by Brian Mahany
To say FATCA isn’t popular is an understatement. Foreign banks hate the new law because it is expensive to implement and because in many circumstances, it violates local bank secrecy laws. U.S. banks hate it because several other nations are now calling for the United States to reciprocate and provide information to foreign tax authorities. Taxpayers with unreported offshore accounts really hate it because the penalties associated with undeclared foreign accounts are outrageous.
FATCA stands for the Foreign Account Tax Compliance Act. That law requires Americans meeting certain income thresholds to report any foreign financial accounts and holdings. Offshore accounts are reported on a Report of Foreign Bank and Financial Accounts (“FBAR” or form TD-90-22.1) and on one’s income tax return (Form 8938). If it sounds a bit confusing, you are not alone.
Beginning in January of 2014, foreign banks and brokerage firms will need to review all their accounts and identify and report those account holders with ties to the United States. Banks that refuse to cooperate are subject to monetary penalties. The Lebanese newspaper The Daily Star reports that there are 90,000 U.S. citizens residing in Lebanon. Presumably there are many more Lebanese citizens and dual nationals residing in the U.S. All of these folks are potentially subject to the FBAR filing requirements if they have accounts in Lebanon.
The head of Lebanon’s banking association noted the need to become FATCA compliant to avoid both monetary penalties and to “avert damage to their [international] reputation.” At the same time, he echoed the same concerns heard around the globe; compliance is both costly and is often runs afoul of national bank secrecy laws.
Time is running out for holders of unreported foreign accounts. Whether you account is in a Lebanese bank or in Switzerland, getting caught with an unreported account could mean prison and huge civil penalties.
How large are the penalties? Failing to file an FBAR could result in a $100,000 penalty or penalty equal to 50% of the highest account balance. Add additional penalties for not complying with FATCA and the penalties can easily exceed the amount of your foreign accounts. In other words, you could be wiped out.
The IRS has an amnesty plan called the Offshore Voluntary Disclosure Program and other disclosure and opt out options also exist. All require you to contact the IRS first before they find you.
If you have an unreported account at Byblos Bank, Audi Saradar Bank, Bank Audi, Bank of Beirut, Banque du Liban et d’Outre-Mer S.A.L. (B.L.O.M. BANK), Banque de la Méditerranée (BANK MED), Crédit Libanais, Federal Bank of Lebanon, Fransabank, HSBC Lebanon or Banque Libano Francaise, give us a call. We can quickly explain your options and obligations. If you retain us, most services can be handled for a reasonable flat fee.
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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