US and Italian officials met in Rome last Friday to ink the agreement between both nations. As a result of an intergovernmental agreement signed by both nations, Italy and the United States will now share information about holders of bank and other financial accounts. The agreement is part of the Obama administration’s FATCA tax bill.
FATCA, short for the Foreign Account Tax Compliance Act, was passed by Congress in 2010. FATCA’s goal is to decrease tax evasion involving offshore bank accounts. Under the law, foreign banks, brokerage firms, hedge funds and even some insurance companies must review their account base. Owners or signers of accounts having ties to the United States must be disclosed to the IRS.
For Italian financial institutions, that means accounts where the account holder identifies himself as a U.S. resident or citizen, an account holder possessing a U.S. passport or “unambiguous indication of a U.S. place of birth,” an account holder with a U.S. phone number, an account with instructions to transfer funds to the United States, an account with a power of attorney or signer that has a U.S. address or an account with instructions to “hold mail” at the branch.
Regarding the last indicia, the IRS has learned that some U.S. taxpayers simply request that statements not be mailed.
A copy of the full agreement is available from the Department of the Treasury’s website.
What does this mean for U.S. taxpayers with unreported accounts in Italy? It means time is running out to come into compliance and avoid huge civil penalties.
U.S. taxpayers have long had to report foreign accounts. This includes not only taxpayers living in the United States but expats who live overseas, green card holders wherever they live, dual nationals and people living and working here whatever their immigration status. The law first came on the books in 1970 (the Bank Secrecy Act) but was widely unenforced until the events of 9/11. Since then, the penalties have become draconian and enforcement beefed up significantly.
Penalties are now as high as $100,000 per account or 50% of the highest historic balance, whichever is greater. Willful noncompliance can also earn you a trip to prison.
Notwithstanding the high penalties, compliance has been spotty. To insure better compliance, the Obama administration secured passage of FATCA in 2010. beginning this summer, foreign banks, brokerage firms, certain hedge funds and foreign insurance companies will be required to review their accounts and determine those accounts that owners or signers with U.S. ties. Soon thereafter, millions of taxpayers will begin receiving nasty notices from the IRS. Ultimately, the IRS expects to collect billions of dollars as the result of FATCA.
The IRS has an amnesty program and several other options that can help eliminate or reduce these big penalties. Although there is no expiration on the amnesty program, taxpayers are no longer eligible once the IRS obtains their names from a bank or financial institution.
If you have 1 or more years of unfiled FBARs or have an unreported account in Italy, speak with an experienced FBAR lawyer immediately. Not taking action is no longer an option.
Need more information? Our team of IRS tax attorneys have helped taxpayers across the world with FATCA and FBAR problems. We usually offer flat fees for our services. Because we handle many of these cases, we can offer our services for less cost than many other tax lawyers.
Post by Brian Mahany, Esq.