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FATCA Discussion Thread (Ask your questions) Part Two

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Please ask your questions here about FATCA.

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3,498 thoughts on “FATCA Discussion Thread (Ask your questions) Part Two”

  1. GATCA is scheduled to be born today in Berlin:

    http://www.bundesfinanzministerium.de/Content/DE/Monatsberichte/2014/08/Inhalte/Kapitel-3-Analysen/3-6-internationale-standards-beim-steuerlichen-informationsaustausch.html

    The USA’s FATCA is lauded (by the German tax authorities anyway) as the infant GATCA’s father and/or Godfather with the OECD Debating and Luncheon Club playing the role of surrogate mother.

    The question now is: will the US do anything more substantial to help raise little GATCA to adulthood or will the threat of being required to pay the costs of child support (i.e. real reciprocity) cause it to run from its parental responsibilities?

    Should be fun to watch.

  2. Based on a question posed to German Finance Minister Wolfgang Schäuble at the OECD Global Forum press conference this afternoon, the United States did NOT sign the “commitment” to GATCA signed by some 90-odd other countries at the meeting today.

    Looks like the US policy will be to enforce FATCA for its own benefit and let GATCA and its OECD mother(s) fend for themselves.

    Interesting note: neither the OECD nor German Finance Ministry website appears to have published the actual text of the “commitment” that the forum delegates actually signed – or refused to sign – today.

  3. Didn’t really expect anything different. The US looks out for the US and the rest of the world can go to you know where.

  5. Recent comments by Stephen Colbert are interesting – even though made in jest, because they underscore the complexity of US citizenship. And US laws, when coupled with citizenship/status-based taxation – results in the taxation of zygotes (creating UStaxablezygotes) IF they inherit UScitizenship, and thus US taxable person status right from conception – depending on their parentage and conception circumstances:

    ….”Colbert said jokingly. “All of us know that citizenship is genetic! And as a Christian, I believe ‘American’ begins at conception.”

    Colbert then went on to cheer the classic “USA” chant with a slightly new, Fox News-inspired twist:

    “UterUS-A! UterUS-A! UterUS-A!”

    But for Colbert, there’s something even worse than women becoming pregnant overseas and passing on their American citizenship.

    “I’m scared this law could inspire a whole generation of American women trying to cash in by moving abroad and carrying anchor zygotes,” he said.”

    http://www.huffingtonpost.com/2014/10/31/colbert-serrogate-immigration-fox-news-outnumbered_n_6083320.html

  7. Am I reading this correctly that the penalty is 10% of tax owing? If so, it’s a far cry from how the US deals with undeclared accounts/income in OVDP:

    People who come forward under the arrangement willavoid harsh penalties and are only assessed for the last four years. They are only liable for a maximum shortfall penalty of 10 per cent, and will not be referred for criminal investigation.

  9. @bubblebustin, I feel for the parents whose children had previously been denied the same status as their parents, but it just points up the ludicrousness of making taxpayers based on DNA and random place of birth.

    As to that related note, when can we expect the IRS to clarify that now those conceived in vitro are UStaxablepersons, and that any babies born of US sperm donors are also US taxpayers – no matter where they reside?

  10. OK, I have actually read ACt, guideance, regs, IGAs, guidance(s), commentary, etc, etc., and though I wish I could have those 100s of hours back lost over hte last 4 years…here are my thoughts;

    1. Everybody needs a strategy if want to keep any financial account open but think it unwise to think beyond want can be done to delay as much as possible given the complete insanity of this actually going forward (not that it won’t go forward, just that it will do so in a druken-stumbling sort of way).
    2. Nobody actually knows how this is going to work as the laws-regs-IGa’s-guidance all use labels we should be able to rely on (its a Law!, its an “intergovernmental agreement!) but in point of fact none of it has any intellectual honesty. The FATCA “law” is pretty much irrelevant now, but that is not supposed to be possible, at minimum it should constrain US authority to act, the regs actually went from proposed to final to amending what was supposed to be final, in a manner that is sloppy and completely detached from proper administrative procedure. The IGA’s are a complete bluff that only work if the host country actually passes laws in their own country, at present an overwhelming majority of the world is under governments that have not signed an IGA AND ITS NOVEMBER! And with every IGA saying that they get the advantage of any favorable term negotiated by any other country, if there is any substantive concession then huge swathes of people may get very different advice next week, next month, next year. This remains a serous bluff but looks like the US is going to pull it off. They bet their capital markets and nobody called them on it.
    3. The Banks have been complicit in the propagation of FATCA rules as they were the ones threatened with withholding and decided that the answer was to get their home governments to play along and essentially get themselves an immunity from a Swiss Style prosecution by surrendering bank secrecy of their individual clients. Turn it all into a paperwork game. Remember the biggest tax avoiders are Multinational Corporations and they do so in the light of day. Operating companies and publicly listed companies are exempt from FATCA. So Any “lobbying” by individuals are going to get undermined by these banks, and I just do not see how that political equation gets solved in individuals favor. Banks want FATCA and IGAs.

  12. Thanks for that tdott. I guess the next question is what’s the likelihood of the US going after their citizens born this way. Without a made in USA stamp in their passport, I imagine they’d be home free, but for those who wish to make a claim to US citizenship, there would be a few hurdles to overcome. Children born in the US and adopted to parents in other nations are a different story:

    “Adopting parents face difficult decisions in the years ahead. The reasons for this are complex, but families basically have three options:

    A. Parents and their adopted children can comply with the US legislation. This seems like the prudent approach, as explained further below.

    B. Have the child renounce his or her US citizenship. Of course this is not a decision that should be taken lightly. The catch is that you cannot renounce your US citizenship unless all your tax returns are filed, all the financial asset disclosure statements (FBARs) have been filed, and all US taxes and penalties are paid to the IRS.

    C. Parents and the adopted child could simply not comply. As the Globe and Mail articles point out, many US citizens living in Canada are confused as to what to do, and some have stated that they do not intend to comply because of the exposure to high rates of taxes and penalties. This reason does not make sense for an adopted child. The chances of them having complex or large assets at this stage in their life are small. It does not make sense for adopted children to choose this route.

    Whether your child lives in Canada as an American citizen, or unless and until they eventually renounce their American citizenship, they must file tax returns every year (if they have income), and if they have any qualifying financial accounts must file FBARs every year.

    As a result, I recommend that all parents of children adopted from the USA become familiar with these rules and, if applicable, file the necessary documents with the IRS every year.

    For more information Google search for FATCA, and that will bring you to links to the IRS web page (which has a FAQ page), as well as many other articles and opinions on this new law.

    Please disseminate this information widely to anyone you know who has adopted a child from the USA or intends to do so in the future.”

    http://www.sunriseadoption.com/adoptive-parents/what-all-adopting-parents-in-canada-need-to-know/important-information-for-all-canadians-who-have-adopted-a-child-from-the-usa

  13. @Badger and tdott

    Many here have predicted that he US will continually try to expand the definition of US person – this is a good case in point.

    Although I’m not cynical enough to believe they made these legal changes to include the non-genetic children of US citizens solely to drag them into the US tax net, the net effect is the same!

  14. Concerning FATCA and the IGA, there are other ways than the bank’s checking their records to determine US “personhood.” So I am wondering if anyone can clarify whether an institution is required to mark an account as “US” if…:

    1. The IRS sends a list of people holding US passports and living in Canada. They have this info when a US passport is renewed in Canada.

    2. The IRS receives information from the new border crossing procedures and transmits it to the banks. Apparently, the US Immigration services will have access to the database of Canadian passports and will be recording crossings into the US. Every day of crossing, even for cross border shopping will be considered a day spent in the US for residency purposes based on amount of time spent there. This will generate a possible list of Canadian US persons. Furthermore, place of birth is indicated on Canadian passports. They may be able to generate another list of suspected persons by place of birth.

    I realized that in the two above cases, they will not have info as the where a person is banking. What worries me is that they may require Canadian Financial institutions to check their lists of account holders against lists of suspects provided by IRS.

    And incidental to this, frequent travellers to the US don’t seem to be prepared for the notion that a form will have to be submitted to the IRS to prove one is NOT a US person despite having crossed the border enough to trigger residence, on the initiative of the Canadian. There seems to be a presumption of guilt… can you imagine people in the transport industry like airline employees and truckers?

    If I have got this all wrong, I’d surely appreciate someone setting me straight.

  15. Further to JoellaP’s comment I wonder if the IRS can legally communicate directly with Canadian FFIs regarding who’s who (i.e. here’s our suspect list now compare it to your customer list … or else). Wasn’t the whole point of the IGA to put the CRA in betwixt these two entities? How much extra work and complexity will the CRA tolerate regarding being in this betwixt position?
    @ JoellaP
    About those airline employees. You might find this interesting.
    http://www.scmp.com/business/companies/article/1438783/cathay-withhold-us-pilots-wages-taxes

  16. JoellaP: Who knows what awaits us in the future if this thing isn’t stopped soon. Four years ago none of us here would have believed what has already transpired. Your conjectures make about as much sense as any but let’s all hope they never come to pass. I am living day to day, trying to educate myself as much as possible about this mess but also trying to think positively and deal with the facts of the situation as they currently are.

  18. Badger:

    Thank you for posting that excellent article you posted from globaltimes. Mr. Gray is a fine and accurate spokesperson for us! Great comments from lots of Brockers, too!

  20. @rrrac

    That’s a very good article offering some practical advice for Americans abroad who are finding their investment options shrinking.

  21. I don’t know much about this, but wondered; is this the beginnings of a way around so much reliance on the US dollar and access to the US financial system?
    http://online.wsj.com/articles/china-canada-in-talks-to-set-up-first-north-american-renminbi-trading-hub-1415389072
    http://online.wsj.com/articles/china-canada-in-talks-to-set-up-first-north-american-renminbi-trading-hub-1415389072
    “…When fully operational, an offshore currency hub, also known as a settlement hub, allows for direct business between the local currency and the Chinese currency. Without a hub and without the pricing of goods or services in yuan, a third currency — most likely U.S. dollars — must be used….”

  23. Hi again.

    I am still hoping someone with a better understanding than me can tell us whether the IRS can submit lists of “suspected” US persons to Canadian Financial institutions and force them to furnish info under the IGA or otherwise.

    Also, I also saw a reference to the Chinese-Canadain yuan hub…. and I believe it was in the Wall Street Journal (which I don’t normally read but it came up in my tablets news aggregator). If the WSJ is talking about it, the Americans may be getting worried.

  24. @JoellaP

    My understanding is that one of the reasons for the IGA instead of direct FI reporting to the IRS is that FIs reporting to the IRS would violate privacy laws. The IGA gets around that by having the FIs report to the CRA, which is perfectly legal and has always existed. It would follow then that the answer to your question is no, the IRS cannot communicate directly with FIs and certainly can’t force them to furnish information back to IRS. In light of the IGA, that scenario just makes no sense at all.

    Now, if you ask of the IRS can submit lists of “suspected” US persons to the CRA and “force them to furnish info under the IGA”, that’s different, but it still makes no sense to me. The IGA defines “US Persons”, and the IGA defines “Reportable Accounts”. For the IRS to give the CRA lists of additional “suspected” US persons, what does that mean? The IGA already has the CRA sending the IRS info of suspected US persons. Would the CRA send the IRS info of Canadians who don’t already have US indicia as reported to them by Canadian FIs? Why would they do that? You would think that would have to be in the IGA to happen. I don’t see it now, but IIRC the US can modify the IGA any time they please.

    I wouldn’t have even thought of this question. I do absolutely believe that “lists of suspected US persons” (with tax deficiencies!) will soon be checked every time a passport is scanned when entering the US. That’s very easy to imagine. I will never enter the US again until and unless I have a CLN because of my US birthplace. Americans born in Canada with no other connections to the US since birth have more options than I do. Arguably, even then some degree of paranoia on their part is justifiable.

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