Lately there have been many rumors about another delay for FATCA. In fact, last week one Chinese publication actually reported that there would be an additional 6 month delay.
The Treasury Inspector General for Tax Administration recently says the IRS is woefully prepared for the new law.
Several US banking industry groups including the American Bankers Association, Clearing House Association L.L.C., Institute of International Bankers (IIB), and Securities Industry and Financial Markets Association, have asked for another delay.
Last month IRPAC – IRS Information Reporting Program Advisory Committee – asked for an additional delay.
And hundreds of foreign financial institutions as well as some governments say they need more time.
So is a third extension a “done deal”? NO says the IRS!
On Tuesday, Michael Danilack, IRS Deputy Commissioner, was speaking to a New York Bar Association group. During a question and answer period, Danilack was asked if FATCA’s July 1st implementation date was going to be postponed again.
His response, “There is absolutely no chance that it’s going to slip.” We think we can make it.”
Danilack’s statement is a bit alarming in that he is unequivocal that there will be no further delays yet his next sentence, “We think we can make it,” causes concerns. When the IRS’ own top cop and the Service’s own independent advisory group warn that the agency isn’t ready, we worry.
The Obama administration was recently bruised when the Obamacare insurance exchange website wasn’t ready. Although FATCA doesn’t garner nearly the same amount of press, the administration is hardly in a position to weather another program failure.
FATCA , short for the Foreign Account Tax Compliance Act, is hugely unpopular among foreign banks, Republicans, privacy advocates and U.S. banks. But Congress passed the law for a reason; many foreign banks were helping Americans evade taxes. While the law may be flawed, we doubt it will be repealed. Many have disagreed with me on that score.
The solution is a global fix, perhaps something that the OECD (Organization for Economic Co-Operation and Development) can develop in cooperation with industry and taxpayer stakeholders. Until that happens, however, we believe FATCA is here to stay. According to the number two person at the IRS, there won’t be any further delays, either.
What does that mean for taxpayers?
It means time is running out. Lest anyone think we are needlessly crying wolf, the penalties to US taxpayers associated with failure to file an FBAR are huge and draconian. Under current banking law – not FATCA – the penalties are up to the greater of $100,000 OR 50% of the highest historical account balance. These are not hypothetical maximums; these are penalties routinely imposed by the IRS.
There are ways to come into compliance and avoid those penalties but many options disappear if the IRS finds you first. What that means is that there are literally months left before the foreign banks will start handing over data about American account holders. The law extends to dual nationals, expats, foreign born Americans and even green card holders. If you are a U.S. citizen or a taxpayer and have an unreported foreign account or financial asset, you could be penalized.
Each time we pen one of these articles, there is inevitably criticism aimed at the messenger. Unfortunately, the penalties are real, FATCA is real and so is the determination of the IRS and Justice Department to uncover unreported foreign accounts and missing FBARs. (An FBAR is a Report of Foreign Bank and Financial Accounts; the form Americans must file each year to declare their offshore accounts.)
We have found that most taxpayers with unreported FBARs are not criminals looking to evade taxes. They are dual nationals, Americans living abroad, part time residents and those looking for the security of Swiss banks. The IRS, however, has a hard time distinguishing between the good and the bad.
We welcome questions about FATCA, FBAR and foreign reporting issues and will gladly explain your responsibilities and explore your options. Our FBAR lawyers have helped many taxpayers with a wide variety of offshore reporting problems.
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). All inquiries are protected by the attorney – client privilege and kept in strict confidence. Our IRS tax services are available worldwide.
Need more information? Our Due Diligence blog has hundreds of text searchable articles on FATCA and FBARs.
Post by Brian Mahany, Esq.
FBAR lawyers – FATCA attorneys – Offshore Voluntary Disclosure Program – IRS tax attorneys