by Brian Mahany
The full impact of FATCA is beginning to be felt around the world. While millions of Americans still haven’t heard of FATCA – short for the Foreign Account Tax Compliance Act – millions more simply think it only applies to offshore bank accounts. We have already written several stories explaining that the law applies to bank CD’s, offshore hedge funds, foreign brokerage accounts and even real estate owned as a corporation (the shares may be reportable) or annuities. Today we add Bahamian Family Trusts and Private Investment Corporations to the list.
Much of the financial services industry in the Bahamas centers on both Bahamas Trusts and PICs. With thousands of these entities already established there, the Bahamas Financial Services Board quickly established a task force to study the impact of FATCA on these entities.
Beginning next year, foreign financial institutions must review and report accounts with ties to the United States. U.S. law – FATCA – requires banks to disclose or face stiff penalties. While owning a trust in the Bahamas is totally legal, the U.S. bank secrecy act requires Americans to report certain holdings annually on an FBAR form. FBAR is short for Report of Foreign Bank and Financial Accounts. The penalties for non compliance are steep and include $100,000 per year or more penalties.
There is an amnesty program called the Offshore Voluntary Disclosure Program (OVDI or OVDP for short) that allows taxpayers to avoid much of the penalties and possible criminal prosecution. In some circumstances, however, amnesty is the best option.
Americans with accounts or trusts in the Bahamas need to get into compliance quickly. The IRS operates on a first contact policy. If the IRS audits you or gets your name from a Bahamian bank first, amnesty is off the table.
Many of our clients were born outside the U.S. or retired overseas. Those folks often don’t understand the offshore reporting requirements and therefore are not in compliance. If you find yourself in that group, seek professional advice immediately. Whether you go with amnesty or not, understand your risks and options.
If you have questions or concerns about your offshore account, give us a call.Our tax lawyers were selected by the CPAmerica organization of accounting firms to be their preferred legal services provider for offshore tax reporting. We happily assist individuals, businesses, accountants and foreign banks with questions about FBARs and FATCA.
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.