Liberty and justice for all United States persons abroad

The Isaac Brock Society

1,012 thoughts on “FATCA Discussion Thread (Ask your questions) Part One”

  1. IRPAC Recommendations Related to FATCA
    Recommendations:
    The “Comparison of Form 8938 and FBAR Requirements” chart that appears on the IRS website be added to the Form 8938 instructions.
    The IRS remove reporting requirements on Form 8938 that are already required on the FBAR.
    Conformity in filing/extension dates and methods for Form 8938 and the FBAR.
    Instructions to both Form 8938 and the FBAR inform taxpayers that they might be required to file the other form.

  2. @Just Me,

    You’re right.

    I think when the expatriation “name and shame” list comes out, which should be soon, more stories about FATCA will appear in the mainstream media, provided the number of expatriations is not cooked downward (or just postponed) to the point of not being newsworthy. 

    This may very well happen being election time.    

  3. Finally! A country decides to stand up against FATCA! The governor of the Central Bank of Trinidad and Tobago has called FATCA “backward imperialism” and urged other countries of the Americas to unite, at the Council of Securities Regulators of the Americas (COSRA). Perhaps this should be in new thread:
    http://www.guardian.co.tt/business/2012-10-30/rambarran-fatca-us-backward-imperialism

    While Europe, Asia and Oceania are accepting FATCA, it looks like opposition will come from the Americas. Many countries in Central America and the Caribbean have no interest in a reciprocal agreement because they don’t tax foreign income or don’t have income tax at all. The large economies of the Americas like Canada, Mexico, Brazil and Argentina are mostly silent about FATCA, but I suspect they don’t like it either. The leftist South American countries like Venezuela, Bolivia and Ecuador will surely oppose implementing any US law there. If these countries all follow Trinidad and Tobago’s call, things will get very interesting. Remember, these countries stood up against the US before and blocked the creation of the Free Trade Area of the Americas (FTAA) (although I don’t think FTAA was a bad idea), so it’s not impossible to stop FATCA.

  4. One quick post before I run to the airport to greet Renounce who is arriving in Seattle.

    Robert Wood has another post today at Forbes…

    As Foreign Banks Brace For FATCA, You Should Too
    I had to respond, so will be curious if it gets called out, or buried.  Buried, I would guess.  :)Got to run.

    One key consideration you didn’t mention, and maybe it is too much speculation, but I think merits consideration of another way you should ‘Brace for FATCA FALLOUT’.  

    Let’s face it.  99% of US Homelanders know nothing about FATCA in spite of your excellent attempts to educate.  They don’t read tax blogs. Consequently, they can not possibly understand what Treasury knows in its ‘heart of hearts’, FATCA as constructed will not work.  

    It is way too complex and too burdensome on the world’s economy to be effective to the Congressional intended goal of stopping Homeland Offshore Tax Evaders.  

    So they desperately want these FATCA IGAs, inter-government agreements, to ease the way to the same goal, or so they think.  (It is the IGAs that is causing the FATCA timeline delays, btw.)  Never mind that it still doesn’t solve the overly broad  application of these FATCA rules to ALL ‘US Persons’ living around the world, which includes millions of dual Citizens resident in the very countries they want to join in an IGA.

    Congress (to the degree they read the bill and understood what they were voting for) thought they were creating a FATCA precision missile aimed at homeland evasion, but with the bureaucrats in Treasury, they have been carpet bombing instead with 388 pages of draft regulations applied to all US Persons living around the globe.  If these FATCANATICS are honest with themselves, they know this to be true. 

    This is the War on Terror, or the War on Drugs all over again.  Now we have the FATCA WAR on Offshore Tax Evasion, and it will be like those that preceded it. Terribly expensive. Mostly ineffective, and will never be won with the approach being taken. It will have significant collateral damage never intended. 

    Of course that doesn’t stop the effort to maintain the momentum. I am sure they will create more drones to export the war onto other distant shores. 

    Currently, they desperately want to maintain the illusion that the FATCA freight train is rolling on, no stopping it, and most of the FCC, FATCA Compliance Complex, work as co-enablers with the IRS to keep pumping out the message, “you better get ready!”  There is money to be made in consulting and new software solutions!

    I get that, as most in the Tax Practitioner and BIG Accounting firm complex, are in the compliance game.  They hardly question the rules. They just salute, ask for modifications on the margins, and then try to construct ways to comply legally, or find loopholes around rules for selected clients.  That is the world we live in. 

    Unfortunately, I think, (maybe this is some degree of hope too) that the IGAs have a big downside that the IRS has yet to confront.  IGAs repatriate the BIG cost of FATCA back onto Homeland US Banks, who will have to meet the requirements of the domestic version of FATCA, or DATCA if you wish.  

    That was NEVER the intention of Congress, and more will wake up to these questions once the silly election season is over just like Congressman Reichert of Washington’s 8th District just did.   Google:  “Rep. Reichert Demands Answers on FATCA Implementation from IRS Commissioner.”

    How are US Banks going to meet the data collection and reporting requirements on 194 countries residents (US non residents) who might have money in the US Banks?  This is NOT an easy feat. It comes at a big cost in back office work, and a real BIG COST in terms of Capital flight as Texas and Florida banks are already complaining about.

    Does the IRS or Congress have any idea what these costs are?  It will not be cheap for US Banks to do all the same things the FFIs have to deal with to change client on-boarding and data processing systems.  

    We know they didn’t care about the cost on FFIS, as they never did any cost vs benefit analysis when they passed FATCA.  Most in Congress had no idea what they were voting for.  But, they will soon be hearing from their constituents about the FATCA cost, as it begins to effect US banks costs and consumer fees.

    I have to think, that when Congress realizes that collateral damage has blown back onto the American Financial system shores, those little IGAs with promises of reciprocity, might just ring hollow for the countries that signed them.  

    Germany has said it really isn’t interested unless it gets REAL reciprocity.  In the UK, parliament still has to approve them. How are they going to get reciprocity when Congress reigns in the International Revenue Services unilateral actions and pulls back DATCA that Congress never intended to happen?  Will a Republican Congress just meekly let the IRS have its way? 

    So, your title is right, “Brace for FATCA”, but maybe not in the way any Homelander knew or expected.   

  6. @bubblebustin, Just Me, Renounce,

    Get together you guys — what an opportunity! If things are backed up there, you can have a good chat / meeting of the minds. All three of you are good minds! Safe travels.

  7. @bubblebustin…

    Darn, I did not get a chance to check this, and so missed you.  Renounce and I had a nice chat. I got bumped off my flight, and so dropped him off at the Comfort Inn and returned home.  What a shame to miss meeting you.  I was in the Central Court for a few hours.   Will you be transiting here anytime soon again?  I will probably be back out at the airport tomorrw.

  8. FATCA Fiasco – A Look at the Reasons Behind the Delay
    The FATCA fiasco Fallout (FFF)  is down to governments clogging the corridors of power in Washington DC with red tape, according to some international financial experts.

    Conspiracy theory

    However, the whisper is the real reason FATCA is on the backburner has more to do with crafty foreign government lawyers buying time by negotiating intergovernmental agreements (IGA) with the US.

  9. @calgaty, thank you. We stayed over in Seattle overnight to catch our Tuesday flight. We are on our way to Florida and were originally routed through Newark. Happily we weren’t left flightless in Seattle and were rerouted through Houston a little later in the morning.

    @just me

    I didn’t see your post until i was through security, too bad. We are back thtough Seattle on the 7th around 7pm, but our return  is routed through Newark still and we will have to see what state their airport is in at that time. Would like to meet up for a coffee before we head back to Vancouver if we can swing it! We also had the pleasure of staying at the Comfort Inn, an just missed renounce by one night!

  10. @bubblebustin

    Stay in touch, and I could meet you at the airport if it works out.  We were probably through security at the same time, and close, but so far! Hope it works out next time.

  11. @just me

    Will do. Re: FATCA Fiasco. Steven Mopsick was correct in stating governments are anxious to enter IGA’s but perhaps only to foul them up enough to give it the proper vetting it should have gotten before it was allowed to pass.

  12. I think I have a new acroynm.  FFF for FATCA Fiasco Fallout brought to you by the IRS, the ‘INTERNATIONAL’ Revenue Service and the FCC, the FATCA Compliance complex, who along with all FFIs, Foreign Financal Institutions want an AGI..

    FFF FCC FFI AGI    Have to work on that one.

  15. Everything should be made as simple as possible, but no simpler

    As FFIs struggle with a strategy to document accountholders for FATCA, many are coming to the conclusion that it may be simpler to standardize documentation and processes using Forms W-8. Depending on the types and number of accountholders, this approach can be simpler, and, while the procedural requirements can be quite precise and apparently complex, there does exist precedent and experience with these rules. A recent Chief Counsel Advice on acceptance of electronically transmitted Forms W-8 aptly demonstrates that this might be simpler, though it is not necessarily simple.

    MY RESPONSE
    If simple is the goal, then transmitt all client data without regard to US person category to the International Revenue Service. That way you don’t chance a lawsuit for discriminating against clients based upon citizenship or birth place, and you overwhelm the IRS with useless data. Now some customers might not like it, but which lawsuit is the easiest to deal with? If simple the only goal, then also look at the simplest lawsuit to defend, as you are going to have some either way, unless you just grow a pair and decided you don’t need to do any business in the US, and you don’t need to deal with those compliant sheep! Just another thought. It all comes down to a business decision, I guess. Maybe it is wrong to think you have to do business with the US. They don’t seem to want it, without a lot of strings and complexity.

  16. It looks like Trinidad and Tobago’s call (see my previous post above) is developing into concrete actions:
    “A senior local commercial banking official has told Stabroek Business that Caribbean banks may adopt a regional political lobby to modify some of the clauses embodied in the legislation.”
    http://www.caribjournal.com/2012/10/31/trinidad-finance-minister-requirements-of-us-fatca-law-onerous/
    http://www.stabroeknews.com/2012/business/11/02/caribbean-banks-could-have-collective-position-on-fatca/

  17. @Shadow Raider.  Thanks for those…

    I should do a separate post on this, but will record here for now…

    LA Times story this morning:  

    Rich Chinese want to buy happiness — by emigrating

    In the comment thread above, I recalled that I had recently posted the story out of the South China Morning Post:

    Tax bills prompt Chinese to ditch US passports
    So this prompted me to post a comment on the LA Times:  

    FBAR_Compliant at 09:24 AM November 02, 2012

    Three things should give Chinese pause:  US Citizenship taxation, and the FWHAT? forms, FATCA and FBAR. 

    I hope the wealthy Chinese are engaging in due diligence, and comparing the tax and penalty systems of the US, Canada and Australia.  It is not just the tax, it is the complexity and penalties for failure that should be considered too.

    I hope they all read this recent story in the Southern China Morning Post  Tax bills prompt Chinese to ditch US passports http://bit.ly/RscHAy 

    Beware of US Citizenship taxation, which is not easy to shed once obtained. USA, as of 2010, now has FATCA legislation that is requiring all Banks in China (actually the whole world) to turn over ‘US Person’ account detail to the IRS. There are also very serious penalties for failure to file FBAR and FATCA forms. Australia and Canada have NONE of these onerous requirements, even if effective tax rates are slightly higher. 

    Listen to these words below very carefully, and do your homework before signing up for US greencard or passport.  

    “Wu, a 31-year-old housewife who asked to be identified only by her family name, said she started toying with the idea about a year ago. “I regret it to death, all of my friends regret it to death,” said Wu about taking out US citizenship. “I’m never going back.”

    Ask yourself, why is that so?  FATCA and FBAR is the answer.

  18. The “Financial Times” carried a letter to the editor on 19 October 2012 warning of the fallout on investment and sovereign funds operating from China, Japan and Middle East countries that have not negotiated FATCA agreements. These funds hold more than $2 trillion in US government debt. The letter is called: “Tax act has to be made less instrusive”

    Excerpt: “Will the ensuing political discussions lead to a barter arrangement
    involving the World Trade Organisation versus the Internal Revenue
    Service whereby the sovereign states refuse to trade with the US and
    will not purchase US Treasuries unless they are exempt from FATCA? If
    this were a game of chess, this would be checkmate, and the US will have
    to make FATCA less intrusive.”

    http://www.ft.com/cms/s/0/ba35e280-186f-11e2-80af-00144feabdc0.html

  20. http://www.mahanyertl.com/mahanyertl/congressman-rips-fatca/2652/

    “Congressman Rips FATCA”

    by Brian Mahany

    ……….”Now, even Congress is starting to wake up.  Congressman David Reichert
    (Washington), a member of the powerful House Ways and Means Committee,
    sent a letter last month to IRS Commissioner Douglas Shulman. In his
    letter he noted the rising concerns from all sides.     “I have watched
    closely the evolution of FATCA over the past months. I have talked with
    constituents, had discussions with international companies who are
    looking to comply with the new law, and had conversations with many who
    both wonder how successful these new policies will be in achieving their
    intended consequences and what the scale and nature of the inevitable
    unintended consequences may be,” said Reichert.”………

  23. An article from TaxindiaInternational has been posted on ACAs Web site.

    Larry Lipsher, member of the ACA Professional Tax Advisory Council, wrote an article in the Nov. 2nd 2012 edition of Tax India International which highlights recent developments and the real dangers of FATCA. The final paragraph compares the Great US Tax Wall to the Great Wall of China: Breaking FATCA’s Seawalls

  24. Great article @Just Me,

    Clearly describes the IRS inappropriately, and unethically threatening, and using scare tactics to forcibly push those abroad into the OVD programs, and in using FATCA to stop US person – even those born and living abroad with another citizenship, from legally banking and investing outside the US. It is not ‘compliance’ they want. It is penalty revenues, and to control all our legal savings for the benefit of US banks.

    ex. ….”the IRS and the U.S. Department of Justice continue with a campaign of scare tactics in its attempt to frighten people into entering the offshore voluntary disclosure initiative“….”We have a number of interesting initiatives that I cannot discuss, but we are every day developing information and getting account holder information. Failure to come into the offshore disclosure iniative is getting increasingly dangerous”………

    ……..”The United States is shamefully building its own Great (Tax) Wall, trying to exclude Americans (both those living in the U.S. and expatriates) from investing outside the U.S.“…………

    Who would want to continue to be in any way associated with a country who would shamelessly use those tactics against those it claims as citizens abroad – and offers them only deception and threats of force?

    Congress and the White house know full well what is going on. They are complicit with the IRS and Treasury. They know that most of us will owe no actual taxes to the US. Their hope is to force us to pay for the US deficit blackhole with penalties levied against our already taxed and legal bank accounts – held outside the US where we were born, naturalized and live entirely lawabiding lives. The US is morally bankrupt.

  25. @badger

    Your last paragraph says it all and is why most of us have renounced- there simply is no hope that this will be “righted” for those already penalized and none that the future holds anything better.

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