Chancellor Warner Faymann says his country is in talks with the United States and will soon finalize an agreement.
Passed by Congress in 2010, FATCA aims to combat tax evasion by requiring offshore banks, brokerage firms and hedge funds to examine their account base and report accounts that are owned or controlled by U.S. taxpayers. Even mere signature authority over a foreign account is enough to trigger reporting.
At first, the worldwide reception to FATCA law was poor. Foreign governments worried about their secrecy and confidentiality laws. Banks worried about the cost of compliance. Things were so bad that the feds had to postpone the effective date by a year. Now, many countries and their banks are signing up. The monetary penalties associated with noncompliance have brought many countries and their bankers to the table.
As acceptance spreads, FATCA is now close to achieving critical mass. It has even spawned its own European Union tax exchange model. As the U.S. program gains steam, other countries are using a similar approach to insure their own citizens don’t try to evade taxes by hiding money offshore.
Given this backdrop, Austria’s decision to cooperate with the U.S. is not surprising. Chancellor Faymann said earlier this spring that Austria was pursuing “a clear, constructive path in the fight against tax evasion.” Austrian authorities had also previously declared that Austria would require shell companies and trusts to declare their beneficial owners.
In addition to joining FATCA, Austria is planning on participating in the EU program and has separately negotiated tax exchange agreements with several countries including the so-called tax havens of Switzerland and Liechtenstein.
What does this mean for Americans living in Austria or taxpayers having accounts there? Plenty.
Beginning in 2014 Austrian financial firms will begin reviewing their accounts. Those with ties to the United States must be disclosed to the IRS.
Mandatory reporting of offshore accounts is nothing new. American law has long required taxpayers to disclose their ownership interest in these accounts. Failure to report a foreign account annually is a crime and also subject to steep civil penalties.
There is still time to come into compliance. The IRS is offering an amnesty program (the Offshore Voluntary Disclosure Program) that includes a waiver of audit and a get-out-of-jail card for most taxpayers. Others who have reported their foreign income – just not the account – may do better with a traditional voluntary disclosure. As this article is written, taxpayers still have several options. Time is running out, however. Once banks disclose names to the IRS pursuant to FATCA, amnesty is off the table.
If you have an unreported foreign account at Bank of Austria, Oesterreichische National Bank, Erste Bank or RZB Bank, give us a call. We will gladly help you explore your options. Our tax lawyers have helped many taxpayers with a wide variety of foreign reporting problems including FATCA and unfiled FBARs.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax services available worldwide.
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Post by Brian Mahany, Esq.