Managing partner Brian Mahany was extensively quoted in a story published in American Banker magazine last week. The topic was whether the Obama administration’s Foreign Account Tax Compliance Act (FATCA) was in jeopardy. Brian’s interview with journalist Jon Matonis can be read here.
Beginning next year, foreign banks are required to review account data and determine if any accounts have ties to the United States. If the account was opened with a U.S. passport or statements go to the U.S., banks will be required to notify the IRS. The IRS can’t regulate foreign banks but it can impose withholding on transactions with American banks. That means if a foreign bank wants to do business here and doesn’t comply, Uncle Sam can make things pretty rough.
Opening an account in a foreign country is entirely legal if properly reported. FATCA is designed to insure that Uncle Sam knows who has foreign bank and brokerage accounts.
To date, more than 50 countries have signaled an interest in complying. Some big Caribbean tax havens and Switzerland have said they will cooperate. The Pacific Rim and Asian countries, however, have been slow to warm up. Japan will probably join and Singapore is at least discussing the possibility. Whether China, joins, however, is subject to great speculation. In Asia, China’s ultimate decision is likely to have more sway on other neighboring countries than Japan.
Failure to report a foreign account can be a felony and is always subject to high penalties. If the IRS decides the failure to report was “willful,” the penalties can be as high as $100,000 or 50% of the highest account balance. We expect FATCA will result in hundreds of thousands – if not millions – of unreported accounts being unearthed. That means billions in penalties.
If you have questions about FATCA, FBAR reporting or the IRS’ Offshore Voluntary Disclosure Program (sometimes called OVDI or OVDP), give us a call. We represent not only taxpayers with reporting obligations but foreign banks, hedge funds and financial institutions as well.
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. 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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