by Brian Mahany
The drum beat and march towards financial transparency continues. Like it or not, FATCA is probably here to stay. FATCA is short for the Foreign Account Tax Compliance Act. FATCA requires foreign banks and other financial institutions to review and identify accounts with ties to the United States. Those financial institutions will either then report that information directly to the IRS or through their national tax agency.
FATCA was designed to help the IRS identify unreported foreign accounts. While American taxpayers have long been required to report these accounts, compliance has been poor. Under the new law, banks, brokerage firms and hedge funds will be providing this informing to the IRS.
Many foreign governments have agreed to join FATCA. The penalties imposed on banks for not joining can be significant and costly. With the exception of Japan and Singapore, interest among Asian and Pacific Rim countries has been poor. Taiwan now joins the list of governments signaling its intent to cooperate.
Last week the Taiwanese Financial Supervisory Commission and Minister of Finance jointly announced that the Taiwan government had reached an agreement in principle with the U.S. Treasury Department.
There are many dual nationals holding both Chinese (Taiwan) and U.S. citizenship. Two years ago, a Taiwanese banking association estimated 20,000 to 30,000 people would be affected by FATCA. Earlier this year, Focus Taiwan News quoted a Taiwanese legislator as saying “scores” of business owners and executives were relinquishing their U.S. citizenship in advance of FATCA. There is no way of verifying if people really are leaving.
U.S. law does not forbid ownership of foreign accounts. They must be reported annually, however. The penalties for not filing an FBAR (Report of Foreign Bank and Financial Accounts) each year are quite onerous and can involve prison if the violation was willful.
The IRS has a variety of amnesty options for those who wish to achieve compliance. These programs offer a break in penalties and a “get out of jail free” card as well. Figuring out what program best minimizes tax and penalties should be left to an experienced tax lawyer.
Beginning next year, Taiwanese banks will begin looking back at their accounts. Simply moving the money to another country or repatriating the money doesn’t eliminate the risk of high penalties.
The FATCA lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of offshore reporting problems. From unfiled FBARs to the new FATCA legislation to the current offshore account amnesty program, we can help. Our firm is the exclusive legal services provider to the CPAmerica organization for foreign reporting issues meaning we are the lawyers that other professionals turn to with questions.
For more information, contact attorney Bethany Kroes at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Whether you hire or us or not, we will gladly discuss your options at no cost and without obligation.
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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