FATCA Discussion Thread (Ask your questions) Part Two
Please ask your questions here about FATCA.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See FATCA Discussion Thread (Ask your questions) for earlier discussion.
Not open for comments, but mentions US lack of reciprocity in FATCA and US lack of participation in OECD CRS;
“………Unlike the FATCA regime to date, the information exchanges will be truly reciprocal with other jurisdictions and will commence in September 2017 for the early-adopting jurisdictions. As of this writing, more than 100 jurisdictions have signed on to the CRS by executing multilateral competent authority agreements (MCAAs). Unlike FATCA, however, the CRS does not include a withholding tax or penalty component on payments. Rather, the home country of reporting entities will be able to assess penalties on those financial institutions that do not comply, including the revocation of a license to do business. The United States has opted not to participate in the CRS at this time and is continuing with FATCA instead. This position has led to some tax advisers’ branding the United States a relative tax haven, given the tendency under FATCA to require less overall reporting than the CRS.
The information required to be reported under the CRS includes name, address, TIN(s), date and place of birth (for individuals), account numbers, and account balances or values, as well as interest, dividends, other income, and gross proceeds, where applicable. In recognition of the administrative costs otherwise created by differing reporting systems, the OECD has chosen a highly standardized approach in designing the CRS. Nonetheless, each signatory jurisdiction can make certain adjustments in its local legislation and system requirements, which has introduced some complexities in the actual implementation of the CRS.
As a result of the CRS, an additional wave of tax compliance is now sweeping the world, much as FATCA and the IRS’s offshore initiatives have done for U.S. persons in recent years. The confluence of technology and tax legislation has reached new heights in the current decade, ushering in a new world order in the battle against global tax evasion, which seems to promise ever-greater transparency.”
from;’Recent developments under FATCA, U.S. withholding tax, and global information reporting’
Randall M. Cathell, CPA, Fort Lauderdale, Fla.
September 1, 2017
https://www.thetaxadviser.com/issues/2017/sep/developments-fatca-withholding-global-information-reporting.html
Don’t understand this, so won’t try to interpret, but seems interesting/significant that the IRS in late 2017 is clarifying something back from 2014, and from earlier this year, so posting here for those who can understand what it means;
‘IRS corrects FATCA & Chapter 3 withholding regs by withdrawing 2014 prop regs’
https://tax.thomsonreuters.com/media-resources/news-media-resources/checkpoint-news/daily-newsstand/irs-corrects-fatca-chapter-3-withholding-regs-by-withdrawing-2014-prop-regs/
More on the withdrawn regulations.
https://www.bna.com/irs-foreign-entities-n57982088237/.
@plaxy, I notice that one quote in that article ‘September 20, 2017
IRS: Foreign Entities Must Forget ‘Unfair’ Old FAQs on FATCA’ https://www.bna.com/irs-foreign-entities-n57982088237/ is from Tara Ferris – once an IRS Senior Counsel FATCAnatic (who can be seen firmly and didacticly issuing IRS orders to the rest of the world on the terms of their surrender to US extortion. To see an earlier incarnation – see https://youtu.be/HMqGRip5bWk “Tara Ferris, Attorney – Office of Chief Counsel at the IRS discusses in a live video stream all you need to know about the final FATCA regulations and offers future guidance ahead of the 2014 deadline, recorded live at the 8th FATCA & Withholding Tax Congress, Feb 2013. Hear the IRS talk about and respond directly to questions on FFI agreement’s & verification, status of QI agreements, release forms and future guidance on FATCA deadlines and compliance …….” ), and now is working for the other side.
And now?;
“…“If you were implementing those FAQs, and now the IRS are saying that you shouldn’t, that creates a problem,” Tara Ferris, a New York-based principal at Ernst & Young LLP, formerly a senior IRS counsel, told Bloomberg BNA at the conference’s sidelines.
The IRS deleted the FATCA-related FAQs from its website between 2015 and 2016, added Ferris, who hosted the conference’s closing question-and-answer session with the U.S. tax agency. The FAQs “give a lot of extra guidance to qualifying intermediaries—guidance that is not in the QI Agreement or the regulations.” ….”…….
Thanks for that, badger. Very gratifying!
I suspect that the problem that Ms Ferris feels has been created is one that disadvantages her – not her clients. I wonder what was in the withdrawn FAQs.
Not enough details on what might be just a cosmetically ‘comfier’ FATCA:
http://www.jdsupra.com/legalnews/treasury-hints-that-regulatory-review-61021/
I see that there are still IGAs not ‘in force’ ( webpage as of “Last Updated: 12/4/2017 4:19 PM”) . China being a major one. And the US hasn’t levied any FATCA withholdings yet that we know of, even on smaller countries who haven’t complied. Several ‘Agreements in substance’ but nothing signed.
Yet Canada rushed to be among the first to bend over.
https://www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA.aspx.
From the OECD website (www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency)
This is about CRS, not FATCA. However, it seems as if it should apply in cases where a USC is being asked CRS due diligence questions under the Wider Approach
If I understand it correctly, USCs and Green Card holders should be able to invoke the treaty to determine whether they are tax-resident in more than one country for CRS purposes.
If anyone in a “Wider Approach” country is willing to try this, and it succeeds (i.e. the USC is agreed under the treaty to be tax resident in the residence country only), the USC could then invoke the treaty to determine whether they are tax-resident in more than one country for FATCA purposes.
If the answer is “yes”, that would be a contradictory result which the USC could surely seek to have resolved.
It might just be resolved by dropping the US from CRS Wider Approach, but even that would serve to demonstrate the discriminatory nature of FATCA, and help to undermine America’s claim to be compliant with transparency criteria.
Plaxy,
In aĺl cases that I’m aware of the saving clause is written so that a US citizen cannot use the residence clause in the treaty to avoid “tax residence” in the US.
Karen – nevertheless, if I still had US citizenship, I would be inclined to have a try. The OECD statement is right there, showing that CRS, the global AEOI standard, is designed in the expectation that the accounts that need to be reported are cross-border accounts – where the account is in one country and its owner is in a different country.
If I were still a USC, I would see this as an opportunity to draw attention to the conflict between the assumptions underlying the US definition of tax-residence and the assumptions underlying CRS.
I’ve renounced though, so I’m just mentioning it here as a suggestion for any USCs that might want to give it a try and then publicise the response, be it yay (unlikely, I agree) or nay.
The assumption underlying FATCA (and the Model 1 IGA) is that all US citizens living outside the US have to be John Doe’d in order to identify cross-border tax evaders.
The assumption underlying CRS is that only those with cross-border accounts need to be John Doe’d in order to identify cross-border tax evaders.
The more this discrepancy can be highlighted, the harder it will be for the US to claim that they are complying with the international tax-transparency standard. A topic which tax-justice folk are very very interested in – not because they care about USCs of course but because they want America’s tax haven activities to be challenged.
A recent paper(by a law student) with the premise that FATCA is unconstitutional;
2018
http://scholarship.shu.edu/cgi/viewcontent.cgi?article=1947&context=student_scholarship
Thanks for the nice light reading this rainy day on the coast, badger.
You’re welcome @BB! At least at a cursory glance the law student paper isn’t arguing anything new, but does mention Crawford and the challenge to FATCA in the US.
(I posted this today as well on another IBS thread, if you haven’t already seen it, but it is mainly about the exit tax and renunciation/relinquishment fees;
Worster, William Thomas, Human Rights Law and the Taxation Consequences for Renouncing Citizenship (March 20, 2017). Available at SSRN: https://ssrn.com/abstract=3073563 or http://dx.doi.org/10.2139/ssrn.3073563 ).
Who would have thought before 2011 that 7 years later, light reading would include anything about US extraterritorial taxation and citizenship? Who would have thought we’d be cozying up on a rainy / wintery day with journal articles about US tax and citizenship?
No kidding, badger. I never would have dreamed that I would ever want to read anything relating to tax so extensively. As a matter of fact, I can read a 35 page paper in one sitting, whereas I pick up a novel and I’m asleep in five minutes!
Must be anxiety that keeps me awake.
@BB, re;
“..I can read a 35 page paper in one sitting, whereas I pick up a novel and I’m asleep in five minutes!
Must be anxiety that keeps me awake.”…
Some of those storied ‘benefits’ of US citizenship”?
: )
Hello all,
Really useful and informative site, looking for some opinions/thoughts/answers (apologies if this isn’t the correct forum):
– USC by birth with passport and SSN, moved away at young age and never lived there since nor filed anything
– Have been receiving self cert forms from banks in the past few years due to US birthplace, and perhaps (in hindsight) foolishly provided my SSN to them
Onto the questions:
– How likely is it that IRS actually have actually received any info as account balances have been below reporting thresholds?
– How likely are they to act on it? I can’t imagine i’d score high on any priority lists and think there is probably a big pile of data with limited resources
– Is anyone aware of cases where someone in my situation has been approached by IRS purely based on FATCA reporting?
– If so, what will likely come of it?
Thinking to lay low for another year or two to see if any meaningful progress on reform is made, and then backfile + renounce if that isn’t the case.
@AccAm
1. Unlikely. While banks may gather the info on all US clients they may not necessarily send it all to the IRS. And even if they do, there’s so much of it worldwide the IRS will spend years and years going through the info, if they even bother.
2. Again unlikely. With no evidence that you’re a “big cash cow” it’s a waste of time, money and resources to attempt to do anything against you.
3. No.
4. Nothing.
@AccAm
One option going forward, with new banks, is to sign their W9s or whatever – since you can’t change your birthplace – but not provide an SSN. Tell them that you never had one, and aren’t about to get one.
There is guidance now, in Europe at any rate, that as long as banks ask for some sort of number once per year, they are complying with their FATCA.
Not giving a number may provide an incremental degree of protection insofar as it makes matching records from different institutions even more difficult.
@AccAm
Good advice from M.F. and Nononymous. The only thing I’d add is that after you have laid low for a few years to see if any there is any progress on reform (there won’t be), you then decide to shed US citizenship, just go ahead, renounce, and get the CLN.
Forget about backfiling; its a waste of time and money. You have never been in the IRS system and there’s no point in entering it only to immediately turn around and exit. Or lay low permanently. Whichever path you choose, the IRS can’t touch you.
it appears the IRS is only using FATCA data to reinforce proceedings against some one they already had in theit sites through the Swiss bank or other means. Big fish such as Paul Manafort
It’s doubtful,they can us the data against small account holders. They are drowning in numbers. Now, if you had tens of millions stashed away…….
Do nothing or if you must start filing going forward.
,
I just wanted to say thanks to the many members of this forum offering so much sensible and calming advice. I only had my OMG a couple of weeks ago and naturally, Google takes you straight to the pages of compliance condors who assert that the IRS WILL find you as a result of FATCA. Very few people are asking “well, so what if they do?” If you’re a minnow with no obvious wealth, is it really likely that they expend the time and resource to come after you? They’re counting on people behaving like sheep, cowering in fear, and complying because it sounds scary, having the tax man after you.
The conclusion I am rapidly reaching is don’t be a minnow AND a sheep.
Alice –
The thing to be aware of is that the IRS has very little power to assess and collect tax outside the US.
Put yourself in the shoes of an IRS agent. How would you go about assessing how much US tax a non-filing USC in the UK might owe, since they haven’t written to tell you?
Say you have their address. Say you write to the USC demanding that they file a US tax return. Say they never reply. What can you do?
Say you create an imaginary return for the person, inventing the numbers. Say you send them a demand for the tax you’ve decided to demand. Say they never reply. What can you do?
That’s why they don’t bother chasing non-filing expats: as long as the person doesn’t file, the IRS can’t make them pay US tax.
Apart from suspension or cancellation of passport, what action can the US government take against a non-complying Australian/US dual citizen who has lived in Australia for 40 years,is married to an Australian citizen, but has no intention of ever returning to the US?
Nothing