We truly appreciate our readers, particular those overseas who frequently call or email us with comments and suggestions. Last week we posted a piece called “How Safe is Your FATCA Data With the IRS? Not Very!” Since then we have received two comments*, one of which provided the impetus for today’s post.
The architect of much of the United States tax transparency legislation is Michigan Senator Carl Levin. Although not the original sponsor of FATCA, Levin was one of its most ardent supporters. Last year he took the time to comment on the new FATCA regulations. (For those not familiar with FATCA, it is the acronym for the Foreign Account Tax Compliance Act, a law designed to address offshore tax evasion.) His comments are very enlightening on just how “secret” the data collected by the IRS really is.
As we noted last week, the data collected is intended strictly for tax administration purposes. The exceptions to the rule, however, are so numerous and so huge that they threaten to become the norm.
Last year Senator Levin wrote to the IRS Commissioner and the Assistant Secretary of the Treasury Department. His message? Let me answer that one in his words, ” Finally, one additional issue is critical to successful implementation of FATCA’s disclosure obligations: treating FATCA offshore account information as non-tax return information to ensure its accessibility to law enforcement and national security communities combating crimes other than tax evasion.
“Although FATCA is structured to address offshore tax abuse, offshore account information has significance far beyond the tax context, affecting cases involving money laundering, drug trafficking, terrorist financing, acts of corruption, financial fraud, and many other legal violations and crimes. Given the importance of offshore account disclosures, FATCA guidance and implementing rule should create account FATCA forms that are not designated as tax return information but, like FBARs, may be provided to law enforcement, regulatory, and national security communities upon request.”
In other words, Levin thinks that cops and regulators should have unfettered access to these sensitive records.
Carl Levin is no neophyte freshman legislator. He is the Senate Chair of the Permanent Subcommittee on Investigations. If anyone understands what is really going to happen once banks begin turning over customer data to the IRS, it is Senator Levin.
So what is next?
If you are not in compliance with your tax and FBAR filings, take immediate action. There is still time to avoid the harsh FBAR penalties. Simply filing past due returns (called a “quiet disclosure”) won’t work, however. Consult an experienced FBAR attorney to help you explore your options and responsibilities. The risks are simply too high to ignore.
Next, realize that whether you disclose your offshore assets and income voluntarily or the banks do it for you, Uncle Sam will probably mine that data for other purposes. Understand that FBAR forms are not tax forms and can already be used for other purposes. (FBARs were born of the Bank Secrecy Act). FATCA disclosures, on the other hand, are theoretically for tax purposes only but don’t count on that.
The world is moving towards global financial transparency. To be forewarned and prepared is the best defense against later surprises.
*Special thanks to “Marvin” for sharing a copy of Sen. Levin’s letter.
Have questions about FATCA compliance, FBAR and foreign reporting issues? Give us a call. Our experienced FBAR and FATCA attorneys can explain your rights and responsibilities.
For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. The author may also be contacted at or by telephone at (414) 704-6731 (direct).
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