Same Country Exception. A letter writing campaign “exempting” one from FATCA reporting has now been kicked off. If one can show that one is tax compliant, one won’t be reported. In this case, one needs only to send a different piece of paper to the IRS that declares that one is same-country exempted. Sounds Good. Is it?
We’ll look at the details. But first, let’s look at something that came along, albeit at a much slower pace–the Social Security number. Since it’s not the prime point, I won’t claim to have researched its history fully, let’s just talk about it from my own memory. And, remember that the course of history need not be planned in advance. However, it can be expected to morph itself to a known end.
Social Security came about as a forced savings system for one’s retirement. The payments after retirement were well publicized, and the incoming payments were accepted by legislation in the houses. In order to keep track of the payments, identification was required for the first time in America. Lots of people complained, that identification was not part of the American ideal. It was a huge transition, for which we dismiss today as “conspiracy theories”. Many of us have a Social Security card which is overlayed with “not to be used for identification purposes”. This didn’t last very long. In fact, long before my first card was printed, the Social Security number was indeed used on tax forms and not just on Social Security.
During the early 80′s, judicial and legislation determined that no one could require you to supply your social security number to them (loans, credit cards, universities, whatever)–however, those institutions need not issue you their services if you don’t cough up your number. The Social Security number has morphed into most everything. In Europe, the government number is used everywhere. Anyone can require that you hand it over. In many countries, the birthdate is ingrained in the number. You have to cough it up for almost anything, including discount cards at the store.
Trying to keep it short, the Social Security number morphed from something with a real need into something used everywhere. Now, with FATCA, globally. Remember that something starts and with or without fore-planning, it morphs into mainstream.
Now, we are being offered Same Country Exemption. Safe Harbor (another Orwellian name which has a background in other areas). You have a safe harbor, if you prove to your bank (by attaching your 1040 IRS document) that you are US-tax compliant. (An individual residing in a foreign country could elect, but would not have to elect, to have an account treated as a “Same Country” Account by providing an election to the relevant FFI (such as, the individual’s bank) and attaching a copy to his or her regular Form 1040 or Form 1040NR. The FFI would then be relieved from the requirement to treat the account in question as a US account and to process and report information with respect to it.)When you do this, your bank will not FATCA report you. You will also then be allowed to not file your form 8938. It does not mention that you would still be required to file your FBAR.
Let’s begin with why this might be a benefit. If you’ve already crossed all your T’s and dotted your i’s, why would you care if you were being reported? If you are filing a paper with the statement that you are only same country, what is the difference between that and just sending in the firetrucking 8938?
Q: Does Same Country Exemption eliminate the FBAR? A: No. Q: Does it eliminate the penalties? A: No. So, now we’ve reached the point of “who cares” and Safe Harbor. But it gets worse.
If you want to take advantage of Same Country Exemption, you need to SEND YOUR PRIVATE AND PERSONAL TAX FORMS TO YOUR LOCAL BANK. Your bank will then make a determination of whether your IRS 1040 is good, bad, or needs to be whistleblown. This would be the first instance where a 1040 tax return might be reviewed by an external source. (Go back to the Social Security example).
Do you want this? But, Safe Harbor is voluntary. When you write to your Congressperson, you support that you can voluntarily submit your private and personal 1040 form to an institution. When your Congressperson reads your letter, he sees that you support voluntary submittal of your personal 1040 form to an institution. He reads thousands of letters of persons who support voluntary submittals of 1040 forms to their institutions.
What does your legislator learn from this? He learns that thousands of persons support the idea of submitting their private and personal 1040 forms to their institution. People will gladly show their private information to an institution. WELL, IF SO MANY THOUSANDS OF PERSONS WOULD VOLUNTARILY SUBMIT THEIR PRIVATE TAX FORMS TO A 3RD PARTY, THEN THOSE SAME PERSONS WOULD NEVER COMPLAIN THAT THEY WOULD BE FORCED TO SHOW THEIR PRIVATE TAX INFORMATION TO A THIRD PARTY. And if they don’t they wouldn’t mind being banned from using that institution.
Do you really want your bank to judge your 1040? Why not your grocer? Why not your gardener? Why not bring your 1040 to the singles bar and paste it to your forehead? Why not send a copy of your 1040 along with your passport application (oops, it looks like that already might be required according to the transportation bill).
So, hurry up and write a letter to your Congresscritter and tell them that you support Same Country Exemption. At the same time, ask them to inform all of the bank employees to close their eyes while they strip search you in the bank lobby.
BE CAREFUL WHAT YOU ASK FOR. And be careful about what others are asking for– remember that a few hundred people will be supporting DA/ACA/AARO/FAWCO SCE as-is. That proposal could affect you.
By all means, write the letters. Be specific about what is needed. Be specific if something is not objectionable and what is definitely objectable. Make sure that you discuss your opinion about the specific issue of giving your bank your personal tax records, in both cases of mandatory or non mandatory.
Noted: (The “Same Country” Exemption, sometimes referred to as “Safe Harbor” Rule, is the product of collaborative work among several groups representing Americans abroad. A detailed description was prepared by ACA and draws upon ideas and work of the other groups – which ACA greatly acknowledges. ACA is solely responsible for its content. This paper (attached) was drafted by Charles M. Bruce, Legal Counsel, ACA….)